Author's Note: This is the final in a four-part series on wealth and income inequality.
"If you get too cold I’ll tax the heat...
‘If you take a walk, I’ll tax your feet."
— "Taxman" as performed by The Beatles
If a business owner or entrepreneur can become wildly wealthy, good for him or her. Applying overly aggressive tax rates to the 0.1% or even the 1%, many of whom are new arrivals in this elite income category, makes no sense for our economy. How, then, do we deal with wealth and income inequality?
First, we must invest in programs designed to retool our workforce in useful, marketable skills, the kind that can render us competitive in global markets. Workers must be willing to retrain. And we think most would agree that we should not commit funding for those who can and should work but don't.
Decoupling schools from property taxes and funding educational needs by a different form of taxation might also provide more equal economic opportunities for more young Americans. We need excellent schools in all neighborhoods. Let's pay teachers a living wage and ask them to teach immediately marketable skills. An aggressive program to deal with student debt is probably overdue, also.
Wealth and income inequality has always been a part of American culture. It was only after WWII, when home ownership and educational opportunities were afforded to millions through such programs as the G. I. Bill, that a true middle class emerged in our society. Our parents were beneficiaries of this era, as the U.S. stood alone in military and political power and possessed abundant natural resources.
Since that golden era, though, wages have stagnated. The Great Recession exposed this truth through the housing crisis. Most Americans whom we traditionally think of us as middle class have most of their wealth tied to home equity; the vast majority of the 1% link their wealth to capital markets or private businesses. After the stock market plummeted in 2008, markets rebounded, albeit slowly. But home values took much longer to reflate. It was not until the end of 2017 that the Case-Shiller Home Price Index topped its all-time high of 2006. Additionally, global competition, automation and outsourcing have simultaneously coalesced to exert tremendous economic pressure on ordinary Americans.
The Harvard Business Review characterizes rising income and wealth inequality in America over the last seven decades as a "race between the stock market and the housing market," and calls the 2008 financial crisis "a definitive moment in the rise of wealth inequality..."
If there is a way out of this conundrum, it is tied to education, job creation, and wage increases. We simply must retrain our labor force in higher paying, in-demand competitive careers, starting in our public schools. Easier said than done, but it's preferable to taxing the wealthy and punishing those who serve as job creators.
Margaret R. McDowell, ChFC®, AIF®, author of the syndicated economic column “Arbor Outlook,” is the founder of Arbor Wealth Management, LLC, (850.608.6121 – www.arborwealth.net), a fiduciary investment advisory firm located near Sandestin.This column should not be considered personalized investment advice and provides no assurance that any specific strategy or investment will be suitable or profitable for an investor.