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Americans need to do something to redistribute their wealth income and power which currently is distributed in a very unequal manner. Americans are born equal, but the rules of life’s game are not the same for everyone. G. William Domhoff, the author of “Who Rules America” explains why there are so many inequalities in the way the wealth-income and power are distributed in America.  Wealth according to him is “the value of everything a person or family owns, minus any debts”.  Income is what a person earns from working and from their “dividends, interest and any rents or royalties paid to them on properties they own.”

A mere 20% of Americans, he says, own 85% of the nation’s wealth while the bottom 80% own just 15%. As for inheritance and estate taxes, the picture is almost the same. A mere 1.6% inherits $100,000 or more. Compared to this, 91.9% of Americans do not receive any inheritance (Domhoff web).

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Is America waking up?

Has America woken up to these harsh realities? The answer is no because most Americans are not even aware of how wealth is distributed in their country. Ninety percent of Americans, “irrespective of their gender, age, income level or party affiliation” wrongly believed that 20% of Americans own 60% of the nation’s wealth (Domhoff web). The truth is that the top twenty percent owns about eighty-five percent of the country’s wealth. The bottom forty percent owns a mere 0.3 percent of their nation’s wealth.

Also, America historically has always been a country where the distribution of wealth has been very unequal. In 1929, the top one percent in seaport cities like Boston, New York, and Charleston owned between 40 and 50% of the country’s wealth. The situation today is no better than then.

Income distribution inequalities are rising

Income distribution inequalities are also on the rise. In 1982, the top one percent in America earned 12.8% of total income in the US. In 2006, their share of total income had shot up to 21.3%. In 1982, the bottom 80% earned 48.1 percent of America’s total income. In 2006, they could only earn 38.6% of the total income in the US.

Does taxation remove income distribution inequalities?

To redistribute income, it is necessary to tax the rich and redistribute their income to the less well-off. However, the fact remains that current tax rates are not progressive enough when it comes to taxing the top one percent of income earners. This top one percent only pays 30.8 percent in taxes and the taxes paid are lower than what the next nine percent pays.

“Cut the throats of the rich”

People on the political left argue that “in an economic climate dominated by bailouts, corporate corruption, and inequality of wealth,” it is time to enact laws that will help to redistribute wealth so that workers get to earn the same amount of money like a CEO. “Cut the throats of the rich” it is how Edmund Burke described redistribution of wealth to benefit society as a whole.

It is important to understand that cutting off the salaries of the rich is not going to have much of an impact on the less privileged. If, for example, the salary of the CEO of Wal-Mart was cut off totally, he will have to give up his salary of 1.24 million dollars so that it could be redistributed among the company’s 1, 80,000 strong workforces. His 1.24 million dollar salary, when redistributed would add a mere 68 cents per year to the salary of each employee. If he also gave up all his wealth of 10.46 million dollars per year, the net income, earned by Wal-Mart employees would rise by a mere 5.81$ per year per employee. Income redistribution through taxation is, therefore, best treated as an emotional response propagated by well-intentioned people that would like to help the disadvantaged in some way.

Redistributing wealth pros and cons

Redistribution of wealth is advocated by those who believe that life should be fair to everyone. The most pressing argument for redistribution of wealth is that it provides equal benefits to the rich and poor. Redistributing wealth, it is argued will also contribute to greater peace and stability.

Most key religions are opposed to the accumulation of wealth. They believe that since everyone is born equal they should also enjoy equality of opportunities in life. They also argue that wealth inequality leads to economic inefficiencies. And, when there is social instability there is bound to be social unrest. Finally, they argue that concentrating wealth in the hands of a few makes it easy to create policies that are undemocratic.

However, for many of us, especially those on the right and who believe in free enterprise, redistribution of wealth is not a boon because it violates the concepts of private property. It is also not a boon because 34.6 percent of wealth is controlled by the top one percent of Americans. The most pressing argument against redistribution of wealth is that it ends up mollycoddling the disadvantaged, makes them lazy as well as willing to live on handouts.

Wealth accumulation is acceptable to those who believe that private property is sacred. They argue that wealthy people are best placed to create new opportunities for their societies. They also say that the wealthy also supports the arts and that poor people are lazy.

Class conflicts

Redistribution of wealth by taxing the rich to benefit the poor is certainly a lofty idea. However, ongoing conflicts between unions and leaders of corporates prevent an equitable redistribution of wealth. A class-based conflict mostly favors the corporate community in the US, which has time and again defeated the unions.  A Pew Research Centre survey shows that 66% believe that there is a “very strong” or “strong” conflict between the haves and have-nots. 74% blacks, 61% Hispanics and 65% whites perceive these class conflicts to be real.

Pluralism is bound to fail in America

Capitalism has given rise to ownership classes that have huge economic resources at their command. This ownership class is in a position to wield a lot of power. Those who propagate redistribution of wealth through pluralism fail to realize that America is a land where there is freedom of assembly and expression. This alone condemns pluralism, Marxism and other alternatives to failure. Since America is class dominated, there is little scope for just redistribution of wealth because in the US the corporate community generally gets what it wants. In a democratic society such as the USA, pluralism cannot succeed as it ignores wealth and income distribution and concentrates instead on short-term political conflicts.

To conclude, there is certainly a case for change in the current distribution method/formula of income wealth and power distribution. For the sake of argument, let us presuppose that arguments in favor of redistribution are stronger than those against.  It this context, it pays to take a look at some instances when wealth has been seized by the leaders and redistributed to the poor. Henry VIII took all of the wealth that belonged to the Church in England, kept some of it and redistributed the rest to the underprivileged. The French Revolution is another example of how wealth belonging to the French aristocracy was seized and even looted by the less well off. During the French Revolution, furniture that was looted from the aristocrats had no value for the peasants other than to serve as firewood. This means that in order to redistribute wealth it is necessary to extract real value from the wealth accumulated and do so without reducing the value of the asset.

In Britain, laws were enacted to deprive the rich of their excessive wealth. This wealth would be transferred via death duties over succeeding generations. The problem, however, is to get the top one percent to pay more than they already pay. Since they own so much wealth, it is hard to find people with enough money power to purchase that wealth.

Is it possible to redistribute wealth in the US? The answer is that it is only possible if changes are made to the country’s tax code. In addition, estate tax has to be restructured but without being eliminated. There is also need to impose wealth taxes as well as, perhaps, even consumption taxes.

The wealthy segment will object to these measures. Since they have the economic clout (and political clout) to get laws passed that serve their own self-interests, it is hard to see such measures being passed given the current state of the country. Wealth can, therefore, be redistributed if both the cream of society and the rest of people join hands to change the very organization of their society.

Pluralism as already mentioned is doomed to fail. The only way to make rules equal for everyone is by getting the rich and the less privileged to join hands and find common middle ground.

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