Americans love to talk about equality in the USA. It started early, with the Declaration of Independence (all men… created equal) and it’s expanded since then to equal protection of the law (the 14th Amendment to the U.S. Constitution), equal employment opportunity, and the equal rights amendment (the ERA).
Well, that last one is here just to see if you’re paying attention. The ERA isn’t a law yet, but it’s still being talked about, even though it was first introduced nearly 100 years ago. It’s been a really long talk.
One even bigger item, however, is rarely mentioned when Americans talk about equality: money. That’s surprising because even a small step toward money equality in the USA would make many other challenges in American life disappear. But it’s a topic that doesn’t seem to interest the majority of Americans, especially some of those with the least amount of money.
Facts about money in the USA
The income gap in America is wide and it’s growing wider. Between 1978 and 2018, CEO compensation increased by more than 900 percent, while other worker compensation increased by less than 12 percent. In 1965, a typical American corporate CEO earned over twenty times more than a typical worker but, by 2018, that ratio had grown to 278. It’s even higher now. Americans employed by the same company make hundreds of times more income than other Americans at the same workplace – millions of dollars more.
To put that into context, let’s use Finland for comparison. American millionaires are nearly 9% of the adult population, while Finnish millionaires are less than 2%. That’s four-and-a-half times more in the USA than in Finland.
The income of the top 1% of Americans is more than 20% of the total income of all Americans, while the top 1% in Finland is only 10% of their fellow Finns’ total income.
That’s just income. Wealth is a closely related thing, but different. Wealth is what someone owns, not what they make. The end result is similar – more money for the wealthy begets more income even from doing nothing other than watching their property values rise or investing in a way that creates even more wealth. 60% of wealth in the USA is inherited, so explanations of “self-made wealthy people” don’t hold up.
In the USA, 0.1% of Americans own 20% of all the wealth. That disparity is even higher when combined with other factors like race; the 400 wealthiest Americans own more than all black American households combined.
Both wealth and income in America can result in less taxes, as inconceivable as that seems to Finns. In Finland, with some exceptions, that’s generally not the case because of progressive taxation. Boiled down to simple terms, in America the rich are really rich and they’re getting richer all the time. It’s not just the famous billionaires whose money is discussed in public frequently.
What if the rich-poor gap could be narrowed, even by a little bit?
What if, for example, a ‘wealth tax’ would be imposed? A few lawmakers in Washington propose a seemingly tiny additional tax on Americans whose wealth is over $50 million. They would be taxed at 2% of their wealth. That means two pennies for each dollar over $50 million -- the first $50 million would remain safe from the tax -- and that would be bumped up to four pennies for every dollar over $1 billion.
That doesn’t seem like a lot for anyone to pay, especially when it would apply only to people who already have more than $50 million or, for a few others, more than $1 billion.
Such a tax would purportedly generate about $3 trillion in revenue over the next ten years. Examples of ways to spend that extra money for all Americans include free universal health care, free childcare, free college tuition and high-quality public education, to name just a few. That would be a major change in American life, without needing to wonder how to pay for it.
Money equality should be talked about
All of these facts and numbers can be debated. Perhaps the ratios between richer and poorer Americans are slightly different, perhaps new taxes on the richest Americans would cost more to collect and wouldn’t be so universally helpful, perhaps Trump-appointed judges would find constitutional problems with any additional taxes, or maybe rich Americans would simply renounce their citizenship and move away.
These have all been offered as reasons to not change anything and to continue to let the money gap widen. It has worked, especially in Washington.
The Biden administration has essentially abandoned any wealth tax efforts. The few people who try to keep alive any real discussion about money disparity in the USA are branded as “socialists”.
Most importantly, the American public doesn’t seem to care. This is no longer an important issue for voters. Politicians who wring their hands about deficits (only when that’s convenient for them, of course) remain opposed to any discussion of taxing their moneyed campaign contributors, yet they offer the lack of money as a roadblock to every proposal to address crucial problems that remain unresolved today in the USA. And then they often get the votes of the poorest Americans.
It seems that money should talk, and be talked about, but it’s been mysteriously buried by other voices lately in Washington.
Tom A. Lippo is a Finnish-speaking American lawyer. Educated at Yale, the University of Jyväskylä and Stanford Law School, he is the founder of FACT LAW, an international law firm established in 1985. FACT is the first law firm with offices in both Finland and the United States. Tom has been a lawyer in Washington, DC based on Capitol Hill for nearly 40 years.