Latest news with #wealthInequality
Globe and Mail
2 days ago
- Business
- Globe and Mail
Income inequality is a vital issue. Why is nobody talking about it?
It is sad the issues currently dominating the headlines are the reshaping of global trade, the White House's battles with elite universities and immigration. There's not a peep from the U.S. government, academia or Wall Street about something that is vital to our social stability now and in the future. That crucial issue is massive income and wealth inequality, which has gone unaddressed by policymakers for years, regardless of whether Democrats or Republicans are in power. It is not foreign producers and exporters who stole jobs away from America and hollowed out the middle class. It is the entire tax system, especially how it directs government subsidies and support. The government never made adequate efforts to retool and retrain workers most affected by globalization. That amounts to years of neglect at the highest levels of the public sector. We need to constantly remind ourselves that capitalism needs democracy, and democracy needs social stability. Nothing I see policy-wise right now tells me we are heading in a very good direction. This is the problem with the tariff war and the 'big beautiful' budget bill. None of these really help the 'little guy.' From 1950 to 1980, productivity growth averaged just over 2 per cent annually, and real worker compensation per hour matched that pace. Something happened in 1980. I have often said that Ronald Reagan was the greatest president of our time, but I'm not so sure any more. While the Gipper had exceptional leadership and communication skills, it was his policies that got the ball on income inequality rolling here, especially on tax reform. Top marginal corporate tax rates were 46 per cent then and are 21 per cent today. Everyone embraced the reforms at the time, notably on Wall Street. But productivity has increased at a 2-per-cent average annual rate since 1980, while real work-based incomes have averaged half that pace at just over 1 per cent per annum. Compound that divergence over a 45-year period and it amounts to a whole lot of money. You see how dangerous this is, right? In a balanced economy, workers should be reaping the fruits of their labour. Their real compensation growth should match the labour component of productivity growth that they bring to their employers. So, who benefited from the continued expansion in labour productivity if it wasn't the workers? It was the owners of these businesses. From 1950 to 1980, unit profits in the non-financial corporate sector rose at an annual average rate of 2 per cent or more. Businesses and workers shared equally in the productivity gains. But since 1980, unit profit growth has doubled to more than a 4-per-cent average annual rate. Washington found a very clever way to keep lower-income individuals feeling they could afford the American Dream. The government deregulated the financial sector and allowed them to plug the proletariat with debt. The outstanding level of debt in the household sector has surged by more than 10 times since 1980 to $20-trillion. (All figures in this piece are in U.S. dollars.) The number of households has only expanded by 70 per cent over this period. In 1970, personal debt (loans and mortgages) was $7,000 per household. In 1980, it went up to $17,000. A decade later, after a proliferation of financial innovation and ever-increasing access to credit, that number rose to $38,000 by 1990. Then to $70,000 in 2000, $120,000 in 2010 (after a debt-laden mortgage boom), $130,000 in 2020, and now $150,000. In 1970, credit cards were a $5-billion business. Only high-income earners with a credit score could access a card, and they had one American Express card. It was a status symbol. Even in 1980, it was just a $60-billion business. Today? Try $1.3-trillion! This, along with government-insured mortgages, encouraged people – and particularly those in the low and middle classes – to replace the incomes they should have received from their productivity with easy access to credit. How can this possibly end well? Now that the Fed has raised rates more than four percentage points from the cycle lows and is leaving monetary policy deliberately tight, we are seeing the strains beginning to surface. Delinquency rates have surged on credit cards and auto loans; now that has spread to student debt, and even mortgage late-payment rates are edging higher. Consumer confidence for the lowest-income cohort has plummeted to all-time lows. Because young adults are saddled with so much debt, with few job or income prospects, their confidence levels have also plumbed the depths as they confront an additional problem, which is that the dream of owning a home is now just that – a dream. A median starter home price today averages out to $342,000 – with median incomes for this group at $68,000 and qualifying income for a mortgage loan at $100,000, how on earth can they ever move out of their parents' basements? There are 45 million Americans between 25 and 34 still living at home! It's time to stop this obsession with blaming foreign trading partners for our problems at home and start focusing on the real problems that are homegrown. The tax system has not only failed to cover the insane level of government spending, which has somehow been allowed to surge more than 50 per cent above the level immediately preceding the pandemic in 2019, but has failed to prevent income inequalities from rising further to unprecedented levels. Means-testing Social Security or widening the bands of the income tax rate schedules have somehow become taboo; not to mention tightening the bands between net effective corporate rates and personal tax rates. And that, my friends, will carry with it the laws of unintended consequences. Not now, perhaps, but in the future. David Rosenberg is founder of Rosenberg Research.
