America’s Wealth Inequality Has Reached Staggering New Levels

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Jeff Bezos recently became the richest person on earth.

Bezos, head of the online retail behemoth Amazon, saw his wealth jump by $ 10 billion in just the past month to now more than $ 90 billion. That’s a stunning leap. But what’s truly stunning is that Bezos and the next two wealthiest Americans, Bill Gates and Warren Buffett, together now own more wealth than the entire bottom half of the American population combined.

The rich are getting richer.

We tracked the rise of today’s uber-wealthy in a new report, “Billionaire Bonanza 2017: The Forbes 400 and the Rest of Us,” published by the Institute for Policy Studies. We compared those at the top to the rest of the nation, whose economic condition isn’t plastered on the glossy pages of Forbes magazine, but instead buried in a study the Federal Reserve releases every three years.

We looked specifically at wealth — the money left over after totaling a family’s assets and subtracting their debt. Wealth is where the past meets the present. It’s a more accurate depiction of economic status than income, which just shows how much money one makes in a given year.

When Forbes first started compiling their famous list of the 400 wealthiest Americans in 1982, just $ 75 million would get you ranked. Even after accounting for inflation, that’s still less than $ 200 million in today’s dollars.

These days, the price of admission is a record $ 2 billion — more than 10 times higher.

This group of just 400 multi-billionaires owns a combined $ 2.68 trillion. That’s trillion with a T. And it’s more wealth than the bottom 64 percent of the U.S. population, an estimated 204 million people. That’s more people than the populations of Canada and Mexico combined.

On the other side of the economic spectrum, where the rest of the country resides, economic conditions are largely stagnant. The median family owns about $ 80,000 in wealth, excluding durable consumer goods like cars and appliances. This figure is essentially unchanged from 1983, when the Federal Reserve first started tracking household assets using a uniform survey.

In other words, despite 30 years of economic growth, the typical American family has barely seen a budge in their economic standing.

Today, about one in five households lives in “underwater nation,” with either zero or negative wealth. That figure is even higher for black and Latino households, the result of decades of discrimination.

We are witnessing the rising concentration and consolidation of our nation’s wealth into fewer and fewer hands. Most concerning is the potential for these wealth hoarders to use their outsized bank accounts to buy outsized power over our government.

A surefire way to make today’s economic inequality greater is to offer a massive tax break to the very wealthy, as President Trump’s “tax reform” plan would do. In fact, major tax breaks for the already wealthy is a big part of what’s created the inequality we see today.

When three people own more than half the country, and when a fifth of us have nothing, that’s the exact opposite of what we need to be doing.

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The GOP Tax Bill Does Nothing to Address Our Racial Wealth Divide

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Wealth is concentrating upwards in this country — we’ve known that for years. But new numbers really drive home just how severely.

According to our new report, Billionaire Bonanza 2017, there’s been a rapid updraft of wealth into the top echelon of multi-billionaires. The wealthiest 400 Americans now have more wealth together than the bottom 64 percent of the population, over 200 million of us.

That’s bad enough. But through the lens of race, these statistics reveal another dimension of the story. Only seven of the 400 wealthiest Americans are black or Latino — the rest are almost entirely white.

It takes barely half of that list to blot out the total wealth of blacks and Latinos alike. The wealthiest 269 billionaires equal the combined wealth of the entire African-American population of 47 million people. For Latinos, it takes just 252 billionaires.

Read the full article on the Hill.

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There Can Be No Genuine Tax Reform Without Addressing Hidden Wealth

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Wealthy elites around the world are finding ways to hide all their earnings in offshore locations, according to the recently leaked “Paradise Papers.” (Photo: Wikirictor/ Creative Commons)

Just as Congress begins debate on the Republicans’ “Tax Cut and Jobs Act,” new revelations have emerged about how wealthy elites around the world hide their wealth.

The “Paradise Papers” — the result of a leak from the Bermuda-based law firm Appleby — shines additional light onto the shadowy world of hidden wealth and tax dodging.

Efforts to reform the U.S. tax system are fundamentally undermined by a global tax-avoidance system that allows individuals and corporations to shift trillions to offshore havens to escape taxation, accountability, and publicity.

