It was 1924 when young F. Scott Fitzgerald wrote the short story “The Rich Boy”: “Let me tell you about the very rich. They are different from you and me.” The Roaring 20s were swinging, booze flowed, wealthy free spirits danced the night away, and Scott and wife Zelda were the poster kids.
But the wild times ended, as they always do. The Gilded Age expired with the stock market crash on Oct. 29, 1929 — Black Tuesday, they called it. Zelda burned to death in Highland Hospital, a mental institution in Asheville. Scott is interred in St. Mary’s graveyard in Rockville, Md.
By 1928, wealth disparity was so out of whack that 0.1 percent of America’s upper class owned one-fourth of the wealth in the entire country. Black Tuesday balanced the scales — for 90 years. Today that 0.1 percent owns one-fifth of America’s wealth, and that percentage gap is growing with frightening speed.
Some say it’s just the way of things, foreordained, the old “Matthew Effect” at play: “For whoever has, to him more will be given, and he will have abundance; but whoever does not have, even what he has will be taken away from him.” (Matthew 13:12, New King James)
Many economists explain wealth inequality with the “1 Percent Rule”: Rewards accrue to the advantaged, no matter the legitimacy of their advantaged status, then the rewards compound, and then the 1 percent ensure that they stay advantaged and that others, even those superior in smarts and skills, do not become members of the club.
Whatever, it can no longer be ignored, not even by some upper-crust. This past January, billionaire George Soros, speaking for 18 of America’s ultra-rich, said, “The top one-tenth of 1 percent of households now have almost as much wealth as all Americans in the bottom 90 percent,” and he called for more tax on wealth. Soros also called the current economic imbalance morally indefensible.
Billionaire Ray Dalio warns that capitalism, the very foundation of our economic system, is no longer working for Americans, adding that the expanding wealth gap is creating “a volatile environment with disturbing parallels to the social upheaval of the 1930s.”
The effects of wealth inequality resonate
like concentric circles in placid water. Women are paid two-thirds what men are paid. The poor rot in jails because they cannot afford bail, while embezzlers and corporate, white-collar and celebrity criminals make the lady holding the scales of justice blush from embarrassment.
The American Civil Liberties Union says “justice” inequality extends even to the death sentence. And Clinton Duffy, former warden at San Quentin prison, says “capital punishment means those without the capital get the punishment.”
When Soros called for greater tax on “wealth,” he knew that taxing “income” of the super-wealthy is a fool’s game. Billionaires, with battalions of accountants and tax attorneys easily game the tax system.
One would think the IRS would focus almost exclusively on the wealthy; that’s where the money is. And that’s where the cheating is. The top 0.5 percent in income account for one-fifth of all underreported income. Adjusted for inflation, that’s more than $50 billion each year in unpaid taxes.
But high-rollers don’t have visible income. Instead, they have trusts, foundations, limited liability companies, complex partnerships and overseas operations, woven together. The IRS has neither the funds nor expertise to disentangle such enigma.
Wealth disparity of the present scale eats at the underbelly of America’s ideals. According to Forbes.com, “Seventy-three percent of all Americans believe that ‘our economic system is rigged in favor of the wealthiest Americans.’”
It is. And our growing plutocracy, the very class-ruling system so anathematic to incipient America, keeps it that way.
Two-thirds of U.S. senators and two-fifths of U.S. House members are millionaires or billionaires, with annual incomes 12 times the average American family’s. Bernie, Elizabeth, Uncle Joe and, of course, the Donald — all are super-rich.
In 2010, the U.S. Supreme Court ended limits on political campaign contributions, freeing the super-rich to contribute $436 million to Super PACs. Six years later, the cost of running for a U.S. Senate seat was $10.4 million; a House seat, $1.3 million. Contributors expect returns on their investments.
The undisputed largest payback is what journalist Michael Kinsley calls the “angel
of death” loophole. In tax-speak it’s the “step-up-in-basis” tax welfare for rich folk. It allows stupefying amounts of compounded interest and unrealized stock dividends to be willed as gifts tax-free.
For perspective, heirs of recently deceased David Koch can receive his $50 billion estate with zero tax on accumulated gains. The same is true for the Walton family (Walmart), who Forbes says accumulates $100 million — every day.
Tax welfare keeps the super-rich super- rich.
Ninety-five years ago, F. Scott Fitzgerald said the rich “are different from you and me.” Now you know how different — and why.
Michael Smith is a Southern Pines resident.