CNN
21-05-2025
- Business
- CNN
The 10 richest Americans got $365 billion richer in the past year. Now they're on the verge of a huge tax cut
Despite a brief market scare, the richest 10 Americans got $365 billion richer over the past year, according to a new analysis from Oxfam. The stunning increase in wealth amounts to a gain of roughly $1 billion per day for those billionaires. By contrast, the typical American worker made just over $50,000 in 2023. Oxfam found that it would take a staggering 726,000 years for 10 US workers at median earnings to make that much money. The findings put an exclamation point on the nation's wealth inequality and come as Republicans debate a costly bill that could make the rich even richer and deeply cut into key safety net programs. 'Billionaire wealth has increased astronomically while so many ordinary people struggle to make ends meet,' Rebecca Riddell, senior policy lead for economic and racial justice at Oxfam America, said in the report. To measure the gains of the richest, Oxfam measured the estimated wealth shifts of the top 10 on the Forbes Real Time Billionaire List between the end of April 2024 and the end of April 2025. Elon Musk, the world's richest person and CEO of Tesla, accounts for just over half of the total wealth gains, with his net worth spiking by $186.1 billion over that span. An analysis last fall found that Musk, a pivotal figure in President Donald Trump's return to the White House, is on track to become the world's first trillionaire. The net worths of Meta boss Mark Zuckerberg and Walmart heir Rob Walton increased by $38.7 billion apiece. Legendary investor Warren Buffett gained $34.8 billion in wealth, while Walmart heir Jim Walton gained $36.5 billion. Oxfam argues that the Republican bill, a legislative priority of Trump, would further stack the deck against ordinary people in favor of the most affluent. 'We're seeing a tax code being designed that would bring about the world's first trillionaire,' Riddell said. Some progressives have called for fighting inequality by imposing a wealth tax on ultra-millionaires and billionaires. Oxfam found that a 3% tax on wealth above $1 billion would raise $50 billion from the 10 richest Americans alone – enough to provide food assistance for one year to 22.5 million people. Of course, taxing wealth would be very challenging, in part because it can be hard to value net worth. And some legal scholars have questioned whether a wealth tax is even constitutional. Lawmakers are debating whether and how to extend the 2017 Tax Cuts and Jobs Act, Trump's signature tax law. The bill that has advanced in the House would make permanent essentially all of the individual income tax breaks from the 2017 law and temporarily cut taxes on tips and overtime. The legislation would increase the nation's economic output, measured by gross domestic product (GDP), by 0.5% in 10 years and 1.7% in 30 years, according to an analysis by the Penn Wharton Budget Model. Those economic gains would be fueled by higher savings and labor supply, incentivized by a weaker social safety net, Penn Wharton found. The bill's gains would go disproportionately to the rich, according to the analysis. The top 10% of earners would receive about two-thirds (65%) of the total value of the legislation, while households in the bottom 20% would lose about $1,035 in 2026 due to cuts to Medicaid, food stamps and other changes, according to Penn Wharton. Kent Smetters, professor of business economics and public policy at the University of Pennsylvania's Wharton School, told CNN that the top 10% of households would get about $3.1 trillion worth of tax cuts over 10 years. Smetters, who runs the Penn Wharton Budget Model, noted that the US tax system is 'very progressive,' with the same group paying about 70% of all federal income and payroll taxes. Democratic Senator Elizabeth Warren of Massachusetts said the GOP bill is a 'giveaway' for the rich. 'Donald Trump and Republicans in Congress are trying to jam through massive tax giveaways for the wealthiest Americans — millionaires and billionaires who are only getting richer by the day. Billionaires don't need another break, working people do,' Warren said in a statement to CNN. The White House, however, says Trump's budget priorities would help Americans thrive, extending gains from his first term in office. 'Wealth inequality in the United States actually decreased for the first time in decades during President Trump's first term thanks to his economic agenda of tax cuts, deregulation, domestic energy production, and tariffs,' White House spokesman Kush Desai said in a statement to CNN. 