What’s happening now is that more rich are being disparaged as “undeserving.” Blamed for the financial crisis, Wall Street types top the list. During the 1990s stock market boom, about half of Americans agreed that “people on Wall Street are as honest and moral as other people,” reports the Harris Poll. This year, only 26 percent think so. Two-thirds believe Wall Street’s most successful people are overpaid.
Corporate chief executives stir similar ire. With 9 percent unemployment, languishing stock prices and stagnant wages, CEO pay raises smack of cronyism with compliant directors. When Hewlett-Packard recently fired chief executive Leo Apotheker after 11 months with a $13 million severance package, the disconnect between pay and performance was especially astonishing.
Beyond these familiar scapegoats, what can we say about growing economic inequality? Here are three generalizations.
First, the increase has been stunning. From 1945 to the late 1970s, the richest 10 percent of Americans accounted for about 33 percent to 35 percent of total income, including capital gains (mostly stock profits), estimate economists Emmanuel Saez and Thomas Piketty. By 2007, their share was 50 percent — equivalent to the late 1920s. Most of the gain went to the richest 1 percent, whose share rose from about 10 percent in 1980 to 24 percent in 2007.
Second, it’s a global phenomenon. In a 2008 study, the Organization for Economic Cooperation and Development (OECD) found that inequality had increased for 17 out of 22 countries over two decades, though conditions vary dramatically by country. In Sweden and Denmark, the richest 10 percent have incomes about five times greater than those of the poorest 10 percent. In the United States, the ratio is 14-1. The OECD average is 9-1. Mexico has the highest, 27-1.
Finally, most of America’s rich — however defined — don’t escape taxation. In 2007, the richest 10 percent paid 55 percent of all federal taxes, estimates the Congressional Budget Office. The richest 1 percent paid the lion’s share of that: 28.1 percent of federal taxes. The average tax rate on the top 1 percent was 29.5 percent. Similarly, the richest 3 percent account for 36 percent of charitable contributions.