The Paradise Papers, alongside the “Panama Papers” released in April 2016, provide another set of disclosures into a system full of titillating details about how high-ranking global officials have created their own system of rules. The Bermuda leaks disclose the role of high-ranking Trump administration members, including Commerce Secretary Wilbur Ross and White House economic advisor Gary Cohn, in using offshore tax havens.

National groups and political leaders, including Democratic House Leader Nancy Pelosi, are calling for a slowdown of Republican efforts to push through their tax bill to address these abuses.

Oxfam America and the Financial Accountability and Corporate Transparency (FACT) Coalition have called on Congress to hold hearings on the findings and a debate over how to best remedy them. Tax Justice Network international has called on the United Nations to convene a global summit to address tax haven abuse.

The hidden wealth system is used by both wealthy individuals and transnational corporations. Research by Gabriel Zucman and others estimates that households in the top 0.01 percent, those with wealth over $ 45 million, evade 25 to 30 percent of personal income and wealth taxes. This amounts to more than 10 percent of global GDP is hidden in offshore tax shelters.

Zucman estimates that tax haven use has grown 25 percent in the past five years and U.S. citizens have at least $ 1.2 trillion stashed offshore. In all, at least $ 200 billion a year in tax revenue is lost from wealthy individuals and $ 130 billion from corporate tax avoidance.

Hundreds of large transnational corporations use the offshore system to reduce or skirt their tax obligations. According to the Institute on Taxation and Economic Policy, Fortune 500 corporations hold an estimated $ 2.6 trillion offshore. Verizon, General Electric, Boeing, Nike, and Amazon are just a few of the offenders.

One common dodge is to shift paper profits to subsidiaries in low-tax or no-tax countries like the Cayman Islands or Ireland. Companies utilizing these schemes maintain the fiction that their profits are piling up “off shore” while their losses accrue in the United States, reducing or eliminating their obligation to Uncle Sam.

Systematically confronting offshore tax havens will require legislative action, international diplomacy, and sanctions and penalties aimed at both banks and tax-haven jurisdictions. Uniform disclosure and transparency, both of banks and capital flows, should be a fundamental component of all new treaties.

The United States has enormous responsibility and leverage in fixing this broken international system. Unfortunately, the House Republicans’ proposed tax legislation would only make matters worse. Rather than cracking down on offshore tax dodging, the bill would give companies that are hoarding profits in tax havens a $ 500 billion tax cut.

Groups working to oppose the current tax bill, including Americans for Tax Fairness and the Financial Accountability and Corporate Transparency (FACT) coalition, have been advocating to close offshore tax havens. They are pressing for such transparency reforms as disclosure of “beneficial ownership” of shell corporations and entities. “The Incorporation Transparency and Law Enforcement Assistance Act” would require virtually all U.S. companies to disclose who really owns or controls them when they are formed and to keep that information updated.

There can be no genuine tax reform until the hidden wealth system for wealthy individuals and transnational corporations is shut down.

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Trump’s Tax Cuts Are the Biggest Wealth Grab in Modern History

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On Nov. 2, Republicans in Congress finally released the details for their tax plan. The Tax Cuts and Jobs Act is a massive overhaul of the tax code and spending priorities—and nothing short of a boon to the very wealthy at the expense of everyone else.

I’m old enough to remember way back to Nov. 1, when CBS released a poll showing most Americans wanted to see the wealthiest households and biggest corporations pay more, not less, in taxes. This is in sync with poll data from Gallup, collected year after year since 1992, that shows a solid majority of Americans believe the wealthy pay too little in taxes.

Given such overwhelming support for raising, not cutting, taxes on the wealthy, it makes sense that President Donald Trump and his allies in Congress would present their tax plan as benefiting the middle class rather than the rich. It’s about “people who are low- and middle-income,” says House Speaker Paul Ryan, “not about people who are really high-income earners getting a break.” Trump has even claimed “the rich will not be gaining at all with this plan.”

Unfortunately, those are bald-faced lies.

Read the full article on Fortune.

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The Racial Wealth Divide in Trump’s America

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(Photo: Ellie / Flickr)

The majority of Black and Latino voters didn’t pull the lever for Donald Trump last November. He is, however, the president — and thus has the power to leave a lasting effect on the trajectory of their lives.

