A couple years ago, Warren Buffett’s secretary became “Exhibit A,” of sorts, in his argument for raising the tax rate on capital gains. The idea of the secretary-to-a-billionaire paying a higher tax rate than the billionaire himself was a poignant comparison aimed to invoke a guttural reply, summed up as: “That’s NOT fair!”
The math of Buffett’s bold statement was scrutinized, as reverse-engineering number-crunchers figured Debbie Bosanek must earn somewhere between $200,000 and $500,000 for the claim to hold true.
Others found an amusing argument in suggesting Bosanek must employ a pretty lousy accountant.
Regardless, the debate was on: Should America support a tax code that allows for unequal treatment of income, depending on its source?
More directly, are wealthy Americans receiving “special treatment” in a tax code that offers benefits to sources of income that are disproportionately accessible by the top 1%?
I’m not here to take up that debate. But I will share an interesting graph that Catherine Mulbrandon at VisualizingEconomics.com created:
While some surely argue that everyone has an opportunity to earn income through capital gains – a la “this is America, land of the free…” – the truth is, the uber-wealthy dominate capital gains income.
The bottom 80% of Americans earn less than 5% of all capital-gains income while the top 20% controls 95% of it.
The chart above shows how capital-gains income creates more inequality than all other sources, including labor. The light grey, equal distribution line – which is straight, at a 45-degree angle – plots the graph as it would look if income was evenly distributed.
Plots in the upper-left corner of the graph would show income advantages the not-too-wealthy Americans gained.
NOTE: There are NONE.
The plots that curve closer to the lower-right corner show income advantages wealthy Americans enjoy.
NOTE: All of them!
As you can see, the capital gains plot is pulled closest to the lower-right corner, providing a great visualization of just how concentrated capital-gains wealth truly is.
Even if their argument wasn’t well articulated, or their goals well-defined, this is the essence of what protesters carrying the Occupy Wall Street banner were decrying.
Of course, you can’t blame Buffett himself for pursuing sources of income that are advantageous to his bottom line. He simply strategizes within the current tax code. And, as if you need reminding, capital-gains tax rates have generally declined since the 1970s.
To quote the ’80s-era American rapper, Ice T: “Don’t hate the player, hate the game."