is warren 'winning'?
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A look at the victors and vanquished after a generation of unrelenting class war in the United StatesTRANSCRIPT
The victors and vanquishedafter a generation of unrelenting
class war
Is Warren Winning?
Sam PizzigatiInstitute for Policy Studies
America’s Future Now!Washington, D.C.
June 1, 2009
The sage of Omaha speaks
“There’s class warfare, all right, but it’s my class, the rich class, that’s making war, and we’re winning.”
Warren Buffett, billionaire investor,
New York Times, November 26, 2006
But who sits in Warren’s class?
Who exactly is really winning?
Is Warren’s income class . . .
Top 10% Top 5% Top 1%
$108,904$153,542
$388,806
Income needed to enter affluent income categories, 2006
Data source: Internal Revenue Service
How we define income class matters
Top 10% Top 5% Top 1%
109.5%
146.0%
265.2%
Income increase, after inflation, 1975 - 2006
Data source: Internal Revenue Service
The real winners sit at the summit
Bottom half, top 1%
Top 99.5 - 99.9%
Top 99.9 - 99.99%
Top 0.01%
113.0%184.8%
406.5%
815.8%
Income increase, after inflation, 1975 - 2006
Source: Saez-Piketty analysis of Internal Revenue Service data
Warren’s side: even more exclusive
Top 0.01% (14,836 families)
Top 400
$29,726,899
$263,306,000
Average income, 2006
Since 1955, top 400 income up 2048%
1955 2006
$12,256,976
$263,306,000
Top 400 average income, 1955 and 2006, inflation-adjusted
Top 400 wealth even more impressive
Forbes 400 Bottom 50%, U.S. families
$1.54 trillion$1.61 trillion
Net worth, 2007
Source: Federal Reserve Board
Our rich by far the world’s richest
USA; 369
China; 47Germany; 44
Russia; 32
UK; 25India; 24
Rest of world; 252
World billionaires, by nation, 2009
Source: Forbes magazine
The Last 30 Years: A Grand Reversal
1917
1920
1923
1926
1929
1932
1935
1938
1941
1944
1947
1950
1953
1956
1959
1962
1965
1968
1971
1974
1977
1980
1983
1986
1989
1992
1995
1998
2001
2004
0
200
400
600
800
1000
Average income of top 0.01 percent of U.S. families as a multiple
of average income of bottom 90 percent of U.S. families Top 0.01% in 1928 makes
892 times the bottom 90%
average income
Top 0.01% in 1955 makes
179 times the bottom 90%
Top 0.01% in 1980 makes
176 times the bottom 90%
Top 0.01% in 2006 makes 976 times the bottom
90%
How extremely concentrated has wealth in the United States become?
Top 1% Bottom 90%
$21.9 tril-lion
$18.4tril-lion
Total net worth, 2007
Source: Federal Reserve Board, January 2009
Does not include total net worth of the Forbes 400
Who’s losing the class war?
Bottom 90%: Going nowhere fast
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
$0
$200,000
$400,000
$600,000
$800,000
$1,000,000
$1,200,000
$1,400,000
$30,659
$1,242,595
Average top 1% income
Average bottom 90% income
2006
The missing American DreamThe more that income concentrates at the top,
the less lives have improved for average Americans.
Bottom Fifth
Second Fifth
Middle Fifth
Fourth Fifth
Top Fifth Top 5%
Up 116%
Up 100%Up 111% Up 114%
Up 99%
Up 86%
Down 1%
Up 9%Up 15%
Up 25%
Up 53%Up 81%
Real family income growth,1947–1979 vs 1979 - 2005
1947-1979 1979-2005
How did all this happen? One major factor:
We stopped taxing the rich.
Taxing the rich: now and then
2009 2000 1959
35.0% 39.6%
91.0%
15% 20% 25%
Top tax rates by income category
Ordinary Capital Gains
The Great Tax Shift
1955 2006
51.2%
17.2%
Share of income paid in federal income tax by top 400
Sweet times at the tippy top
1955 2006
$6,275,573$45,216,000
$263,306,000
$12,256,976
Top 400 income and federal income tax, 1955 and 2006, inflation-adjusted
The right’s argument
‘We’re overtaxed’
USA UK Germany France
35%40%
45%40%
Current top tax rate on income in top income bracket
Not by comparison with our global peers
The right’s argument
‘The rich can easily avoid high taxes’
1955 1966 2006
Tax rate on income in top income bracket
Share of total income actually paid in taxes
51.2% 42.3% 17.2%
91%
70%
35%
But the wealthy pay more in taxes when tax rates start high
The right’s argument
‘High taxes endanger philanthropy’
John Paulson 2007 income Gates Foundation 2007 grants
$3.7 billion
$2.0 billion
Foundation giving pales against revenue taxing the rich would generate
$1.9 billion
$636 millionAverage current tax rate for top 400
Average 1955 tax rate for top 400
Understanding the impact of inequality
The more equality, the more givingIndeed, everything that matters improves as we become less unequal
The more middle class a society, research shows, the better the society for all the people in it. The more democratic
The more economically vibrant
The more environmentally sound
The more honest
The more trustful
The more compassionate
The more healthy
America’s mid 20th century consensus
Smart societies do not let wealth concentrate in a precious few hands.
Smart societies tax the rich to invest in opportunity for all.
‘In many countries of the free
world
private enterprise is greatly
different
from what we know here. In
some,
a few families are fabulously
wealthy, contribute far less
than they should in taxes, and
are indifferent to the poverty
of the great masses of the
people . . .
A country in this situation is
fraught
with continual instability. It is
ripe for revolution.’
Dwight D. EisenhowerNational Automobile Show Industry DinnerDetroit, October 17, 1960
Our current reigning wisdom
We can’t go back to the equality we had
Lawrence Summers,
currently director, Obama
White House National
Economic Council
In 2004, to give America’s bottom 80% the same share of the nation’s income they received in 1979 “would have required transferring $664 billion from the top 1% of households to the bottom 80%.” “No one would suggest this is feasible or even desirable . . .”
For a America that works for everyone,
maybe we need to start doing the
suggesting.