Trump has recently made headlines for making significant reversals in policy positions on issues ranging from immigration to the national debt ceiling. Perhaps, he could change his tune on how he addresses the growing racial wealth divide as well.

Will the already deep racial wealth divide grow wider under Trump, or can we begin to close it?

Recently released figures from the Census Bureau show that Black and Latino families saw a slight uptick in their household income last year. They still lagged far behind White families — with median households earning more than $ 10,000 less than their White counterparts. The racial income gap did get a bit smaller over the very short term.

Unfortunately, the long term trends go in the other direction.

A just released report I co-authored titled “The Road to Zero Wealth” looks at trends in household wealth, which includes the total sum of a families’ assets minus their debts. Wealth, not income, is the better measure of long-term financial stability.

The median Black family today has just $ 1,700 in wealth, with Latino families not far ahead at just $ 2,000. White families, meanwhile, own more than $ 100,000. That gap is staggering.

And it’s getting worse.

The report looks at racial wealth data over the past 30 years to project what we can expect in the future if current trends continue. By 2020, the end of Trump’s first term, median Black and Latino households stand to lose nearly 18 percent and 12 percent of the wealth they held in 2013, respectively.

Median White household wealth, on the other hand, looks set to increase 3 percent.

At that point, White households will own 85 times more wealth than black households, and 68 times more wealth than Latino households. That’s in just three years — let that sink in for a moment.

Looking a bit further into the future, Black families are projected to own no wealth at all by 2053. By that point, our country will be majority non-White, but Whites and non-Whites will be farther apart than ever.

That’s assuming nothing changes. If Trump moves forward with the policies he campaigned on, especially his tax “reform” plan, the gap surely grows.

Trump’s tax plan is heavily skewed toward providing massive tax breaks for the ultra-wealthy. Half of the proposed cuts will go to millionaires, according to the Institute on Taxation and Economic Policy. Less than 5 percent go to families with household incomes below $ 45,000.

Perhaps more insidious is Trump’s plan to eliminate the federal estate tax, also known as the inheritance tax. This levy applies exclusively to the wealthiest 0.2 percent of households and is intended to curtail the growing concentration of wealth in families like, say, the Trumps.

Fortunately, the president has other options. He could choose to expand, rather than abolish, the estate tax.

He could also address the deep disparities in homeownership — and particularly in the mortgage interest deduction in the tax code, which benefits the wealthy and those who already own a house. Thanks to generations of discrimination in housing and credit, black families trail whites in homeownership by a margin of over 30 percent.

Unfortunately, it’s unlikely Trump changes course. While the president is nothing if not mercurial, his commitment to protecting the wealth of the already wealthy has remained steadfast.

That the vast majority of the nation’s wealth is, and always has been, held in predominantly white hands at the expense of non-whites hasn’t concerned him. Perhaps, however, he’ll change his mind.

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Black and Latino Families Will Be Broke in a Few Decades if We Don’t Fix the Wealth Divide

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Many people see progress on racial equity in the U.S. as a steady march forward, in which people of color become more equal with their White counterparts as the years go by.

Those are people who don’t pay attention to household wealth figures.

A new report I co-authored, “The Road to Zero Wealth,” looks at the past 30 years of wealth accumulation across racial lines, as well as what the future will bring if current trends continue. Our findings were bleak.

The divide between the wealth of a typical Black family and a typical White family today is vast. A median Black family has just $ 1,700 in wealth—total assets minus total debt. Thirty years ago, that same family had $ 6,800 in today’s dollars. Latino families at the median have similarly small assets, just $ 2,000, also seeing a decline over the past three decades.

White median household wealth, meanwhile, is significantly higher: $ 116,800, up from $ 102,000 over the same period.

So Black and Latino families at the middle have seen their wealth slip while white families in the middle saw their wealth rise. What does this look like projected into the future?

By 2053, just 10 years after the country is projected to become majority non-White, Black median families will own zero wealth if current trends continue. Twenty years later, Latino median families will follow suit. White median families will continue to own six figures.

Even those Black and Latino families who’ve achieved the traditional markers of middle class life—a good-paying job and a college degree—still lag far behind their White counterparts in terms of wealth. Black and Latino families with a member holding a four-year degree own just a fifth of the wealth of equivalent White families. In fact, they own less wealth than a White family whose head has just a high school diploma.

