- Must Wealth Always Concentrate?Just taxing high incomes hasn’t brought us lasting equality. We may have to cap them.
Can a society with desperately poor people ever be a good society?
Almost all Americans today, outside a few cranks, readily agree on an answer. No truly good society, Americans believe, sees abject poverty as anything but a deep social stain. We do certainly differ on how to rub that stain out. But rub we must. So says George W. Bush. So says Edward Kennedy. So says every significant political leader, conservative or liberal, on America's contemporary national political stage.
But what about abject wealth? Can a society with awesomely rich people ever lay claim to the "good society" label? In our mainstream political life, we have essentially shoved this question off the table. We worry about the absence of wealth. The concentration of wealth, we have concluded, need not concern us.
Even politicos who style themselves as insurgents share this indifference to grand concentrations of income and wealth.
"The thing to do is concentrate on the 90 percent of people who don't have what they need and make sure they have it," as Howard Dean argued during his run for the White House, "and not worry about the people who make $500,000 a year. Of course, it's obscene, but so what?"1
Anyone who worries about grand accumulations of private wealth, in other words, is simply distracting attention from the real work necessary to build a good society. We need to be devoting ourselves to a "leveling up" of America's poor and increa-ingly impoverished middle class, not a "leveling down" of America's rich.
Earlier generations of Americans would not have understood, or accepted, this contemporary consensus. Those earlier generations feared concentrated wealth. No real democracy could ever survive, they believed, wherever great wealth gave a society's most privileged considerably more political power than every-one else.
Today, ironically, we have even more reason to fear inequality. Over recent years, a new generation of researchers — sociologists and psychologists, economists and epidemiologists — have added enormously to our understanding of what happens when gaps between the wealthy and everyone else widen. The wider these gaps, these researchers have documented, the less stable our economies, the less productive our enterprises, the less compassionate our communities, the less content with life our people.
We even live shorter lives when some have much more than others. The societies with the briefest life spans, epidemiologists tell us, are not the societies with the most poor. The societies with the shortest life spans are those that sport the greatest gaps between top and bottom. Inequality can actually kill.
James Madison, two centuries ago, suspected as much. Good societies, he believed, battle on two fronts. They endeavor to both "reduce extreme wealth towards a state of mediocrity, and raise extreme indigence toward a state of comfort."
A century ago, amid the most extreme wealth and indigence the nation had ever seen, Americans would eagerly embrace a policy prescription that seemed to have the potential to nurture the equality Madison considered so essential. They would struggle over decades to lock this prescription — progressive taxation — into place. And they succeeded. By the 1940s, the nation's most affluent faced steeply graduated tax rates on both their incomes and inheritable wealth.
How steep? The top marginal rate on incomes would hit 94 percent in 1944 and hover around 90 percent for the next twenty years. Those years would see a startling reduction in inequality. By the mid-twentieth century, America's grand mansions and estates had become hospitals and college campuses. The United States would emerge, in the 1950s, as the first mass middle class nation in the history of the world.
That middle class America now seems incredibly distant. Wealth in the United States has now been concentrating for over a generation, and the tax code, after years of rate cutting, no longer brakes this concentration. The nation's 400 richest taxpayers now pay just 17.5 percent of their total incomesin federal tax.2 Sixty years ago, according to IRS data, the richest Americans paid 78 percent of...