Tuesday, August 13, 2013

Wealth Redistribution Graph

Every time I hear the "redistribution" trope it reminds me how ignorant the speaker typically is, not knowing the difference between wealth and income. I heard it again today by accident when I made the mistake of listening to a few minutes of Rush Limbaugh, still jabbering about how the president wants to take money from the rich and redistribute it to those who didn't earn it.

We have had redistribution for sure. But it is a redistribution of wealth, not income. Income, of course, is the source of wealth. But wealth is another way of saying net worth -- the lifetime accumulation of assets minus all liabilities.

Adjustments, exceptions, credits, carve-outs and exemptions encrusting the tax code during the last three decades have had the effect of channeling most new wealth to those at the top of the economic ladder. Not just those near the top, but at the top, the famous one or two percent of the population.

This is not a secret.
The arithmetic has been widely distributed and not challenged.
And here it is again, via The Monkey Cage.

Stop a moment to think about what those numbers are telling us. Millions of people in the bottom tier of the working class have lost, on average, 85% of their net worth. (Their average net wealth, which was already falling before the onset of the Great Recession, went from $6700 as recently as 2007 to $1500 in 2011). People even lower in the wealth distribution don’t appear in the graph because their net worth was negative all along; but in real terms, they have been hit even harder (at the 5th percentile, $39,000 in debt in 2011 as compared with $13,000 in 2007). Meanwhile, those near the top of the wealth distribution have been held harmless.

Next time someone sez those at the top pay most of the taxes, remind them that's cuz they are the ones with nearly all the wealth. Those at the other end of the economy have zero to negative net worth. 

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