These numbers represent a troubling trend in which assets and economic opportunities are channeled away from families of color and toward White families.

The enduring legacy of slavery and the Jim Crow era contribute to this growing divide. For instance, just 2% of the heavily subsidized mortgages made available by the Federal Housing Administration in the 30 years following the Great Depression went to non-White households. Homes are the biggest asset most middle-class families own, so this sort of federally sanctioned discrimination created a huge, inter-generational disadvantage for the Black and Latino families left out.

Modern public policy decisions rooted in expanding inequality also play a significant role. One such policy is America’s complex system of tax expenditures—essentially discounts handed out to certain groups and individuals that together total more than a half a trillion dollars in public spending each year.
One example is the mortgage interest deduction, a tax break designed to promote homeownership. Unfortunately, the deduction is only available to those who itemize their tax returns, which skews the beneficiaries heavily toward the already wealthy—who are disproportionally White.

Changing our priorities around tax incentives, as well as investments in bold new programs like Children’s Savings Accounts (CSA) and a federal jobs guarantee, could reverse the decades-long rise in the racial wealth divide. Had Congress instituted a robust universal CSA program in 1979—seeding small savings and investment accounts for all children that could mature as they grew older—the white-Latino wealth gap would have disappeared by now and the white-black gap would have dropped by 82%.

Policy changes like these would require bold leadership from across the federal government, including Congress and the White House. In today’s political atmosphere, marked most often by scandal and regressive policy decrees as well as congressional gridlock, this does not appear forthcoming.

The good news, however, is that the policies needed to begin to turn the tide on our growing divide are readily at hand. We know what the problem is and how to fix it. Building the political will, and political power, to put such policies in play is the next step.

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It’s Not Too Late to Reverse the Road to Zero Wealth for Households of Color

What would U.S. society be like if a majority of families had no wealth – no savings, no home equity, no investments of any kind?

That is exactly where the country is headed if we continue on our current path toward economic dystopia for black and Latino families.

While we celebrate a modest reduction in poverty rates and an encouraging uptick in median income, as disclosed in this week’s Census report, the stagnation and decline of wealth remains a troubling indicator.

Between 1983 and 2013, median black household wealth decreased by 75%  to $ 1,700 and Latino household wealth fell 50% to $ 2,000. At the same time, median white household wealth rose 14% to $ 116,800.

If this trend continues, an African American born in 2013 will see her household wealth hit zero by the time she turns 40. Her Latino peers will suffer the same fate 20 years later.

This is happening as households of color make up a growing share of the population and are projected to reach majority status by 2043. If the accelerating racial wealth divide isn’t halted, a majority of U.S. households will no longer have enough wealth to stake a claim in the middle class. The consequences for the economy and society as a whole will be devastating as racial and political polarization deepens and intensifies.

A combination of bold societal and policy changes is the only way out of this crisis.

We have a choice to make. Do we want to become a country like Brazil where staggering wealth inequality is the norm? Or do we want to be more like Canada, where there is far less inequality and greater opportunities for all?

Read the full article on USA Today.

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Report: The Road to Zero Wealth

In this report, we look at the racial wealth divide at the median over the next four and eight years, as well as to 2043, when the country’s population is predicted to become majority non-white. We also look to wealth rather than income to reconsider what it means to be middle class. In finding an ever-accelerating gap, we consider what it means for the American middle class and we explore what policy interventions could reverse the trends we see today. We find that without a serious change in course, the country is heading towards a racial and economic apartheid state.

