The 1990s was a decade of growing inequality in the United States, with an increasing consolidation of wealth in the hands of a small number of people and a growing gap between the richest and poorest citizens. From 1995-2000, during the era of the great "stock market boom," if one uses the terminology of the mainstream media, the media reported that wealth was becoming democratized and that everyone was making money in the stock market. However, an assessment is a media myth with little validity, as economic numbers do not support the claims about stock market wealth or those of greater monetary equality. While inequality grew slower in the 1990s than in the 1980s, the gap between the wealthiest Americans and the majority continued to grow. ¹ From 1995-2000, the income of the top five percent of Americans grew by approximately 3.5% while that of the bottom twenty percent grew by 1.7%.² Such disparities are found across all income levels, with those in the second twenty percent growing by just over 2%, those in the third growing by 2%, the fourth by approximately 2.2%, and those in the eighty-five to ninety-five percent range growing by approximately 2.5%.³ Incomes grew most significantly for those who already had the most money, which is a trend that continues into the 2000s. From 2000-2001, while all other brackets experienced declines, the wealth of the top five percent of people grew by .4%.⁴ While .4% does not seem significant, in light of the decreases in income experienced by other groups in the United States, it is a significant difference. During that period, the bottom quintile's income fell by 3.9%, the second by 2.3%, the third by 1.8%, the fourth by 1%, and those in the eighty-five to ninety-fifth percentile by .7%.⁵

Michigan's 9,938,444 citizens have experienced growing inequality consistent with the national trend towards consolidation of wealth by a small minority.⁶ By the late 1990s, income of the wealthiest twenty percent of families was 9.2 times that of the poorest twenty percent, an increase from the late 1980s when that number was at 8.9.⁷ While some have tried to dismiss the numbers pointing to growing inequality as being flawed, an examination of the arguments against rising inequality are rather weak. One such argument states that different measurements lead to different numbers, and that therefore the current statistics on inequality are flawed. However, economists for the Economic Policy Institute have found that no matter what measurement is used, inequality is growing.⁸ Another popular argument acknowledges that there is inequality, but says it is "non-economic" and is caused by increased taxes, however, this argument was also found to be lacking by the Economic Policy Institute.⁹

Presumably, it is the aforementioned belief that leads to the tax code changes such as those recently signed by President Bush in May of 2003. These "economic stimulus packages," a term which is simply a euphemism for "tax cuts for a small minority," are passed under the premise that it is the "tax burden" which causes both economic slowdowns and inequality, a belief which ignores questions about the systemic nature of these problems, failing to ask for example, if such levels of inequality are an inherent part of an economic policy that benefits the wealthy and corporations to the detriment of those outside of these groups. President Bush, arguing that the economy has become stagnant, despite the fact that the economy has grown by small amounts for seven of the last eight quarters, passed a tax package that primarily benefits the wealthy.¹⁰ Just as the majority of people in the United States and Michigan saw little benefit from economic expansion of the 1990s, they will see little to no benefit from the recent tax package.

During the 1990s the mainstream media played a key role in creating the myth that it was an economic "boom time" for everyone, despite the fact that the economic data shows that this was clearly not the case. If recent reporting is any indication, they will be playing a similar role in creating the mythology that the Bush tax package benefits all Americans. CBS news boldly proclaimed that "Most families will get a $400 check this summer for each child to cover the increased tax credit, which went from $600 to $1,000 under the law Mr. Bush signed Wednesday," merely one example in what has been a chorus of media reporting on the benefits of the "tax cut."¹¹ In addition to the increase in the Child Tax Credit, which will go to families with children under 17 making between $26,625 and $110,000, there was a reduction and eventual elimination of taxes on dividends, elimination of the so-called "Marriage Penalty," and a reduction of taxes for those in the upper income brackets. Perhaps one of the most interesting twists in the discussion of the tax package is the fact that middle-income people will have the highest tax burden because they do not quality for the targeted tax rates that go to the poorest and wealthiest segments of the population.¹²

