FiveThirtyEight has this item in its significant digits email (Nov. 14).
Based on a report from the Joint Committee on Taxation, in 2019 households making $1 million per year or higher would on average enjoy a tax cut of $58,000 under the GOP tax plan. Households earning $50,000 to $75,000 would see an average tax cut of $688 in the same period. [Bloomberg]
But those may not be the most interesting numbers coming from the tax cut bills. Assume a 40-hour work week for 52 weeks each year (2080 hours/year). Assume also that the heads of million-dollar households work the same hours as do the $50K-$75K households. (OK - LOL!) What are the increments in hourly pay? $58,000/2080 = $27.88. $688/2080 = $0.33. Rounding the hourly pay increments a bit, the millionaire gets about 30 dollars and the non-millionaire gets about 30 cents. (For you math-philes, the actual ratio is 84.3.)
Here is more from the Bloomberg article.
Those amounts, based on a Saturday report from the Joint Committee on Taxation, contradict President Donald Trump’s repeated assertions that the GOP tax plan would benefit the middle class but not the highest earners.
“Our framework ensures that the benefits of tax reform go to the middle class, not the highest earners,” Trump said last month in Pennsylvania, before either the House or Senate had released actual legislative plans. Since then, his Twitter posts on taxes haven’t failed to mention cuts for the middle class.
Several recent studies show that plenty of benefits would go to the highest earners — and some middle-class taxpayers might actually pay more. Both findings complicate Republicans’ messaging about their plans. Already, both Senate Majority Leader Mitch McConnell and House Speaker Paul Ryan have walked back guarantees that no one in the middle class would see a tax increase under their plans.
“You can’t guarantee that absolutely no one sees a tax increase,” McConnell told the New York Times on Friday. And an aide for Ryan told the Washington Post that he misspoke when he said during a radio interview last week: “So actually, even though there’s a lot of false information out there, everybody gets a tax cut.”
In reality, both measures call for eliminating tax breaks that might raise taxes for some middle-class taxpayers — depending on their situations.
So you can tell your “R” neighbors that the Republican leaders themselves contradict Trump’s promise that “the benefits of tax reform go to the middle class, not the highest earner”. That’s worse than just nonsense. It is a lie and the Republicans in congress know it.
America’s Extreme Economic Inequality
And the actual distribution of tax breaks will assuredly even more worsen our increasing income inequality.
Economic inequality is at it’s highest point since 1929 - just before the Great Depression. Here’s one way to look at it. CNN reports thatMiddle class income tops $59,000. That number sound familiar? It’s almost the same as the $58,000 the millionaire got back in the proposed tax cut. That is, the tax break for the rich, or , if you like, the yearly raise for the rich is about the same as the entire yearly earnings for the non-rich.
CNN also reports on our Record inequality: The top 1% controls 38.6% of America’s wealth. America’s inequality problem is getting worse.
The richest 1% of families controlled a record-high 38.6% of the country’s wealth in 2016, according to a Federal Reserve report published on Wednesday.
That’s nearly twice as much as the bottom 90%, which has seen its slice of the pie continue to shrink.
TheBalance.com reports on sources of and solutions to Income Inequality in America.
One-quarter of American workers makes less than $10 per hour. That creates an income below the federal poverty level. These are the people who wait on you every day. They include cashiers, fast food workers and nurse’s aides. Or maybe they are you.
In 2012, the top 10 percent of earners took home 50 percent of all income. That’s the highest percent in the last 100 years. The top 1 percent took home 20 percent of the income, according to a study by economists Emmanuel Saez and Thomas Piketty.
Many of the causes of U.S. income inequality can be traced to an underlying shift in the global economy. Emerging markets incomes are increasing. Countries such as China, Brazil and India, are becoming more competitive in the global marketplace. That’s because their work forces are becoming more skilled. Also their leaders are becoming more sophisticated in managing their economies. As a result, wealth is shifting to them from the United States and other developed countries.
This shift is about lessening a global income inequality. The richest 1 percent of the world’s population has 40 percent of its wealth. Americans hold 25 percent of that wealth. But China has 22 percent of the world’s population and 8.8 percent of its wealth. India has 15 percent of its population and 4 percent of its wealth. (Source: “Estimating the Level and Distribution of Global Household Wealth,” World Institute for Development Economic Research, November 2007.)
As other countries become more developed, their wealth rises. They are taking it away from the United States, the EU and Japan. In America, the least wealthy bear the brunt.
What Is the Solution?
Trying to prevent U.S. companies from outsourcing will not work. It is punishing them for responding to a global redistribution of wealth. Neither will protectionist trade policies or walls to prevent immigrants from entering illegally.
The United States must accept that a global wealth redistribution is occurring. Those in the top fifth of the U.S. income bracket must realize that those in the bottom two-fifths cannot bear the brunt forever. The government should provide the bottom two-fifths access to education and employment training. It can raise taxes on the top fifth to pay for it. It should make these changes now so that the transition is gradual and healthy for the economy overall.
For that to work, our policy makers and political leaders must come to the views that (1) extreme economic inequality is bad for our society and (2) government has a legitimate role in the management and correction of that threat to our general welfare and domestic tranquility. They can start with a more sensible tax policy. The current policy is like an upside-down pyramid - most tax breaks at the top. A useful first step would be to rewrite the policy to that it flips the pyramid such that most tax breaks go to the bottom - and more taxes are paid by those at the economic apex.