If you still happen to be wondering what’s causing the rampant wealth inequality in the United States, here’s a hint: The richest Americans are now paying a lower tax rate than the working class.
The revelation is part of an analysis by University of California at Berkeley economists Emmanuel Saez and Gabriel Zucman, whose new book The Triumph of Injustice breaks down the troubling evolution of tax rates in the United States. Saez and Zucman found that in 2018, the total tax rate for the 400 wealthiest families in America was 23 percent, while the tax rate for bottom half of American families was over a percentage point higher, at 24.2 percent. It marks the first time in history the richest 400 households have shouldered less of a tax burden than the working class.
Just as startling is the degree to which the tax rate for the wealthy has plummeted since the middle of the 20th century. In 1950, the first year of one of the most prosperous economic decades in American history, the richest 400 households paid a tax rate of a whopping 70 percent. In 1980, the number was 47 percent. Now, it’s down to 23, a curious (by which we mean batshit crazy) policy evolution in a nation in which the richest 400 families possess as much wealth than the bottom 60 percent of households.
So what happened? Saez and Zucman explain that following the high tax rate on the wealthy in the middle of the century, corporations and politicians worked to find ways for the rich to pay less, under the guise that it would help lift up the lower classes (see: “trickle-down economics”). But this was not the case, and income inequality worsened, which, in turn, has hurt the economy.
In reviewing the book on Monday, the New York Times created a striking visualization of how precipitously the tax rate for the wealthy has fallen while the tax rate for lower earners has remained mostly level, due in part to cuts to the inability of lower earners to benefit from cuts to capital gains, estate, and corporate taxes as much as wealthier Americans.