Raymond Richman - Jesse Richman - Howard Richman
Richmans' Trade and Taxes Blog
There Is Less Inequality Now Than Ever Before in History
There is less inequality today than at any time in our history. There is less wealth inequality now and there is less income inequality now than at any time in our history. Those who argue that wealth is more unequal now or that income is more unequal now are using a very narrow definition of wealth and income. They exclude, for example all public goods like public education, public parks, museums, swimming pools, beaches, police and fire departments, international security, water and sewage, streets, legal courts, etc. They do not include ownership of real estate and personal property including autos, boats, clothing, and recreational vehicles. They do not include hospitals, churches, colleges and universities, clubs, voluntary associations, etc. They do not include recreation and entertainment.Baseball, football, soccer, hockey games and other mass entertainments such as movies and television exist for the masses not billionaires.
In Rome and during the middle ages, there were a handful of royalty and nobles and their staffs who owned all the land with the mass of the population consisting of serfs living hand to mouth or craftsmen living hand to mouth. As far as the masses are concerned poverty was the rule not the exception that it is at present in the USA.
Take a look at our cities: office buildings, commercial buildings, factories, apartment buildings, homes, parks, monuments, etc. Billionaires own a fraction of what you see. Billionaires sleep in one bed at a time, eat three meals a day, have one spouse, and probably have fewer children and a less satisfactory family life on average.
And what is often forgotten is that the wealthy do not take their wealth with them when they die.
What makes billionaires and multi-millionaires? Let us look at how some of them made their money. Bill Gates founded Microsoft; Andrew Carnegie helped create the American steel industry; Mark Zuckerberg invented and founded Facebook; Warren Buffett created a massive industrial firm; Bernard Aarnault developed Europe’s cosmetic and fashion industries; Larry Ellison founded Oracle. Forbes magazine found 2,208 billionaires from 72 countries and territories including the first ever from Hungary and Zimbabwe. This elite group is worth $9.1 trillion. That is a great deal of wealth but their income is probably less than six percent of that or about half a trillion dollars. That is a small price to pay for the millions of jobs they created around the world supporting millions of families.
Sen. Elizabeth Warren has proposed an "ultra-millionaire" tax on the wealthiest families in America. Sen. Bernie Sanders wants to jack up the estate tax for rich heirs. I have some sympathy for Sen. Bernie Sanders’ proposal to jack up the estate tax for rich heirs which Pres. Trump wants to abolish. The estate tax falls mainly on heir who did not innovate or invent. Sen Warren does not differentiate between the income tax and the estate tax. Payroll taxes, which help to finance Social Security, Medicare, and unemployment benefits, are the second largest source of federal revenue, and make up about one-third of total receipts annually. In 2016 the bottom 40 percent of wage earners pay no individual income tax, they face payroll taxes. The Tax Policy Center estimates that 66 percent of taxes collected for 2016 came from those in the top quintile, or those earning an income above $147,700 annually. The top one percent of income earners — those earning more than $717,900 in income per year contribute almost a quarter of all federal revenues collected. (Source: Peter G. Peterson Foundation.)
Comment by Jesse, 5/7/2019:
Here's a link to a nice chart that helps illustrate Ray's point.
Last 100 Years
Real Estate Taxation
Journal of Economic Literature:
Atlantic Economic Journal: