Mind the Gap
You can talk about a lot in an hour-long speech, and President Bush’s State of the Union address on January 31 contained the expected lengthy list of initiatives to solve the great challenges facing the nation. The president even had time to call for anti-cloning legislation against “creating human-animal hybrids,” also known as manimals. We’re not sure what a manimal is, exactly, but we suspect it may explain Dick Cheney. It certainly sounds like something out of Lord of the Rings, but apparently, to Mr. Bush’s mind, constitutes a grave enough threat to warrant a place in his biggest speech of the year. Left unmentioned by Bush, though, was one of the most important and disheartening problems facing the country—the widening gulf between rich and poor.
The amount of national wealth that has shifted toward the super-rich recently is astounding. Late last year, the Congressional Budget Office posted some disturbing economic data on its Web site that has received too little attention (The New York Times ran a short article). The data illustrated that the top 1 percent of households now own 57.5 percent of the country’s combined corporate wealth. That’s up from 38.7 percent in 1990, according to the nonpartisan agency. That means the other 99 percent of us have our mitts on less than 43 percent of the wealth. (And that corporate wealth is booming: ExxonMobil recently reported that it earned $36 billion last year, a record for an American company.) Bush’s tax cuts on capital gains and dividends have only spurred the trend.
It won’t shock you to learn that Texas is leading the way on this one. Five days before Bush’s speech, the Center on Budget and Policy Priorities, a liberal Washington think-tank, reported that Texas boasts the nation’s largest income gap between the wealthiest families and middle-income families. The richest 20 percent of Texas families earn an average of $114,000 a year, compared to $41,000 for the middle 20 percent. The distance between Texas’ poorest 20 percent of families and the richest is only second to New York. But we’re working hard to reach No. 1 in that category too: The incomes of poor families in Texas grew at the lowest rate in the nation between 1990 and 2003, according to the report. Keep in mind that 13-year period included the largest economic expansion in the nation’s history. In Texas, at least, it’s clear that the rising tide hasn’t been lifting all the boats.
Since the income gap wasn’t mentioned in the State of the Union speech, which also included a reference to using wood chips and something called “switch grass” for energy, it’s clearly not a top priority for the administration. On the state level, there’s only so much we can do to curb such a long-term national trend.
But the Center’s report recommends a few sensible measures to help boost the state’s poorest families, including an increase in the minimum wage, and a crack down on predatory lending and payday loan companies.
It would also help if the Texas tax system weren’t so backwards. The poorest of the poor pay about 14 percent of their income in state taxes, according to the state comptroller. Meanwhile, the richest of the rich, earning $177,000 a year and up, pay just 5 percent.
Yet during the most recent school finance go-round last summer, state lawmakers nearly passed a proposal that would have cut taxes on that richest 20 percent of Texans and raised taxes for the rest of us. The Legislature will reconvene this spring for another attempt at re-jiggering the tax system. Lawmakers should craft a tax bill that ensures the richest among us—who have enjoyed such good times lately—pay more of their fair share.