While the mainstream media has not undertaken a complete analysis of the tax cut as a way of increasing inequality, they have looked at the inherent inequality in the way the newly increased Child Tax Credit (from $600 to $1,000) is awarded. This credit is one of the hallmarks of the Bush plan, as it will send $400 checks to make up the difference to qualifying families. The media has reported that families making over $110,000 will be left out from the cut, and surprisingly, that those making between $10,500 and $26,625 will not receive this credit. By excluding families in the $10,500 to $26,625 range, 6.5 million families, with 12 million children, will not receive the credit, despite the fact that they probably need the credit more than anyone else, as income has been falling most rapidly for those in low paying jobs.¹³ Credits for this income group were approved in the Senate version of the bill, but dropped in the conference committee.¹⁴ According to White House Press Secretary Ari Fleischer, "Low-income families are treated differently because of the fact that they don't pay income taxes at the same rate that somebody not on the earned income tax credit does," and consequently, as far as the Republicans are concerned, they do not deserve the credit.¹⁵ Republicans such as Senate Majority Leader Bill Frist, who dismissed criticism of decision not to award the Child Tax Credit low-income families as being "...the old, worn-out, tired, class warfare issue," have been forced to reexamine the credit, and there are bills proposed which would extend the credit.¹⁶ Thus far, these proposals seek to extend the credit both to minimum-wage families, as well as to more wealthy Americans, raising the cut-off from $110,000 to $150,000.¹⁷ While some Republicans, such as Tom Delay, argue that "...it's a little difficult to give tax relief to people that don't pay income tax," they are ignoring the fact that giving credits to those not paying income taxes has historic precedence.¹⁸ Such credits have been awarded annually since 1975 with the Earned Income Credit, which provides $32 billion in refunds to 19 million houses, while in 2001, a previous Bush tax plan gave rebates to all people that paid taxes as a means to offset Social Security and Medicare payments.¹⁹

Criticism in the mainstream media has been confined primarily to the Child Tax Credit, but several independent organizations that monitor tax policy have raised even more significant questions about who benefits from the tax plan. According to Citizens for Tax Justice, 49% of taxpayers will receive a cut of $100 or less from the recent tax bill, and for those 65.7 million people; the average reduction will be $19.²⁰ Eight million taxpayers making under $75,000 will receive no cut at all, a number that includes working people earning less than $30,000.²¹ United for a Fair Economy, another non-profit organization, came to similar conclusions. Their examination of the recent bill found that in 2003, the majority of Americans will receive a cut of $0 to $100, while those making $1 million or more will receive a $93,500 tax cut.²² According to their calculations, over the next four years people in the lower 60% of wealth will get 8.6% of the tax cuts, while the top 1% will receive 39% of the tax cuts.²³ Here in Michigan, 2,184,000 million people, or 48% of all taxpayers, will receive a tax cut of less than $100.²⁴ Over the next few years these numbers, with the exception of 2002 when "only" 46% of the population will receive a tax cut of less than $100, get progressively worse, with 72% in 2005 and 88% in 2006 receiving a benefit from $0 to $100.²⁵

One of the major reasons that the wealthiest Americans benefit the most from the recent tax bill is that a cornerstone of the package is a reduction in, and elimination of, taxes on dividends. The reduction in dividend taxes disproportionately benefits the wealthiest 1% of the population, as they have the largest amount of assets and capital.²⁶ Two-thirds of the benefit will go to the top 5% of wealthiest Americans, with 25% of the benefit going to the top .2% of wealthiest people, or those making more than $1 million dollars per year.²⁷ The cut on dividends was able to pass, in part because of the mythology of the 1990s -- one in which the majority of Americans owned stocks and benefited from the "bull market" of the late 1990s. However, such a belief is clearly a media created myth, as only 48.2% of the population owns stocks of any kind, a number which includes those owned indirectly in 401(k)'s, retirement plans, and other such investments.²⁸ Moreover, an examination of those who benefited from stock market gains in the period of 1989 to 1998, shows that it was the wealthiest households, with the top one percent receiving 34.8% of gains, the next nine percent receiving 37.7%, the next ten percent receiving 14.0%, and the bottom eighty percent receiving only 13.6% of stock market gains.²⁹

