A flat tax would further exacerbate income inequality

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Daily Titan
By: Matthew Haddix
November 4, 2013

The disparity of personal wealth and income amongst the richest and poorest Americans has become more visible than ever in the last decade, causing many to ask if the pathway to a middle class life is still as feasible as it once was.

Organizations such as the National Taxpayers Union (NTU) suggest emulating many other countries worldwide by adopting a flat tax rate for all individuals, but this will only exasperate the gap between the richest and poorest Americans.

As of 2013, the tax rate for the lowest bracket of wage earners stands at 10 percent. For top wage earners making over $400,000, the tax rate is 39.6. For organizations like the NTU, adopting a flat tax rate to even out tax rates would increase American competitiveness in the world marketplace.

While this may seem fair, it is important to understand the reality of wealth distribution in the U.S. To be part of the top 1 percent, Americans must make over $394,000; Americans making over $114,000 fall into the top 10 percent of the total population.

Of the wealthiest Americans in 2012, the top 1 percent took in close to one-fifth of total household income, while the top 10 percent took in close to half.

Though growth in the top 10 percent has stagnated, the richest 1 percent reported a 95 percent income gain since 2009.

While anti-tax advocates like Grover Norquist claim Americans are paying too much in taxes, a report released by Reuters showed that some of the highest wage earners are not paying their fair share.

In 2009, six families making over $200 million did not pay any income tax, while another 110 families from the top bracket paid a tax rate of 15 percent or less. Reuters points out that the 15 percent tax rate is what someone making $61,000 would pay.

If you factored in the actual amount of taxes paid by the top bracket of wage earners, the effective tax rate would be 19.9 percent. That is the same rate someone making $110,000 would be taxed at. Reuters notes that the top 400 made five times as much every day.

The issue of whether the top wage earners in this country are paying too much in taxes has now become an issue of whether top wage earners are actually paying taxes at their designated rate at all.

The income of the top 10 percent of Americans will only continue to grow if current economic policies continue. Sadly, uproar against this growth has had little effect. Two years ago, protesters gathered in Zuccotti Park in New York City to protest income inequality. The movement, which later became known as Occupy Wall Street, was quietly suppressed after the owner of Zuccotti Park deemed the conditions at the demonstrators' camp too unsanitary.

Occupy may have died, but the inequality that the Occupy protesters sought to bring attention to still remains. New strategies must be devised to combat the ever-growing power of the top 10 percent.

The forces that are perpetuating this cycle of inequality may not respond to reason because they are distracted by dollar signs, but perhaps they will take a lesson from history. At John F. Kennedy's inauguration, he said "if a free society cannot help the many who are poor, it cannot save the few who are rich."

http://www.dailytitan.com/2013/11/a-flat-tax-would-further-exacerbate-income-inequality/

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This page contains a single entry by CFED published on November 4, 2013 7:41 PM.

Millennials are confident homebuyers was the previous entry in this blog.

Black-white wealth and income gap at all-time high is the next entry in this blog.

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