It has been said that there are three kinds of lies: lies, damned lies, and statistics. Well, there’s no lying about the growing income inequality in America. In 1965, America’s top 1% controlled about 10% of the nation’s after-tax income. That number has now grown to over 15%. The average CEO-to-worker pay ratio has increased from 20-1 in 1965 to a whopping 312-1 in 2017. And middle-class real wage growth has been stagnant for decades.
For better or worse, this trend shows no signs of slowing down. And, as the fissure grows wider, it is increasingly important to understand citizens’ attitudes toward the wealth gap in America — or at least that is the claim made in a new study led by Professor Alain Cohn of the University of Michigan.
Cohn and his team of researchers sought to test whether opinions toward income inequality differed between America’s wealthiest 5% and the rest of the country. To accomplish this, the team surveyed 882 American citizens in the early part of 2017. Of those surveyed, 465 belonged to the top 5% (defined as households with an annual income above $250,000 or gross financial assets of $1 million or more) while the remaining 417 individuals comprised the bottom 95%.
The researchers asked both groups to reflect on the current state of wealth inequality in America. Specifically, participants were asked to report whether they preferred a higher or lower income tax rate for the top income bracket and if they wanted to see a change made to the effective estate tax rate. Next, participants indicated how much they trusted the government. They were also asked to report their beliefs regarding the importance of luck versus hard work in getting ahead in life. Finally, participants responded to a series of socio-demographic questions, such as age, gender, religion, and personal financial history.
Comparing the responses of America’s economic elite to the rest of the country, the researchers first found (not surprisingly) that the wealthiest 5% preferred a reduction in the top income tax rate while the bottom 95% thought that it should be raised. Regarding the estate tax, both the top 5% and the bottom 95% reported that they would like to see it lowered. The top 5%, however, was in favor of a much steeper reduction.