Last week, one of the doctors I was working with was talking about
taxes, and mentioned the top 1 percent of taxpayers pay 40 percent of the income tax
revenue. On the surface that sounds awfully unfair – why should 1 percent of Americans be footing 40 percent of the tax bill? It’s true, though; according to the conservative National Tax Foundation,
the top 1 percent of taxpayers paid 38 percent of all income taxes in 2008 and 40.2 percent in
2007.

But tax rates for the wealthy are the lowest they have been in years, so why are tax bills so disproportionate? It’s because taxes are based on one’s means to pay, and the top 1 percent of tax payers have means that far exceed those of the average American. Consider that the top 1 percent of earners took home around 20 percent of the national total yearly income in 2008. Disparities in total wealth are even greater, with the top 1 percent of Americans controlling 42.7 percent of total financial wealth in 2007, compared with the bottom 80 percent of Americans, who laid claim to only 7 percent of that money.

Of course inequalities in wages and wealth are nothing new, but the point is they have been growing by leaps and bounds for the past several decades. The average annual salary in the United States rose only 10 percent from 1970 to 1999, while average salary for the top 100 CEOs in the nation increased $1.3 million (39 times the national average) to $37.5 million (more than 1,000 times the pay of an average worker).

Disparities in wealth have grown as well. The net worth of the top 10 percent of families rose 69 percent from 1998 to 2001, while the net worth of the bottom 20 percent climbed only 24 percent. The ratio of median wealth between the top 10 percent of income earners compared to lower-middle income families went from 12 to 1 in the 1990s to 22 to 1 by 2001.

Wealth inequality has been recognized by economists as a potentially destabilizing influence. Alan Greenspan – former chairman of the Federal Reserve – testified in 2005 before Congress that income inequality “is not the type of thing which a democratic society – a capitalist democratic society – can really accept without addressing.” But six years later, after the Great Recession, after the jobless recovery, with unemployment above 9 percent, little has been done to address the issue.

Some amount of financial inequality is necessary as a driver of the economy. However, the large and ever-widening gap between the rich and the not-rich is bad for the United States and bad for us.

For one thing, it is unhealthy. We know low socioeconomic status is a risk factor for bad health, but several studies also found higher levels of financial inequality exacerbate this effect. And because access to health care is unequal and often dependent on financial resources, illness can have a far greater financial impact on those lower on the socioeconomic ladder, which only serves to worsen inequalities.

The presence of profound – and increasing – inequality also calls into question the basic principles on which our nation is built. We have long taken it for granted that hard work, ambition and education are the key ingredients to financial success, that people earn money on the basis of effort and ability. But when a corporate executive earns hundreds – or a thousand –  times more than an engineer who works just as hard and has just as much education, we have to wonder whether or not income really correlates with effort.

The success of our economy depends on the promise of rewards inspiring hard work, creativity and productivity. If invisible but unyielding barriers are erected that separate the laborers from the masters, what incentive is there for trying hard? Ted Turner, George Sorros and other investors have worried the widening wealth gap risks transforming our meritocracy into an aristocracy with its rigid social classes, absence of upward mobility and resulting economic stagnation.

Geoff Jara-Almonte ([email protected]) is a fourth-year medical student
going into emergency medicine.