Have the Very Wealthy Achieved Victory in Their Class-War?

By Sam Pizzigati, Dollars and Sense. Posted November 3, 2009.

Back in 1974, the inaugural year for Dollars & Sense, young economic justice activists -- like me -- felt we had our hands full. I was working, at the time, in upstate New York, helping mobile home owners organize against trailer park landlord extortion. I had one friend active on a campaign to win bargaining rights for the local university’s food service workers, another pushing for public housing, still another advocating for a badly needed primary health care clinic.

Everywhere we all looked, we saw people hurting, we saw unfairness, we saw economic injustice. Now today, 35 years later, I’ve come to understand what we didn’t see: the big picture.

Yes, back then in 1974, we certainly did face injustice at every turn. But we were living, thanks to years of struggle—and success—by our activist forebears, in a society where politics actually revolved around confronting those injustices and making change that could really help average working people.

And, even better, we had a realistic shot at achieving that change. The reason? Our activist forbears had sliced the single greatest obstacle to social progress—the rich and powerful—down to democratic size. In 1974 we were living in a society with an enfeebled wealthy, and we didn’t know it.

Shame on us. By not understanding—and not appreciating—the equality our progressive predecessors had battled so hard to achieve, we failed to defend it. We let the wealthy come back. We let grand concentrations of private wealth reconstitute themselves across the American economic landscape. We let the super rich regain their power to dictate and distort America’s political discourse.

How rich—and powerful—have today’s rich become? Some numbers can help tell the story. In 1974, the most affluent 1% of Americans averaged, in today’s dollars, $380,000 in income.

Now let’s fast-forward. In 2007, the most recent year with stats, households in America’s top 1% averaged $1.4 million, well over triple what top 1% households averaged back in 1974—and, remember, this tripling came after adjusting for inflation.

Americans in the bottom 90%, meanwhile, saw their average incomes increase a meager $47 a year between 1974 and 2007, not enough to foot the bill for a month’s worth of cable TV.

The bottom line: top-1% households made 12 times more income than bottom-90% households in 1974, 42 times more in 2007.

The numbers become even more striking when we go back a bit further in time and focus not on the top 1%, but on the richest of the rich, the top 400, the living symbol of wealth and power in the United States ever since America’s original Gilded Age in the late 19th century.

In 1955, our 400 highest incomes averaged $12.3 million, in today’s dollars. But the top 400 in 1955 didn’t get to enjoy all those millions. On average, after exploiting every tax loophole they could find, they actually paid over half their incomes, 51.2%, in federal income tax.

Today’s super rich are doing better, fantastically better, both before and after taxes. In 2006, the top 400 averaged an astounding $263 million each in income. These 400 financially fortunate paid, after loopholes, just 17.2% of their incomes in federal tax.

After taxes, as a group, the top 400 of 2006 had $84 billion more in their pockets than 1955’s top 400, $84 billion more they could put to work bankrolling politicians and right-wing think tanks and Swift Boat ad blitzes against progressive candidates and causes.

How could America’s super rich have so little, relatively speaking, back in 1955 and so much today? What has changed between the mid 20th century and the first decade of the 21st? We have lost, simply put, the economic checks and balances that so significantly discouraged grand concentrations of private wealth in the years right after World War II.

Among the most important of these checks and balances: steeply graduated progressive tax rates. Over most of the quarter-century between the early 1940s and the mid 1960s, America’s richest faced at least a 91% federal tax rate on "earned" income over $400,000. By 1974, that top rate had dropped, but only to a still steep 70%. The top rate today: 35%.

Tax rates on income from the sale of stocks, bonds, and other property -- capital gains -- have traveled the same trend line. In the postwar years, the wealthy paid a 25% tax on capital gains. The current rate: just 15%.

So what should today’s activists for economic justice do about all this? Hit the repeat button and re-fight the struggles of our activist forbears?

That course certainly seems reasonable. Our forbears, after all, pulled off quite a stunner. They faced, a century ago, a super rich every bit as rich and powerful as the super rich we confront today. Over the course of the next half-century, they leveled that super rich.

By the 1950s, the incomes of America’s richest had been "hacked to pieces," as best-selling author Frederick Lewis Allen would marvel in a 1952 book. The grand estates of the super rich, jubilant postwar progressives would add, had become housing tracts and college campuses for the first mass middle class nation the world had ever seen.

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Sam Pizzigati is the editor of the online weekly Too Much, and an associate fellow at the Institute for Policy Studies.

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