Edward Wolff on financial claims to the social surplus product
Source Jurriaan Bendien
Date 03/12/05/23:20

IN THE UNITED STATES, in the last survey year, 1998, the richest 1 percent
of households owned 38 percent of all wealth. (...) the level of wealth
inequality today is almost double what it was in the mid-1970s. (...) The
top 5 percent own more than half of all wealth. In 1998, they owned 59
percent of all wealth. Or to put it another way, the top 5 percent had more
wealth than the remaining 95 percent of the population, collectively. The
top 20 percent owns over 80 percent of all wealth. In 1998, it owned 83
percent of all wealth. This is a very concentrated distribution. (...) The
bottom 20 percent basically have zero wealth. They either have no assets, or
their debt equals or exceeds their assets. The bottom 20 percent has
typically accumulated no savings. (...) The top 1 percent of families hold
half of all non-home wealth. The middle class's major assets are their home,
liquid assets like checking and savings accounts, CDs and money market
funds, and pension accounts. For the average family, these assets make up 84
percent of their total wealth. The richest 10 percent of families own about
85 percent of all outstanding stocks. They own about 85 percent of all
financial securities, 90 percent of all business assets. These financial
assets and business equity are even more concentrated than total wealth.
(...) The average African-American family has about 60 percent of the income
as the average white family. But the disparity of wealth is a lot greater.
The average African-American family has only 18 percent of the wealth of the
average white family. (...) In 1983, only 32 percent of households had some
ownership of stock. By 2001, the share was 51 percent. So there has been
much more widespread stock ownership, in terms of number of families. But a
lot of these families have very small stakes in the stock market. In 2001,
only 32 percent of households owned more than $10,000 of stock, and only 25
percent of households owned more than $25,000 worth of stock. So a lot of
these new stock owners have had relatively small holdings of stock. There
hasn't been much dilution in the share of stock owned by the richest 1 or 10
percent. Stock ownership is still heavily concentrated among rich families.
The richest 10 percent own 85 percent of all stock. (...)

I would model (taxation) after the Swiss system, which I think is a pretty
fair system. It would be a progressive tax. In the United States, the first
$250,000 of wealth would be exempt from the tax. That would exclude 80
percent of all families. The tax would increase at increments, starting out
at .2 percent from about $250,000 to $500,000. The marginal rate would go up
to .4 percent from $500,000 to $1 million, and then to .6 percent from a $1
million to $5 million, and then to .8 thereafter.
It would not be a very severe tax. In fact, the loading charges on most
mutual funds are typically of the order of 1 or 2 percent. It would not be
an onerous tax, but it could raise about $60 billion annually. Eighty
percent of families would pay nothing, and 95 percent of families would pay
less than $1,000. It would really only affect very rich families. (...)

The minimum wage has fallen by about 35 percent in real terms since its peak
in 1968. We should think about restoring the minimum wage to where it used
to be. That would help a lot of low-income families. The unemployment
insurance system is in a real mess; only about one third of unemployed
persons actually get unemployment benefits, either because they don't
qualify or because they exhaust their benefits after six months. Typically
the replacement rate is about 35 or 40 percent. In the Netherlands, the
replacement rate is 80 percent. Our unemployment insurance system is much
less generous than in other industrialized countries and can certainly be
shored up. Of course, the welfare system is in a total state of disrepair,
since it provides very restrictive coverage. Even before the switchover from
AFDC to TANF with the 1996 welfare reform bill, real welfare payments had
declined by about 50 percent between 1975 and 1996. So we had already
experienced an enormous erosion in welfare benefits, even before we adopted
this new system.


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