Bankers' Trillion-Dollar Crime Scene - The U.S. Greater Depression Unfolds

Taking from the Poor to Give to the Rich: The Top 20% Percent of Americans Own 85% of All Wealth and the Top 400 Wealthiest Earn $345 Million Per Year

March 7, 2010

Jeff Nielson - In several previous commentaries, I have criticized our system of income taxation as being fatally flawed. The primary flaw is that for the people at the top of the economic pyramid, income is usually only a tiny component of their increasing wealth. Generally, the vast majority of new wealth for the ultra-wealthy comes from the appreciation of assets, which are never (and can never) be taxed by an income-based system of taxation.

The ultimate result of an income-tax system is that wealth is relentlessly transferred out of the hands of the poor and middle class -- and into the hands of the ultra-wealthy. I have previously illustrated the net result of decades of income taxation in the United States, through some horrifying demographic data.

The top 20% of wealthiest Americans hold an obscene 85% of all wealth. Put another way, the “little people” who comprise the bottom 80% of U.S. society hold only a pitiful 15% of U.S. wealth -- the most lop-sided wealth distribution among all Western societies. However, while that data is bad enough, it gets much worse when we focus upon the top 1% of wealthiest Americans. These pseudo-aristocrats hold 35% of all wealth and 56% of all stocks held by Americans.

Put another way, as the Wall Street Oligarchs crow about the “amazing rally” in U.S. equity markets, 56 cents of every dollar of profit goes to just 1% of Americans. Meanwhile, the “little people,” the 80% of Americans on the bottom hold less than 15% of all stocks -- meaning that this Wall Street-manufactured “rally” is doing nothing to alleviate the economic suffering of the vast majority of Americans.

However, some new, economic data out of the U.S. has left me completely flabbergasted. While I was well aware of the Bush-era tax hand-outs to the wealthy, I did not truly understand the magnitude of that windfall. The numbers are totally shocking.

In 1995, during the Clinton-era, the top-400 wealthiest Americans 'earned' an average of $50/million per year in income, while paying an effective tax rate of 30% on those earnings. In 2007, a mere 12 years later, the effective tax rate for the “400” had fallen by 45%, thanks to the Bush hand-outs.

What is even more shocking (and despicable), however, was the rise in incomes of the “400.” In just 12 years, their average incomes rose from $50 million/year to $345 million/year -- a nearly 700% rise in incomes in just 12 years, or an average wage-hike of well over 50% per year. What makes this all the more despicable is that during this same period of time, the U.S. government (and Canada's government, as well) have been doing everything in their power to prevent the “little people” from getting any wage increases, at all.

In aggregate terms, this unequivocal decision to “take from the poor to give to the rich” has produced a wealth schism which literally has not been seen in our societies in over 70 years.

As you can see in the chart above, it is “deja vu all over again” as the share of increases in income for those Americans at the top is now at virtually the same level it was in 1929 -- just before the Great Depression began. While it would be inaccurate to say the Great Depression was “caused” by this grossly disproportionate schism in incomes, I will remind readers of one of my favorite quotations, from Greek philosopher, Plutarch -- nearly two thousand years ago:

An imbalance between rich and poor is the oldest and most fatal ailment of all Republics.

Thus, while the obscene plundering of America's wealth by the top 1% (courtesy of the Bush regime) did not cause the second “Greater Depression” in the United States, it will certainly make it much, much worse.

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