Why Inequality Hurts Democracy (News Journal 2/23/15)

Here is my recent letter to the editor:

“In a recent editorial on income inequality, the News Journal mentions Thomas Piketty but omits his explanation for how we got in this mess and why it matters for democracy.

“Piketty documents that income inequality in the U.S. began skyrocketing because of changes in the tax code. From 1930-1980, very high incomes were taxed at 80-90%, not to raise revenue, but to prevent the emergence of a small cadre of wealthy elites that could become a new aristocracy (an oligarchy). When the top bracket was lowered to 30-40%, it incentivized corporate executives to pursue oversized salaries (not tied to productivity).

“While most Americans are fine with some income inequality, how many know that the top 1% in Delaware make $863,734 on average, while the top .1% (nationally) make over $1.5 million – which expands exponentially via investment? In contrast, Delaware’s 99% average only $46,686.

“While such extreme inequality is obviously unfair, it also threatens democracy. The super wealthy have so much political influence that we are heading towards oligarchy, a trend that will be exacerbated through inheritance.

“To put us back on the right track, Piketty proposes taxing “incomes over $500,000 or $1 million” at 80%, a rate that would not “reduce the growth of the US economy but would in fact distribute the fruits of growth more widely while imposing reasonable limits on economically useless (or even harmful) behavior.” However, raising the revenue we really need, while reducing the deficit, would also require higher taxes on incomes over $200,000.”

Published in the News Journal, February 23, 2015

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