Occupy this: Six culprits for economic injustice and inequality in America

So, what should be occupied next?

No doubt, the Occupy Wall Street protesters were right to target the financial industry first. Soaring Wall Street pay has been a key force behind America’s income disparities over the past three decades, and banks have yet to be held accountable for the destruction they wrought in recent years.

Loading...

Comments

• Weigh In
• Corrections?

Featured Comment

"What other locations should Americans occupy?"

Outlook editor

Join The Discussion

Graphic

Live updates: Occupy protest check-ins on Foursquare

Questions about the piece?

Live Q&A 11 a.m. Monday

Ask Now

But the movement needs some new destinations. It’s getting cold in Zuccotti Park, and the authorities in other Occupy cities are starting to run out of patience. Besides, if you’re really serious about addressing income inequality and economic injustice in America, there are other institutions and figures worth challenging. Their roles in creating the gaping divides in our economy — in which the top 1 percent of taxpayers take home a quarter of the nation’s income — prove that inequality is not just a result of abstract trends of globalization and technology. No, wide inequality in this country has been driven in large part by specific actions, or failures to act, by people and organizations in positions of authority.

Protesters need no introduction to Wall Street, let alone the Capitol or the White House. But here, in no particular order, are other culprits in need of occupation.

Occupy Bill Clinton

Hold on, you might say. Didn’t President Clinton preside over our last stretch of solid economic growth? And didn’t his budget deal of 1993 raise income taxes on the wealthy? Yes, and yes, but Clinton also signed off on a giant windfall for affluent Americans — the 1997 reduction in the capital gains rate, the tax paid on profits from the sale of assets such as stocks or real estate.

President Ronald Reagan’s 1986 tax overhaul raised the capital gains rate from 20 percent to 28 percent, equalizing it with the new top tax rate for earned income. This was a progressive move, given that capital gains are claimed disproportionately by the very rich; half of all capital gains have gone to the top 0.1 percent of earners over the past 20 years. His successor, President George H.W. Bush, repeatedly attempted to lower the capital gains rate but was blocked by Senate Democrats.

But early in his second term, Clinton cut a deal to reduce the rate from 28 percent to 20 percent in exchange for congressional Republicans’ approval of college tax credits. With Clinton having signed off on that reduction, it was easier for his successor, George W. Bush, to drive the rate even lower, to 15 percent.

The low capital gains rate explains why billionaire investor Warren Buffett was taxed at only 17 percent last year and why millionaires paid an effective tax rate of 22.1 percent in 2007, down from 30.8 percent in 1996. The low capital gains rate also gave rise to the “hedge fund loophole,” under which investment managers classify their pay as capital gains, thus having their income taxed at a mere 15 percent.

“By far the largest contributor to the reduced progressivity of the U.S. tax system is the change in the capital gains rate. It is reason number one, number two and number three,” said Marty Sullivan, an economist with Tax Analysts. “The Democrats were fighting for years to keep that out of the law, and then Clinton comes in and bargained it away.”