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It's capital vrs. labor and guess who has been winning.  Marx, while not a prophet, certainly had some insights that keep getting validated.

The single greatest driver of income inequality over a recent 15 year period was runaway income from capital gains and dividends.
Many know that.  What big thing happened over those 15 years?  Why, of course, taxation on capital gains and dividends was reduced way below taxation on income.  

Work should not be taxed at a higher rate than wealth accumulation.  That is a moral principle.  Even now, capital gains and dividends are taxed at the extremely low rate of 20%, up from the 15% rate in the Bush tax cuts.  Tax them as oridinary income and much of the deficit bs would disappear.

The reforms to capitalism to address impovrishment of workers in the the early to mid-20th century involved progressive taxation, protection of unions, and the growth of a social welfare state.  In Western Europe, especially the UK, and even a greater degree in America, where such reforms were weakest due to the lack of a viable socialist party, starting in the late 70s and accelerating afterward, there was a movement with the aim of increasing inequality (although it often hid its real goals), and that "conservative" movement succeeded.  The Bush tax cuts were its apex.  

How do we know about this fundamental driver of inequlity?  Did I make it up to fit my ideology?  No, we have facts, a new study that was not corporate funded.  

The new study was performed by Thomas Hungerford of the non-partisan Congressional Research Service. Though the study is not a CRS product, Hungerford’s data is widely cited on both sides; he’s an impeccably objective analyst.

Here’s what Hungerford found: The single greatest driver of income inequality over a recent 15 year period was runaway income from capital gains and dividends.


“By far, the largest contributor to increasing income inequality (regardless of income inequality measure) was changes in income from capital gains and dividends,” the report concludes.

Or, as Hungerford put it in an interview with me: “The reason income inequality has been increasing has been the rising income going to the top one percent. Most of that has come in capital gains and dividends.”

In other words, wealthy beneficiaries of low tax rates on capital gains and dividends are doing extremely well — and their runaway wealth is a major driver of income inequality. There’s a lot of that money out there that could be taxed as ordinary income — as Obama and Dems want — as a way to avert the sequester, which could badly damage the economy. Republicans oppose this.

WaPo, The Plum Line, New study badly undermines GOP position on sequester

Greg Sargent sees the impact on the debate of the day, and that's fine, but I think this is a fundamental issue.  This is a fight we will have to fight even after this President.  The economic inequality is still accelerating in the Great Recession (probably due to a rising stock market and a not rising job market with stagnant wages)

It's a long struggle for justice, fairness, and decency, and small reforms help people on the way.  It should be a fundamental principle of Democrats that wealth should at least be taxed at the same rate as work.  We're not there yet within the Dem Party.  Much work to be done, but that is a North Star worth aiming at.      

Originally posted to TomP on Wed Feb 20, 2013 at 10:08 AM PST.

Also republished by Income Inequality Kos.

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