Income Gap Between the Rich and Poor in the U.S.

There is a major wealth and income gap between the rich and poor in the United States. A new
study has confirmed that the gap in the wealth that different Americans have accumulated is more
extreme than at any time since the Great Depression (Matthews). After much research there is a lot of
information that says this large gap is not health for our Country.
Some factors that affect this wealth gap is contributed to a large pay increase in senior company
executives and successful entrepreneurs. Another is that the wealthy are able to save a lot of money,
whereas the middle to lower class is not able to save as much. The graph below shows the large income
gap between the top 1% and bottom 90% of Americans from 1946-2012. It is easy to see that the
largest gap at any point in time is just recently in 2012. (Hiltzik)

Another graph shows how the top 0.1% have rebounded financially from the Great Depression.
Wealth inequality, it turns out, has followed a spectacular U-shape evolution over the past 100 years.
From the Great Depression in the 1930s through the late 1970s there was a substantial democratization
of wealth. The trend then inverted, with the share of total household wealth owned by the top 0.1

percent increasing to 22 percent in 2012 from 7 percent in the late 1970s. The top 0.1 percent includes
160,000 families with total net assets of more than $20 million in 2012. (Matthews)

Another factor is that the wealthy are able to pay less in taxes finding loop wholes and tax ride
offs that the middle to lower class are not able to take advantage of. A flat tax has been proven to be an
effective way to narrow this gap. Where everyone pays the same percentage of their income in taxes.
No loop wholes, and no tax ride offs. Everyone pays taxes, but the people with more money pay more.
This would narrow the gap and the Government would have more money then they have now to get out
of debt. Estate taxation is the most direct tool to prevent self made fortunes from becoming inherited
wealth. Progressive estate and income taxation were the key tools that reduce the concentration of
wealth after the Great Depression. The same proven tools are needed today. (Kleinbard)
The comparison of the composition of wealth shared between the upper class and middle-lower
class also shows the wealth and income inequality in America. The authors blame sharply rising
indebtedness; of course, the collapse of stock values and home prices in recent years has destroyed a

huge volume of middle-class wealth. The top 1% have been able to recover much of that wealth, but
the bottom 90% have continued to fall. They've continued to be dependent on housing and pensions,
both of which have continued to be very shaky legs of a tottering stool. (Hiltzik)

In conclusion, it is clear that some change is necessary to narrow the income gap between the
rich and poor in our Country. The current gap is not healthy for America. If income and wealth
inequality keeps increasing, and if the saving rate of the middle to lower class families stays low, then
wealth disparity will keep getting worse (Saez & Zucman). This will hinder the growth of our
economy and overall state of our Country.

References

Matthews, Chris. "Wealth Inequality in America: It's Worse Than You Think." Finance. Fortune,
31 Oct. 2014. Web. 4 Dec. 2014. <http://fortune.com/2014/10/31/inequality-wealth-incomeus/>.

Hiltzik, Michael. "U.S. Income Inequality Is Bad, But Wealth Inequality Is a Bigger Problem."
The Economy Hub. LA Times, 24 Oct. 2014. Web. 4 Dec. 2014.
<http://www.latimes.com/business/hiltzik/la-fi-mh-us-income-inequality-is-bad-20141024column.html>.

Saez, Emmanuel, and Gabriel Zucman. "Exploding Wealth Inequality in the United States."
Washington Center for Equitable Growth. 20 Oct. 2014. Web. 4 Dec. 2014.
<http://equitablegrowth.org/research/exploding-wealth-inequality-united-states/>.