'The One, Big, Beautiful Bill locks many of these successful policies in, including President Trump's historic first term tax cuts, to again restore prosperity for Main Street.' The debate comes as concerns increase over America's $36 trillion mountain of debt. Moody's Ratings on Friday downgraded the perfect credit rating it held for the United States since 1917 due to concerns about the surge in government debt over the past decade and high interest payment ratios. The White House has argued the GOP tax bill will help address these concerns by cutting spending. Karoline Leavitt, the White House press secretary, said on Monday that the sweeping legislation won't add to the deficit. However, in its downgrade decision, Moody's said it does 'not believe that material multi-year reductions in mandatory spending and deficits will result from current fiscal proposals under consideration.' Likewise, the Committee for a Responsible Federal Budget, a fiscal watchdog group, warns that the GOP bill would 'add massively to near-term deficits' by piling another $3.3 trillion on the national debt over a decade including interest. That figure surges to $5.2 trillion if temporary provisions are made permanent. 'This additional near-term borrowing could stoke inflation and push up interest rates,' the Committee for a Responsible Federal Budget wrote in its analysis.
CNN
21-05-2025
- Business
- CNN
The 10 richest Americans got $365 billion richer in the past year. Now they're on the verge of a huge tax cut
Despite a brief market scare, the richest 10 Americans got $365 billion richer over the past year, according to a new analysis from Oxfam. The stunning increase in wealth amounts to a gain of roughly $1 billion per day for those billionaires. By contrast, the typical American worker made just over $50,000 in 2023. Oxfam found that it would take a staggering 726,000 years for 10 US workers at median earnings to make that much money. The findings put an exclamation point on the nation's wealth inequality and come as Republicans debate a costly bill that could make the rich even richer and deeply cut into key safety net programs. 'Billionaire wealth has increased astronomically while so many ordinary people struggle to make ends meet,' Rebecca Riddell, senior policy lead for economic and racial justice at Oxfam America, said in the report. To measure the gains of the richest, Oxfam measured the estimated wealth shifts of the top 10 on the Forbes Real Time Billionaire List between the end of April 2024 and the end of April 2025. Elon Musk, the world's richest person and CEO of Tesla, accounts for just over half of the total wealth gains, with his net worth spiking by $186.1 billion over that span. An analysis last fall found that Musk, a pivotal figure in President Donald Trump's return to the White House, is on track to become the world's first trillionaire. The net worths of Meta boss Mark Zuckerberg and Walmart heir Rob Walton increased by $38.7 billion apiece. Legendary investor Warren Buffett gained $34.8 billion in wealth, while Walmart heir Jim Walton gained $36.5 billion. Oxfam argues that the Republican bill, a legislative priority of Trump, would further stack the deck against ordinary people in favor of the most affluent. 'We're seeing a tax code being designed that would bring about the world's first trillionaire,' Riddell said. Some progressives have called for fighting inequality by imposing a wealth tax on ultra-millionaires and billionaires. Oxfam found that a 3% tax on wealth above $1 billion would raise $50 billion from the 10 richest Americans alone – enough to provide food assistance for one year to 22.5 million people. Of course, taxing wealth would be very challenging, in part because it can be hard to value net worth. And some legal scholars have questioned whether a wealth tax is even constitutional. Lawmakers are debating whether and how to extend the 2017 Tax Cuts and Jobs Act, Trump's signature tax law. The bill that has advanced in the House would make permanent essentially all of the individual income tax breaks from the 2017 law and temporarily cut taxes on tips and overtime. The legislation would increase the nation's economic output, measured by gross domestic product (GDP), by 0.5% in 10 years and 1.7% in 30 years, according to an analysis by the Penn Wharton Budget Model. Those economic gains would