Wider division | National | stardem.com
EASTON – The economics of the coronavirus pandemic shows a very stark contrast between the rich and the poor, investors and workers with growing wealth disparities, leading to calls for changes to a tax code that provides shelters and loopholes for the rich and big business.
The wealthy and investor class prospered financially during the pandemic, even as low-income workers lost their jobs and saw their wages and hours cut in the past year. The pandemic has also amplified income inequality in the United States – including here on the Shore – and tax code preferences favoring investors over employees, according to Memo Diriker, professor of commerce and economics at the University. from Salisbury.
“The pandemic has accelerated trends that were already in place. We were already seeing a significant increase in the gap between the top and the rest of the population, ”Diriker said.
Simply put, the wealthy got richer during the pandemic while workers, especially in industries hard hit by COVID, such as restaurants, retail and travel, lost their jobs and saw their wages and salaries. their hours decrease.
“The divergence is more acute,” said Isaac Marcelin, professor of finance at the University of Maryland Eastern Shore, of growing class gaps during the COVID-19 pandemic.
Marcelin and Diriker both said that the United States faces the trend of wealth disparity, with high incomes increasing their wealth while workers’ wages have been relatively stable for years.
A 2018 analysis from the University of California at Berkeley found that the richest 1% of Americans have doubled their share of national income over the past five decades, while wage earners have recorded smaller gains.
The poverty rate in the United States was 10.5% in 2019 (the most recent data available), according to the US Census Bureau. This translates to 34 million people. Urban Institute economists predict that the poverty rate in the United States will be 13.7% this year with a poverty rate of 18.1% for blacks and 21.9% for Hispanics.
Meanwhile, the stock markets have set all-time highs throughout late 2020 and this year.
The Dow Jones Industrial Average has gained more than 12,516 points since March 2020, a gain of 57%.
The tech-rich Nasdaq index has jumped 86% and the S&P 500 – which set a new all-time high on Friday, June 25 – is up 57% since last March, when the coronavirus pandemic devastated others aspects of the economy.
The rich – including high profile billionaires such as the founder of Amazon and Washington post Owner Jeff Bezos, Tesla Motors mogul Elon Musk, Warren Buffett of Berkshire Hathaway, Facebook founder Mark Zuckerberg and Microsoft founder Bill Gates – have seen their wealth grow during the COVID pandemic. The quintet has seen its wealth increase by $ 71.4 billion this year as stock prices rise, according to the Bloomberg Billionaires Index.
These gains were contrasted by a report from ProPublica, a nonprofit media outlet, showing that these top billionaires pay little or no federal income taxes, according to leaked IRS documents.
On the other hand, the US economy hemorrhaged 22.4 million jobs at the start of the pandemic. Many of these jobs were low-wage workers.
“They are the ones who were put on leave. They are the ones who get let go, ”Diriker said. “They are the ones who make their money by hitting a clock.”
Meanwhile, many professional and white-collar workers kept their jobs and worked from home during the COVID pandemic. “They have the luxury of settling in their homes. They are better paid and more skilled workers, ”Marcelin said.
The economies of the United States and Maryland have created jobs, but are still down from pre-pandemic levels. Maryland’s economy has lost 155,600 jobs compared to February 2020 and before COVID hit, according to the United States Bureau of Labor Statistics. The U.S. economy shows that the number of people employed declined by more than 7.1 million people in May 2021 compared to February 2020 and before the pandemic, according to the BLS.
Socio-economic class juxtapositions help push Democratic calls for tax changes with higher rates on higher incomes and investment profits. US Senator Chris Van Hollen, D-Md., Sponsors a Millionaire Surtax measure. Other Democrats are pushing for wealth taxes, and President Joe Biden wants to withdraw federal tax cuts adopted under the Trump administration.
Diriker said the federal tax code is a major factor in the disparity of the wealthy, as investments are privileged over wages. “It’s structural in nature. People who increase their wealth with their investments are taxed differently, ”he said.
The top federal rate on long-term capital gains is 20% while the top federal tax rate is 37%.
Diriker said the United States needs to consider how it approaches investment, income and wages as it grapples with the challenges of wealth disparity. He said the current system drives significant wealth growth at the top, while wage earners see limited income growth and are hit harder by inflation.
The economic gap is evident in Maryland and on the coast where there are wealthy communities and areas of poverty, lower paying jobs and limited opportunities. Marcelin said more progressive tax rates could be proposed to help shift the burden upward.
“The tax burden can be shifted to the rich,” he said.
These efforts are challenged by the equally divided US Senate, arguments that higher taxes hold back growth and investment, and more moderate Democratic lawmakers who would only favor gradual and minimal tax increases on the rich and big business. . There are also dozens of lobby groups and industries ready to fight major tax changes and increases.
“There’s a reason the tax code is so broad,” Marcelin said, pointing to the shelters, loopholes and subsidies created for certain interests, investments and industries. “The tax system in the United States was not designed to help the poor.”