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Ali: Brazen Inequality

12/09/10 5:55PM By Saleem Ali
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(HOST)  As Congress and President Obama finally resolved the issue of tax cuts, commentator Saleem Ali was left wondering how many Americans actually comprehend the growing problem of "national inequality".

(ALI)  I am a firm believer in capitalism when it comes to markets providing incentives for performance. However, the notion that this translates into a right for endless wealth accumulation is a betrayal of true capitalist ideology as well. Let us not forget that part of the reason for democratic capitalism to emerge in America was to provide an antidote to the hereditary aristocracy of Great Britain.
 
It is therefore bitterly ironic that a country which was formed to counter huge land and wealth accumulation of empires is now subservient to the desires of the rich.  What is wrong with sharing a small percentage of their excess fortunes with the society that has helped them reach those levels of prosperity?
 
There is often a perception that the hyper-wealthy families contribute philanthropically and hence there is no need to tax them further. Yet the reality of the matter is that the percentage of philanthropy from wealthy families is in fact often less than from middle-class families. One study found that only 9% of those Americans who donated more than $500 per year have a charitable estate plan. Indeed most of the wealth ends up being transferred to offspring which perpetuates dynasties and often leads to little more than spoilt children and despicable scavenging behavior by relatives. This is precisely why sensible billionaires such as Bill Gates have argued for greater inheritance taxation. Relying on philanthropy for social services can also lead to undemocratic and idiosyncratic outcomes.

Average national US philanthropy per year these days is around $300 billion and one third of this is usually given to religious organizations.  Compare this total philanthropic amount annually to the nearly $700 billion which would be given to the top 2% of income earners in the next five years if the tax cuts were made permanent for the elite.

Often those who earn more than $250,000 are affectionately assumed to be "small -business owners"  with the assumption that tax cuts would somehow lead them to hire more people. Yet, we are talking about personal income taxes and not business taxes and so Americans are confused beyond comprehension of the perils of such structural inequality. Even the spending pattern of the elite favors luxury brands with capital flight overseas rather than general wealth generation.  One of the measures of development and conflict is what economists call the Gini coefficient that measures inequality in a country. The United States inequality coefficient has been growing steadily in the last two decades and is now about the same as Mexico. Let us hope that as dust settles from the election and the misleading rhetoric around taxing and spending, Americans can have a civilized discussion about inequality.

(TAG) You can find more commentaries by Saleem Ali at VPR-dot-net.
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