The drums sound as to income and wealth inequality as an issue for the 2020 Democratic Presidential primaries. The loudest voices calling for increasing taxes on owners, investors and entrepreneurs – with a view that raising taxes on high-end income families is a good in of itself. All this jawing on hiking taxes on owners/investors/entrepreneurs comes at a time when the nation enjoys good economic growth, unemployment levels at the lowest in decades and increase in wages for low and middle income workers – outpacing wage growth for higher earners. Those advocating for a tax increase for increase sake are too often whistling by the graveyard as to the possible negative impact of such tax increases.
The proposals to tax our way to greater equality regardless of the possible impact on the current strong economy – brings to mind Prime Minister Margaret Thatcher’s brutal putdown to a Labour MP – “he would rather that the poor were poorer, provided that the rich were less rich.” There is a better way.
I would suggest that the better policy (and more importantly — one that could actually pass Congress) is putting more wealth (significantly more wealth) into the hands of working families through employee ownership and profit sharing – and less emphasis on trying to shake the wealthy. A recent study from Rutgers – “Building the Assets of Low and Moderate Income Workers and their Families: The Role of Employee Ownership” provides a wakeup call to the enormous possibilities of wealth creation for working families by encouraging employee ownership and profit sharing.
Highlights of the study (based on a series of interviews with employee owners) include:
“ESOP [Employee Stock Ownership Plans] employees we studied earning less than the national household median income had greater wealth for retirement than did their counterparts in the nation . . . The greatest difference can be seen in those who are closer to retirement in the 60-64 age range. The ESOP workers we interviewed in this income range have over 10 times the median savings of employees nationally.”
“Women and people of color in the ESOPs studied here are faring much better than women and people of color nationally in building wealth. For example, the median wealth of Latinx ESOP employees in our sample is nearly 12 times the wealth of the national median for Latinx households. Black ESOP employees have approximately 3 times the wealth of Black households nationally.”