Wednesday, June 28, 2006

Taxes then and now


"Well before the [civil] war, the wealthy of America had begun holding a dramatically large portion of the nation's wealth. According to the economic historian Lee Soltow, 37 percent of the nation's wealth was held by 2 percent of the people, and the top 5 percent held 50 to 60 percent of the nation's wealth in the 1850s. This inequality was tolerated, according to Soltow, because the average person was gaining wealth and saw the system as making it possible to get more."

Steven R. Weisman, The Great Tax Wars:Lincoln to Wilson - The Fierce Battles over Money and Power That Transformed the Nation.


But when all federal taxes were thrown together, the share of the lowest quintile was 1.6%, while the share of the highest quintile was 60.2%. Karl Marx, call your office.

- The Wall Street Journal Editorial Board, January 20, 2003.

Well, if "all federal taxes thrown together" includes taxation of wealth it may behoove us to note that as of 1998 when all marketable wealth - defined by economist Edward Wolff as "the current value of all marketable or fungible assets less the current value of debts" were "thrown together," the share of the lowest two quintiles (bottom forty percent) was 0.2%, while the share of the highest quintile (top 20%) was 83.4%.

Andrew Mellon, Line One.

Charts based on 1998 figures analyzed by economist Edward Wolff.

How the pie is sliced

"At least the surface evidence suggests that equality and growth are complementary. The high growth rates of the 1950s and 1960s occurred during a period of low inequality. The slowdown in growth that began in the 1970s was accompanied by rising inequality in both income and wealth. High levels of inequality put better training and education out of the reach of more workers and may breed resentment in the workplace. Analyses of historical data on the U.S. as well as comparative international studies confirm a positive association between equality and growth."

Brad DeLong's favorite Paul Krugman Essay:

"A particularly striking statistic in Wolff's book should put an end to the still widespread tendency to discuss the growth of inequality in America by tracking the fortunes of the top 20 percent, or of college-educated workers. Between 1983 and 1989, while the wealth share of the top 20 percent of families rose substantially, the share of percentiles 80 to 99 actually fell. In other words when we say that America's rich have gotten richer, by the " rich " we did not mean the garden variety yuppies-we mean true plutocrats."

The Rich Get Richer

"Despite the overall gains in stock ownership, fewer than half of all U.S. households had any stake in the stock market by 1998--and many of those had only a minor stake. In 1998, while 48 percent of households owned some stock, only 36 percent had total stock holdings worth $5,000 or more and only 32 percent owned stock worth $10,000 or more. Moreover, the top 1 percent of households accounted for 42 percent of the value of all stock owned in the United States; the top 5 percent accounted for about two-thirds; the top 10 percent for more than three-quarters; and the top 20 percent for almost 90 percent (see table 2)."

[Added to the Chronicle of the 2003 Tax Cut]

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