be fueled by higher savings and labor supply, incentivized by a weaker social safety net, Penn Wharton found. The bill's gains would go disproportionately to the rich, according to the analysis. The top 10% of earners would receive about two-thirds (65%) of the total value of the legislation, while households in the bottom 20% would lose about $1,035 in 2026 due to cuts to Medicaid, food stamps and other changes, according to Penn Wharton. Kent Smetters, professor of business economics and public policy at the University of Pennsylvania's Wharton School, told CNN that the top 10% of households would get about $3.1 trillion worth of tax cuts over 10 years. Smetters, who runs the Penn Wharton Budget Model, noted that the US tax system is 'very progressive,' with the same group paying about 70% of all federal income and payroll taxes. Democratic Senator Elizabeth Warren of Massachusetts said the GOP bill is a 'giveaway' for the rich. 'Donald Trump and Republicans in Congress are trying to jam through massive tax giveaways for the wealthiest Americans — millionaires and billionaires who are only getting richer by the day. Billionaires don't need another break, working people do,' Warren said in a statement to CNN. The White House, however, says Trump's budget priorities would help Americans thrive, extending gains from his first term in office. 'Wealth inequality in the United States actually decreased for the first time in decades during President Trump's first term thanks to his economic agenda of tax cuts, deregulation, domestic energy production, and tariffs,' White House spokesman Kush Desai said in a statement to CNN. 'The One, Big, Beautiful Bill locks many of these successful policies in, including President Trump's historic first term tax cuts, to again restore prosperity for Main Street.' The debate comes as concerns increase over America's $36 trillion mountain of debt. Moody's Ratings on Friday downgraded the perfect credit rating it held for the United States since 1917 due to concerns about the surge in government debt over the past decade and high interest payment ratios. The White House has argued the GOP tax bill will help address these concerns by cutting spending. Karoline Leavitt, the White House press secretary, said on Monday that the sweeping legislation won't add to the deficit. However, in its downgrade decision, Moody's said it does 'not believe that material multi-year reductions in mandatory spending and deficits will result from current fiscal proposals under consideration.' Likewise, the Committee for a Responsible Federal Budget, a fiscal watchdog group, warns that the GOP bill would 'add massively to near-term deficits' by piling another $3.3 trillion on the national debt over a decade including interest. That figure surges to $5.2 trillion if temporary provisions are made permanent. 'This additional near-term borrowing could stoke inflation and push up interest rates,' the Committee for a Responsible Federal Budget wrote in its analysis.
CNN
21-05-2025
- Business
- CNN
The 10 richest Americans got $365 billion richer in the past year. Now they're on the verge of a huge tax cut
Despite a brief market scare, the richest 10 Americans got $365 billion richer over the past year, according to a new analysis from Oxfam. The stunning increase in wealth amounts to a gain of roughly $1 billion per day for those billionaires. By contrast, the typical American worker made just over $50,000 in 2023. Oxfam found that it would take a staggering 726,000 years for 10 US workers at median earnings to make that much money. The findings put an exclamation point on the nation's wealth inequality and come as Republicans debate a costly bill that could make the rich even richer and deeply cut into key safety net programs. 'Billionaire wealth has increased astronomically while so many ordinary people struggle to make ends meet,' Rebecca Riddell, senior policy lead for economic and racial justice at Oxfam America, said in the report. To measure the gains of the richest, Oxfam measured the estimated wealth shifts of the top 10 on the Forbes Real Time Billionaire List between the end of April 2024 and the end of April 2025. Elon Musk, the world's richest person and CEO of Tesla, accounts for just over half of the total wealth gains, with his net worth spiking by $186.1 billion over that span. An analysis last fall found that Musk, a pivotal figure in President Donald Trump's return to the White House, is on track to become the world's first trillionaire. The net worths of Meta boss Mark Zuckerberg and Walmart heir Rob Walton increased by $38.7 billion apiece. Legendary investor Warren Buffett gained $34.8 billion in wealth, while Walmart heir Jim Walton gained $36.5 billion. Oxfam argues that the Republican bill, a legislative priority of Trump, would further stack the deck against ordinary people in favor of the most affluent. 