The Zeitgeist

In a Free-Market Economy “Income Inequality” will Always be a Fact of Life.

Thomas Jefferson famously wrote in the Declaration of Independence that “We hold these truths to be self evident that all men are created equal.” Only three divine “inalienable” rights were then named, those being “Life, Liberty and the pursuit of Happiness.”

Ever since the Occupy Wall Street events of a couple of years ago there seems to be a clamoring for an additional sacred right to add to the original troika – that being income equality. The mantra of income equality was recited to great effect by then candidate and now New York City Mayor Bill DeBlasio and has subsequently been picked-up by President Obama.

It is true that the overwhelming majority of Americans are not rich. The U.S. Census Bureau reports that in 2010 per capita income was $40,584 nationwide. Even affluent states like New York and California are at $48,821 and $43,104 respectively. While Massachusetts (at $51,552) and Maryland ($49,025) which have even higher income numbers can’t guarantee the good life for all its residents.

The Census Bureau also reports that 42 percent of households in the U.S. have dual incomes which would account for the high percentage of Americans in the middle class and upper middle class. The Census Bureau also reports that as of its 2006 statistics (which will show higher numbers for 2010 and beyond) only the top 25 percent of households earned in excess of $77,500. Further refining this, the top five percent of households earned $167,000 or better; the top one percent had incomes exceeding $350,000, so, clearly, those earning a million dollars a year or more are a very rare breed.

On the tax front it seems that the bigger earners are paying a heavy chunk of U.S. income taxes. For 2009, the top one percent paid 36.73 percent of all federal income taxes. The top five percent were carrying 58.66 percent of the tax burden and the top 10 percent were bearing almost 71 percent of the tax load. So 10 percent of Americans are paying more than 70 percent of the taxes.

According to 2006 Census figures, the top 10 percent of households earn $118,200 or more whereas the top 10 percent of individual earners were at the $75,000-plus level and only 5.63 percent of individuals were exceeding $100K. So what constitutes the “wealthy”? It is really the guy in New York or San Francisco who earns $100,000 a year?

There has always been a top five percent and a top one percent in the U.S. In any free market capitalist society there are always going to be some folks who do exceedingly better than others.

Part of getting into the top five percent or higher is a combination of hard work, education, talent, pluck and luck. And not everyone is going to get there. The percentage of high school and college athletes who get into professional sports is miniscule and these athletes are on the whole very well compensated deep into the top one percent. Very few pretty girls will become a super model or appear in the Sports Illustrated swimsuit issue.

There are very few aspiring broadcast journalists or actors who will make it onto the big networks and fewer yet who will be in Hollywood’s top 100. and believe it or not, there are very few people working on Wall Street who will crack the finance stratosphere.

The tenth of the Ten Commandments reads as follows from the King James Version of the Bible: “Thou shalt not covet thy neighbor’s house, thou shalt not covet thy neighbor’s wife, nor his manservant, nor his maidservant, nor his ox, nor his ass, nor any thing that is thy neighbor’s.” According to Merriam-Webster’s dictionary, one of the key definitions of “covet” (and meant in the biblical sense) is “to desire (what belongs to another) inordinately.” Because coveting leads to resentment.

The authors of the Bible put the prohibition on coveting into the top 10 because jealousy of those who have more than you can be both self-destructive and damaging to society as a whole. There will always be someone you know who earns more, has a bigger house, drives a better car, wears better clothes or takes better vacations. There is no way to assure equal money and equal stuff for everyone. They tried that in the 20^th Century. It was called Communism and Socialism and as George Orwell wrote, still “some pigs were more equal than others” which is why it failed.

Yet we currently have a political environment where the term “income inequality” is being bandied about prolifically with the intention of arousing the resentment of the masses against all those who’ve done well for themselves. What American equality has always stood for first and foremost has been equality before the law, equality in voting, equality of opportunity (a country where anyone can become President, for example) and surely equality in education to the greatest extent possible.

What is not guaranteed in life are equal outcomes for one’s life and career efforts and as a consequence, equal incomes. That’s why the Declaration of Independence only guarantees the right to pursue happiness, not happiness itself. Life isn’t fair. We don’t always get what we want or what we deserve. Government has to provide a climate of equal opportunity for all to excel but ought not be fomenting resentment against those who have succeeded or succeeded spectacularly. Government needs to have an impartial, non-discriminatory playing field that doesn’t discriminate or vilify any of its citizens, including those who’ve done well.