While the recent tax bill will increase inequality in the Michigan and the rest of the United States, it is important to look at the context into which the tax cut fits in order to completely understand it. This context is one of steadily growing inequality over the past thirty years. In Michigan, this inequality can be seen in the wages people are paid, as these wages have fallen consistently during the past twenty years. The median, inflation-adjusted wage for low-wage workers in 1999 (those in the 20^th percentile) were 6.9% lower than they were in 1979, while those for workers in the middle were 9.8% lower than in 1979.³⁰ When broken down in terms of dollars, for workers in the twentieth percentile wages the median wage in 1979 was $8.45 and $7.87 in 1999, mirroring the decline in the United States from the median of $7.61 to $7.35 in 1999.³¹ For Median-wage workers, or those in the fiftieth percentile, the median wage in Michigan in 1979 was $13.87 but had fallen to $12.51 in 1999, which exceed the national decrease from $11.89 to $11.87.³² Because of this decline in wages, the percentage of jobs paying poverty level wages has increased in Michigan. A poverty level wage is defined as one paying less than $8.19 per hour, which is the wage required to lift a family of four above the poverty line with full-time, full-year employment.³³ In 1979 17.9% of jobs paid poverty level wages, while in 1999 that number had grown to 22.9%, an increase that exceeded the rate of the larger United States, which saw a growth from 23.7% to 26.8%.³⁴

Due to falling wages, government policies that favor the wealthy, and cuts in social programs, among other factors, poverty rates are rising in Michigan and the United States. From 2000 to 2001, the percentage of people living in poverty grew from 11.3% in 2000 to 11.7% in 2001, for a total of 33 million people.³⁵ Statistics from the 2000 Census reveal that in 1999, 192,376 families, or 7.4% of those in Michigan were living below the poverty line.³⁶ The Economic Policy Institute provides another marker to see how people in Michigan are faring with their "Basic Family Budget Calculator," a formula that calculates how much a family with 1 to 3 children needs to earn in order to pay for basic expenses such as housing, food, and transportation, and have additional money leftover. 380,000 families live below the level they define as the minimum, which is 20.2% of all families in Michigan, numbers that provide more evidence of inequality.³⁷

If only a small segment of the population is benefiting from recent government policy, who else benefits? Corporations, many of whom have CEOs who are among those benefiting from recent tax legislation, continue to make massive profits despite the current economic situation and are consistently given massive tax breaks. Their profits are such that in 2001 the average factory worker was paid $26,764 while the average CEO was paid $11 million, or 411 times what their average worker received.³⁸ While this fell from 2000 levels, when the average CEO made 531 times that of the average factory worker, it remains an important way of demonstrating inequality.³⁹ Not only do these corporations continue to make enormous profits, they continue to receive major tax breaks from the government. For example, Microsoft received $12 billion in tax breaks from 1997 to 2002, paid no tax in 1999 despite profits of $12.3 billion, and only paid a tax of 1.8% on their profits of $21.4 billion from 2000-2002.⁴⁰ Microsoft is not merely an exception; rather it is indicative of the huge tax breaks given to corporations. General Electric made $50.8 billion in profits from 1997-2002, yet they only paid 11.5% in taxes, while Ford, with profits of $18.6 billion from 2000-2002, paid only 5.7% in taxes.⁴¹ Even WorldCom, paid no taxes in two of the years from 1999 to 2002, despite having profits of $15.2 billion.⁴² While these corporations receive massive tax cuts and make small segments of the population millions of dollars, the majority of the population must make up for the taxes not paid by corporations.

The level of inequality in the United States and Michigan has risen in recent years, and the current tax plan will further the current level of inequality. However, much of the current analysis of the recent tax plan has failed to examine the plan as an agent of increasing inequality. While there has been criticism of the Child Tax Credit and the way in which it was awarded only to certain families, much of this criticism has failed to look at the systemic nature of inequality in the United States. Given the level of inequality, a "tax cut," even if those who need it the most received it, is unlikely to be able to overcome the current gaps in wealth. Based on the statistics that exist for Michigan and the United States, it seems increasingly likely that such disparities will need to be addressed by asking fundamental question about the way in which government functions and who benefits from its policies, and ultimately, major reforms need to be instituted.

1. Lawrence Mishel, Jared Bernstein, and John Schmit, The State of Working America 2000-2001, (Economic Policy Institute, 2001), 34.
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