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Inequality – The Growing Divide

As Janet Goloub pointed out in her 2005 essay, the United States “is an example of ‘the rich getting richer and the poor getting poorer.’ ” Using the work of United For a Fair Economy (UFE), she pointed out that “From 1979–2001, real family income increased 3% for the lowest fifth, 53% for the top fifth—and 81% for the top 5%. During this time, taxes were reshaped to decrease the burden on the wealthy, anti-union policies by the government undermined worker security, CEO salaries exploded upwards, and the main growth came from investment earnings, which are owned by the wealthier to begin with.”

It appears that this growing divide is based on class difference – note that the main growth in the wealth of the wealthy came from investment earnings, not from wages.

This growing divide also appears to be part of a dysfunctional economic system, with economic instability widespread. UFE has pointed out that elected officials in many states facing shortfalls and economic declines have been opting for policies that have “been downright harmful, shortsighted, and economically unsound”.

“By design, our state tax structures are designed to fail. Why? Because every state in the U.S. has a regressive tax structure, meaning it takes a greater share of income from low- and middle-income families than from the wealthy. In tough economic times, trying to raise adequate revenue through a regressive tax structure is like trying to squeeze water from a stone.”

On May 25, 2011, UFE released a new study that shows there is “a solution to state deficits that would raise significant revenue, encourage investment, and create jobs—without cutting vital public services”. It would be “achieved by inverting each state’s tax structure. In other words, taking each state’s current distribution of state and local taxes and flipping it, with a pivot point at dead center (the 50th percentile). In this inverted state and local tax model, the wealthiest 20 percent pay the share of state and local taxes currently imposed on the least wealthy 20 percent, and vice-versa, with the fourth quintile also trading places with the second.”

Placing unfair and excessive financial burdens on working people in order to “correct” system dysfunction is a time-honored approach. Berit Lakey et al, point out, in Grassroots and Nonprofit Leadership: A Guide for Organizations in Changing Times (1995: 38), a lesson for “every cause whose success is going to cost substantial money. Success requires that you address tax equity [taxing the wealthy as per UFE above] and militarism [the military budget].” Note: this book is available in three downloadable pdfs from Training for Change.