'We're seeing a tax code being designed that would bring about the world's first trillionaire,' Riddell said. Some progressives have called for fighting inequality by imposing a wealth tax on ultra-millionaires and billionaires. Oxfam found that a 3% tax on wealth above $1 billion would raise $50 billion from the 10 richest Americans alone – enough to provide food assistance for one year to 22.5 million people. Of course, taxing wealth would be very challenging, in part because it can be hard to value net worth. And some legal scholars have questioned whether a wealth tax is even constitutional. Lawmakers are debating whether and how to extend the 2017 Tax Cuts and Jobs Act, Trump's signature tax law. The bill that has advanced in the House would make permanent essentially all of the individual income tax breaks from the 2017 law and temporarily cut taxes on tips and overtime. The legislation would increase the nation's economic output, measured by gross domestic product (GDP), by 0.5% in 10 years and 1.7% in 30 years, according to an analysis by the Penn Wharton Budget Model. Those economic gains would be fueled by higher savings and labor supply, incentivized by a weaker social safety net, Penn Wharton found. The bill's gains would go disproportionately to the rich, according to the analysis. The top 10% of earners would receive about two-thirds (65%) of the total value of the legislation, while households in the bottom 20% would lose about $1,035 in 2026 due to cuts to Medicaid, food stamps and other changes, according to Penn Wharton. Kent Smetters, professor of business economics and public policy at the University of Pennsylvania's Wharton School, told CNN that the top 10% of households would get about $3.1 trillion worth of tax cuts over 10 years. Smetters, who runs the Penn Wharton Budget Model, noted that the US tax system is 'very progressive,' with the same group paying about 70% of all federal income and payroll taxes. Democratic Senator Elizabeth Warren of Massachusetts said the GOP bill is a 'giveaway' for the rich. 'Donald Trump and Republicans in Congress are trying to jam through massive tax giveaways for the wealthiest Americans — millionaires and billionaires who are only getting richer by the day. Billionaires don't need another break, working people do,' Warren said in a statement to CNN. The White House, however, says Trump's budget priorities would help Americans thrive, extending gains from his first term in office. 'Wealth inequality in the United States actually decreased for the first time in decades during President Trump's first term thanks to his economic agenda of tax cuts, deregulation, domestic energy production, and tariffs,' White House spokesman Kush Desai said in a statement to CNN. 'The One, Big, Beautiful Bill locks many of these successful policies in, including President Trump's historic first term tax cuts, to again restore prosperity for Main Street.' The debate comes as concerns increase over America's $36 trillion mountain of debt. Moody's Ratings on Friday downgraded the perfect credit rating it held for the United States since 1917 due to concerns about the surge in government debt over the past decade and high interest payment ratios. The White House has argued the GOP tax bill will help address these concerns by cutting spending. Karoline Leavitt, the White House press secretary, said on Monday that the sweeping legislation won't add to the deficit. However, in its downgrade decision, Moody's said it does 'not believe that material multi-year reductions in mandatory spending and deficits will result from current fiscal proposals under consideration.' Likewise, the Committee for a Responsible Federal Budget, a fiscal watchdog group, warns that the GOP bill would 'add massively to near-term deficits' by piling another $3.3 trillion on the national debt over a decade including interest. That figure surges to $5.2 trillion if temporary provisions are made permanent. 'This additional near-term borrowing could stoke inflation and push up interest rates,' the Committee for a Responsible Federal Budget wrote in its analysis.
