You Probably Don’t Understand The Wealth Gap And The Mega-Rich Love You For It

Editorial Director, Life
01.09.19 40 Comments

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Here’s the thing about the 0.01% that you need to understand: They’re spectacular, as a group, at getting richer. Like world class. You know how Steph Curry is fire beyond the arc? Or how Beyonce owned Coachella? Or how Scorsese is unbeatable at filming gritty mob shit? None of them are nearly as skilled at their respective crafts as the mega-rich are at extracting wealth from our financial system. And it’s not even close.

Right now, the highest-earning Americans are sequestering money from the economy at a staggering rate. And they’re doing it seamlessly, thanks to financial tools that you literally have never heard of. Tools that even the vast majority of one percenters never get access to. This is sped along by the unapologetic use of tax shelters. It’s all grossly blatant, lightning quick, and teeters dangerously close to breaking the #1 rule of amassing wealth: Make as much money as you can, but not so much that the poor raid your stronghold and you wake up with a pitchfork in your eye socket.

Usually, the insanely-wealthy are good at understanding how much money they can horde without the peasants taking action. That’s basic Scrooge McDuck 101. But when they get it wrong and things get out of whack, there are dramatic corrections until the system is brought back into balance. How do things return to some sense of equilibrium? According to The Great Leveler: Violence and the History of Inequality from the Stone Age to the Twenty-First Century by Walter Scheidel, change comes through widespread calamity. The author and Stanford professor cites “the Four Horsemen” — state collapse, war, natural disaster, or revolution. Looking backward, it’s always one of these and it’s always bloody.

Newsweek

To identify when the wealth gap is growing out of hand, statisticians and economists worldwide use the Gini coefficient — a number that measures inequality based on how wealth is spread across society. When the wealth of the richest citizens leaves the poor too far behind, there is, historically speaking a dramatic reckoning, e.g. death and chaos.

Now take a stab at which country’s Gini coefficient is highest among the Top 10 Richest Nations? If you guessed that it was the US (even though many economists agree that our official Gini number is actually much higher than reported due to mega-rich’s use of tax havens, blatant tax evasion, and a lack of nuance in how the Gini coefficient itself is calculated) then you’re absolutely correct.

Can you hear the bottom 50% percent of earners — disproportionately Millenials — who control a perilously low percentage of our national wealth, sharpening their pitchforks? Is it time to worry yet?

This is the backdrop into which Alexandria Ocasio-Cortez suggested the possibility of a 70% marginal tax rate. Speaking with Anderson Cooper on 60 Minutes last week, she said:

You look at our tax rates back in the ’60s and when you have a progressive tax rate system, your tax rate, let’s say from zero to $75,000, may be 10 percent or 15 percent, etc. But once you get to the tippy-tops — on your 10 millionth dollar — sometimes you see tax rates as high as 60 or 70 percent. That doesn’t mean all $10 million are taxed at an extremely high rate, but it means that as you climb up this ladder, you should be contributing more.

The very suggestion was met with immediate derision and claims of socialism from the right, to which Ocasio-Cortez quickly responded.

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