A look at the victors and vanquished after a generation of unrelenting class war in the United States

1. Is Warren Winning?
The victors and vanquished
after a generation of unrelenting class war
Sam Pizzigati
Institute for Policy Studies
America’s Future Now!
Washington, D.C.
June 1, 2009

2. The sage of Omaha speaks
“There‟s class warfare, all
right, but it‟s my class, the
rich class, that‟s making war,
and we‟re winning.”
Warren Buffett, billionaire investor,
New York Times, November 26,
2006

3. But who sits in Warren‟s class?
Who exactly is really winning?

4. Is Warren‟s income class . . .
Income needed to enter affluent income categories, 2006
$388,806
$153,542
$108,904
Top 10% Top 5% Top 1%
Data source: Internal Revenue
Service

5. How we define income class
matters
Income increase, after inflation, 1975 - 2006
265.2%
146.0%
109.5%
Top 10% Top 5% Top 1%
Data source: Internal Revenue
Service

6. The real winners sit at the summit
Income increase, after inflation, 1975 - 2006
815.8%
406.5%
184.8%
113.0%
Bottom half, top Top 99.5 - 99.9% Top 99.9 - 99.99% Top 0.01%
1%
Source: Saez-Piketty analysis of Internal Revenue
Service data

7. Warren‟s side: even more
exclusive
Average income, 2006
$263,306,00
0
$29,726,899
Top 0.01% (14,836 families) Top 400

8. Since 1955, top 400 income up 2048%
$263,306,00
0
Top 400
average income,
1955 and 2006,
inflation-
adjusted
$12,256,976
1955 2006

9. Top 400 wealth even more
impressive
Net worth, 2007
$1.61 trillion
$1.54 trillion
Forbes 400 Bottom 50%, U.S. families
Source: Federal Reserve
Board

10. Our rich by far the world‟s richest
World billionaires, by
nation, 2009
Rest of
world, 252
USA, 369
China, 47
India, 24
UK, 25
Russia, 32
Germany, 44
Source: Forbes magazine

11. The Last 30 Years: A Grand
Reversal
Average income of top 0.01 percent of U.S. families as a multiple
of average income of bottom 90 percent of U.S. families
Top 0.01% in
1000
Top 0.01% in 2006 makes
1928 makes 976 times
892 times the the bottom
bottom 90% 90%
800 average income
600
Top 0.01% in
Top 0.01% in
1980 makes
1955 makes
176 times the
400 179 times the
bottom 90%
bottom 90%
200
0
1917
1919
1921
1923
1925
1927
1929
1931
1933
1935
1937
1939
1941
1943
1945
1947
1949
1951
1953
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005

12. How extremely concentrated has
wealth in the United States become?
Total net worth, 2007
$21.9
trillion
$18.4
Does not trillion
include total
net worth of
the Forbes 400
Top 1% Bottom 90%
Source: Federal Reserve Board, January 2009

13. Who‟s losing the class war?

14. Bottom 90%: Going nowhere fast
$1,400,000
$1,242,595
$1,200,000
$1,000,000
$800,000
$600,000 Average top 1% income
$400,000
$200,000
Average bottom 90% income $30,659
$0
1975 1979 1983 1987 1991 1995 1999 2003 2006

15. The missing American Dream
The more that income concentrates at the top,
the less lives have improved for average Americans.
Real family income growth,
1947–1979 vs 1979 - 2005
Up 116% Up 114%
Up 111%
Up 100% Up 99%
Up 86%
Up 81%
Up 53%
Up 25%
Up 15%
Up 9%
Down 1%
Bottom Fifth Second Fifth Middle Fifth Fourth Fifth Top Fifth Top 5%
1947-1979 1979-2005

16. How did all this happen?
One major factor:
We stopped taxing the rich.

17. Taxing the rich: now and then
Top tax rates by income category
91%
35% 39.6%
25%
20%
15%
2009 2000 1959
Ordinary Capital Gains

18. The Great Tax Shift
Share of income paid in federal income tax by top 400
51.2%
17.2%
1955 2006

19. Sweet times at the tippy top
$263,306,000
Top 400 income
and federal income
tax,
1955 and 2006,
inflation-adjusted
$12,256,976 $45,216,000
$6,275,573
1955 2006

20. The right’s argument
„We‟re overtaxed‟
Not by comparison with our global peers
Current top tax rate on income in top income bracket
45%
40% 40%
35%
USA UK Germany France

21. The right’s argument
„The rich can easily avoid high taxes‟
But the wealthy pay more in taxes when tax rates start
high
91% Tax rate on income in top income bracket
70%
35%
Share of total income actually paid in taxes
51.2% 42.3% 17.2%
1955 1966 2006

22. The right’s argument
„High taxes endanger philanthropy‟
Foundation giving pales against revenue taxing the rich would
generate
$3.7 billion
Average 1955 tax rate for top 400 $2.0 billion
$1.9 billion
Average current tax rate for top 400
$636 million
John Paulson 2007 income Gates Foundation 2007 grants

23. Understanding the impact of inequality
The more equality, the more giving
Indeed, everything that matters improves as we become less unequal
The more middle class a society, research shows,
the better the society for all the people in it.
 The more democratic
 The more economically vibrant
 The more environmentally sound
 The more honest
 The more trustful
 The more compassionate
 The more healthy

24. America‟s mid 20th century consensus
Smart societies do not let wealth concentrate in a precious few hands.
Smart societies tax the rich to invest in opportunity for all.
‘In many countries of the free world
private enterprise is greatly different
from what we know here. In some,
a few families are fabulously
wealthy, contribute far less than they
should in taxes, and are indifferent to
the poverty of the great masses of
the people . . . Dwight D.
A country in this situation is fraught Eisenhower
National Automobile
with continual instability. It is ripe for Show Industry Dinner
Detroit, October 17, 1960
revolution.’

25. Our current reigning wisdom
We can‟t go back to the equality we had
In 2004, to give
America‟s bottom
80% the same share
of the nation‟s
income they received
in 1979 “would have
required transferring
Lawrence $664 billion from the
Summers,
currently top 1% of
director, Obama households to the
White House
National Economic bottom 80%.”
Council “No one would
suggest this is
feasible or even
desirable . . .”

26. For a America
that works for everyone,
maybe we need
to start doing the suggesting.