Was 2000-2007 the U.S.’s new Gilded Age? Try platinum.
By Elaine Mejia
In American history, the “Gilded Age” refers to the late 19th Century period in which the nation’s population grew rapidly, along with the wealth and excesses of America’s upper class. The wealth gap between the richest and poorest Americans soared as corporate “robber barons” hoarded vast fortunes. After a brief improvement during the Progressive Era, the Gilded Age wealth disparities returned during the 1920s and peaked immediately before the infamous stock market crash that precipitated the Great Depression.
If we continue with the metallic monikers, we might well refer to the period just prior to the current recession – the period from 2000 to 2007 – as “the Platinum Age.” During that period, the income gap in the United States grew to historic proportions, with an astonishing share of the nation’s wealth falling into the hands of a tiny elite.
A recently released research paper from the University of California shows that in 2007, the top .01 percent of American earners took home 6 percent of total U.S. wages – nearly twice as much as in 2000. The top 10 percent of American earners pulled in 49.7 percent of total wages, a level that, according to the research paper, “is higher than any other year since 1917 and even surpasses 1928, the peak of the stock market bubble in the ‘roaring’ 1920s.”
Figures for North Carolina’s income patterns for 2007 haven’t been released yet, but the data through 2006 suggests that our state’s inequality is tracking, if not outpacing, the national trend. In 2006, the average income of the top 5 percent of income earners in North Carolina was 12 times greater than the bottom 20 percent of income earners, or $197,000 compared to just $16,000.
This growing disparity undermines the ability of low-income families to move into the middle class and of middle-class families to accumulate the assets needed to weather economic downturns and financial troubles such as illness or job loss. And, during the Platinum Age, the federal government’s actions only exacerbated the problem.
During the 2000 to ‘07 period, tax cuts for the rich, enacted at the behest of President Bush, made the federal tax system much less progressive than at any time in recent history, and the evidence is clear that this windfall for the well-off did not trickle down to working families.
However, tax policy can be one of the government’s most powerful tools for closing the income gap. At the end of this year, Congress will face critical decisions about how to deal with the 2001 and 2003 tax cuts. In particular, legislators will decide whether income from investments really deserves to be taxed at roughly half the rate as that of income from actual work. The fate of the estate tax – instituted by Teddy Roosevelt to “break up the swollen fortunes of the rich” – will likely also be up for debate.
Here in North Carolina, the General Assembly can do a lot to address the income disparity. Legislative leaders say they will hold hearings and town-hall-style forums to discuss how the state should modernize the tax system – a move that is widely considered badly needed and long overdue.
Changes currently under consideration include broadening the sales tax to include services and applying the income tax to a broader swath of income and then lowering tax rates across the board. These are all changes that, if done wisely, could stabilize the tax system and make it fairer to working families.
However, the state can and should do more to boost the wages of working families. Increasing the state Earned Income Tax Credit would put more money into the pockets of many low- and middle-income families with children. State leaders should also consider creating a tax credit for low-income people who don’t benefit from the EITC, such as those on fixed incomes or without children.
It is high time that elected officials put the interests of working families first by using tax policy to create opportunity and protect the assets of middle- and low-income workers. If not, the Platinum Age will return in full force as the economy recovers. And what comes after platinum anyway? Titanium? Whatever it is, we don’t want to go there.
Elaine Mejia is the director of the N.C. Budget and Tax Center.
Comments are closed.