The smartest way to make the rich pay is not a wealth tax
Democratic capitalism, for all its shortcomings, remains the greatest engine of widely-shared prosperity the world has ever known. History rendered judgment on this question in the momentous year of 1989, when communist regimes in Europe began to fall. Yet today both democracy and capitalism are under siege from populists of the left and right, around the world, and in the country whose economic and political model seemed vindicated by the Cold War’s result: the United States. [Read more]
How to close the wealth gap from the bottom up
More taxation of capital gains and estates could help shrink the United States’ wealth gap from the top down. The gap must also be closed from the bottom up, by bolstering access to the three key ingredients of middle-class wealth: owner-occupied homes, which represented the majority of household wealth for most people in 2019; financial assets, such as stocks, whose value, measured by the Dow Jones industrial average, has increased sevenfold since 1989; and human capital, in the form of training and education, which is highly correlated with household wealth. Seven out of 10 Americans in the wealthiest 10 percent have at least a bachelor’s degree, according to the Federal Reserve, but only 1 out of 5 members of the least wealthy half of society does. Overall, much more could and should be done to give the poorer half of the American population a stake in the nation’s growth and prosperity. [Read more]
Narrowing the U.S. wealth gap is important. Narrowing the racial wealth gap is urgent.
The Federal Housing Act. The Social Security Act. The G.I. Bill. To list these landmark 20th-century laws is to understand how important government support was to building a broad middle class, endowed with a modest but meaningful “piece of the rock,” in the United States. It is also to acknowledge that this historic effort mostly bypassed people of African descent — who were deliberately, if often implicitly, denied the benefits. [Read more]
Private fortunes shouldn’t be abolished. But our society shouldn’t be this unequal, either.
Over the course of this series, we have made the case that inequality of wealth is a serious problem in the United States. Disparities between the wealthiest 1 percent and the bottom half are far larger in this country than in other democratic capitalist countries, and far larger than can be justified as reward for productive effort. Indeed, to an unhealthy degree, wealth in the United States is being gained through unproductive activity — “rent-seeking” — or simply through inheritance. Well-designed government interventions can reduce inequality from the top down, through more aggressive taxation of capital gains and estates, and from the bottom up, through better-targeted support for homeownership, higher education and retirement savings. [Read more]