The Ever-Shrinking Paycheck
by Clyde Weiss | January 09, 2013
39.6 percent.
That’s the new top rate Congress set on wages and salaries as part of the recently passed fiscal cliff deal. Previously, wages and salaries were taxed at 35 percent. But the rate that rich folks pay on their investment income was raised to only 20 percent.
Why is this disparity important? Washington Post columnist Harold Meyerson notes that “taxing wages and salaries at a higher rate than investment income means that the tax code is taking a bigger bite out of a steadily shrinking share of Americans’ income. Pay from work just ain’t what it used to be.”
Meyerson also notes that “income from wages and salaries as of July 2012 constitutes the smallest share of gross domestic product [the market value of all goods and services produced in the country] since World War II” – just 43 percent. That’s down from its high of 53 percent in 1969.
What’s missing is about $1.5 trillion annually that went “to corporate profits, whose share of the economy has risen as the share going to wages has diminished,” Meyerson writes. “This shift from wages to profits is called redistribution. It is the central fact of American economic life. And it is the primary reason that economic inequality in the United States has skyrocketed.”
Corporations have been very successful in avoiding paying their fair share. The time has come for Congress to end the various legal tax dodges corporations use to beat the system – dodges that the working middle class can only envy.