The Guardian
17-05-2025
- Business
- The Guardian
It's not a rich list – it's gone far beyond that. We need to talk about ‘extreme wealth'
Once again, it's the Hinduja family. Gopi Hinduja and his family, who run the Hinduja Group, are cited as Britain's richest family in the latest Sunday Times rich list. The big story so far seems to be that their wealth has dropped to £35.3bn from £37.2bn the year before. But that story, and much of the discussion there will be this weekend, risks missing the real story. 'Rich list' is barely the right description for the extreme wealth we should be talking about. In 1989, when the Sunday Times first published its annual rich list, to be included someone would need to have 6,000 times the wealth of the average person in the UK. That's already a pretty big gap – but this has now tripled to more than 18,000 times the average, according to a study by the University of Greenwich. The problem is that wealth begets wealth. Those who own land, property and shares have seen huge returns on these investments and been able to accumulate more assets over time, generating even more returns. To make things worse, while income inequality can be tempered by measures like a minimum wage or progressive taxes, policymakers seem unable or unwilling to do anything about wealth accumulation. Successive governments have claimed to be for 'working people' but have turned a blind eye to the fact that most wealth accumulation in recent decades has been through the passive collection of returns on existing wealth, rather than earned through hard work or entrepreneurial brilliance. Worst of all, there is no upper limit on how much an individual or family can acquire. Instead, we are asked to celebrate the vast fortunes of the super-rich and watch passively as we hurtle towards the world's first trillionaires. One thing that could help curb the excesses of wealth inequality is an 'extreme wealth line', an idea that is starting to gain traction among campaigners and policy experts. Decades ago, economists at the World Bank formulated an extreme poverty line by calculating how much money someone would need to buy enough food and essentials to survive each day. That innovation helped us compare poverty across countries and eras, and helped policymakers prioritise interventions to reduce poverty. It was also an ethical statement: the point below which a society should not let any household fall. Today, I believe we need an equivalent line for the other end of the spectrum: the point above which a society should not let any household accumulate wealth, and above which policymakers should act proactively to curb wealth accumulation. There is a point above which wealth gives you too much power to shape politics through lobbying, party donations or freebies, just as there is a point above which the environmental impacts of super-rich lifestyles cause extreme harm to the environment. And a point above which wealth concentration undermines economic competition and reduces productive investment. Meanwhile, rising inequality tears at the social fabric that binds us together. We risk becoming an island of have-yachts and have-nots, rather than an island of strangers. This is where it gets tricky. If you ask what that point is, you get a range of answers. Is it when someone becomes a billionaire? Is it the top 1% of wealth holders? Is it €10m, the suggestion made by the Dutch writer Ingrid Robeyns in her excellent book Limitarianism: The Case Against Extreme Wealth? Here's where the work done by the compilers of the rich list to tot up the value of land, property, shares and 'other assets such as art and racehorses' of the super-rich might come in handy. Turns out you need net assets of £350m to make it into this year's list. I'm not sure whether they intended it, but this is about 1,000 times the median household wealth in Great Britain. Interestingly, a recent survey found nearly two-thirds of millionaires from G20 countries think wealth poses a risk to society when someone has 1,000 times the societal median. Even the rich think there is a line. I would love to put these options to a citizens' assembly and ask a representative sample of British people to consider the evidence, hear the arguments, and come up with a point above which wealth should be considered extreme. Without some kind of independent understanding of when wealth becomes harmful, there will be the option to obfuscate, impede and nullify attempts to rein in extreme wealth harms. Finding a democratic way of defining an extreme wealth line could finally give politicians the mandate and a framework to tackle inequality before it is too late. It would give the chancellor a solid rationale for raising tax rates on those whose wealth exceeds the line. If she is not prepared to go that far, tax and inheritance rules could be changed to compel the rich to donate wealth above the line to charity. If even that feels too audacious, government could limit the inheritance that any nepo baby could have to below the extreme wealth line. Last week Bill Gates pledged to give away 99% of his fortune, quoting an 1889 essay (The Gospel of Wealth) by tycoon Andrew Carnegie, who wrote: 'The man who dies thus rich dies disgraced.' This is admirable, but it is naive and dangerous for society to rely on the enlightened philanthropist to curb inequality. We need to stop glorifying wealth through rich lists and start drawing a line on extreme wealth. Dhananjayan Sriskandarajah is chief executive of the New Economics Foundation and author of Power to the People