Key Findings:

  • While households of color are projected to reach majority status by 2043, if the racial wealth divide is left unaddressed, median Black household wealth is on a path to hit zero by 2053 and median Latino household wealth is projected to hit zero twenty years later. In sharp contrast, median White household wealth would climb to $ 137,000 by 2053.
  • If current trends continue, by 2020 median Black and Latino households stand to lose nearly 18% and 12% of the wealth they held in 2013, respectively, while median White household wealth increases 3%. At that point–just three years from now–White households are projected to own 85 times more wealth than Black households and 68 times more wealth than Latino households.
  • The declining wealth of households of color is already taking a significant toll on the broader economy. The nation’s overall median wealth decreased nearly 20% from 1983 to 2013 ($ 78,000 to $ 64,000—a period when Black and Latino median wealth went down and White wealth slowly went up.
  • Even earning a middle-class income does not guarantee a family middle-class economic security, according to the report. White households in the middle income quintile—those earning $ 37,201-61,328 annually—own nearly eight times as much wealth ($ 86,100) as Black middle-income earners ($ 11,000) and ten times that of their Latino counterparts ($ 8,600).
  • This disconnect in income and wealth is visible across every socioeconomic level. The report found that on average, only Black and Latino households with an advanced degree have middle-class wealth or higher, while White households, on average, need only a high school diploma to attain that same level of wealth.

The report calls on the Trump administration and Congress to consider a range of policy options to help close the racial wealth divide. They include:

  • Changing our tax code to stop subsidizing those who are already wealthy and start investing in opportunities for low-wealth families to build wealth. Specifically, the report recommends reforming the mortgage interest deduction and other tax expenditures, bolstering and expanding the federal estate tax, and creating a net-worth tax on multi-million-dollar fortunes.
  • Protecting low-wealth families from wealth-stripping practices by strengthening the Consumer Financial Protection Bureau and closing the offshore tax shelters currently enabling the ultra-wealthy to hide their assets.
  • Investing in bold new programs like Children’s Savings Accounts, automatic-enrollment retirement accounts, federal jobs guarantees, and a racial wealth divide audit of government policies.

Read the full report here [PDF].
Find sharable graphics here.

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How Wealth Managers Undermine Society and What We Can Do About It

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Honor Juneteenth by Closing the Racial Wealth Divide

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(Image: Khalil Bendib / OtherWords.org)

On June 19, 1865, Union soldiers arrived in Galveston, Texas. They carried some historic news: Slavery had finally and completely ended, they declared. All of America’s enslaved people were now free, some two and a half years after President Lincoln’s Emancipation Proclamation.

That day in June would soon become “Juneteenth,” a holiday still celebrated in communities across the United States.

African Americans have now been free from slavery for over 150 years. Over the course of those years, the United States has made some appreciable and even impressive progress. In 1964, passage of the Civil Rights Act toppled Jim Crow. A year later, the Voting Rights Act challenged discriminatory voting laws.

We’ve even seen the election — and re-election — of the nation’s first black president.

So why, amid all this progress, does the Juneteenth holiday still resonate so powerfully for so many Americans?

Because Juneteenth reminds us how far we have yet to go. Racial inequality remains one of the top issues of our time. Black households, research shows, continue to lag economically behind their white counterparts, in both income and wealth.

Last summer, the Institute for Policy Studies and the Corporation for Enterprise Development explored that inequality in a report called the The Ever-Growing Gap, which focused on the essential role wealth plays in achieving financial security and opportunity.

Over the past 30 years, the report found, the average wealth of white families grew at three times the rate of growth for black families. If those trends continue, black families would have to work another 228 years to amass the amount of wealth white families already hold today.

That’s almost as long as the 245 years that legal slavery stained colonial America.

Over the course of those years, slave labor built the backbone of America’s economy — and gave white families a 245-year head start on building household wealth and overcoming economic insecurity.

Juneteenth helps us remember this history — and we need to remember.

The conventional narrative around wealth building in America simply ignores slavery and its aftermath. Those with more than ample wealth, the narrative goes, fully merit what they have. And others merit less.

“Most people look at the story of inequality through the lens of deservedness: People get what they deserve,” writes my colleague Chuck Collins in his book Born on Third Base.

The standard narrative, he says, implies “that people are poor because they don’t try as hard, have made mistakes, or lack wit and wisdom.” And the rich, the same story goes, have worked “harder, smarter, or more creatively.”

This “deservedness” narrative never acknowledges the discrimination and other barriers that have blocked black economic progress, or the public policies that have kept these barriers intact — things like housing and employment discrimination, mass incarceration, and tax policies that favor the wealthy over poor people of all colors.

It’s time to take a close look at federal policies and the role they play in keeping the growth of black wealth stagnant. This Juneteenth, let’s rededicate ourselves to closing the racial wealth divide.

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