Five years out of the Great Recession of 2008-09, most Americans feel stuck in a pocketbook time warp.
Most still earn less than when the bottom dropped out of the housing market and Wall Street tumbled, according to a recently released study by the Federal Reserve — the nation’s bank. The comprehensive study is conducted every three years and evaluates Americans’ income, wealth and debt.
Overall, earnings are up 4 percent. Trouble is, all of that increase went to the top 3 percent of Americans who witnessed a 54.3 percent jump in their paychecks. So the pie is bigger, but the majority is receiving considerably smaller slices. Before long, there will be only crumbs.
Beyond that privileged 3 percent, the following 7 percent of wage-earners are seeing a healthy 18 percent jump in their incomes.
After that, things pretty much go to pot.
A full 90 percent of Americans make 12 percent less than what they did in 2007. The share of total wealth owned by the bottom 90 percent has declined from 33 percent in 1989 to 25 percent in 2013.
Most families have not recovered all the wealth they lost in the Great Recession. Yes, the stock market has recovered, but fewer are investing. Today, less than half own any kind of stock either in the market or indirectly through a retirement account or mutual fund. For most Americans their retirement accounts are in the neighborhood of about $40,000. That other 10 percent? Their nest eggs average $500,000.
SUCH DATA are helpful in understanding why the Kansas income tax rate is skewered to favor the rich. Though they are earning considerably more, their income tax rates are falling.
And conversely, low-income wage earners are being required to pay proportionately more of their paychecks to state coffers.
Under Gov. Sam Brownback, legislators have reduced the top income tax rate from 6.45 percent to 4.9 percent, a difference of 1.5 percent, and the lower from 3 to 2.5 percent, a 0.5 percent decrease. By 2018, top income earners will be taxed 3.9 percent and lower-income earners 2.3 percent.
Brownback contends the lower taxes have spurred job growth, but according to a recent Bureau of Labor Statistics report, Kansas is one of eight states experiencing a decline in new jobs.
If re-elected on Nov. 5, Brownback has pledged to eliminate the state income tax altogether swapping it for higher sales and property taxes. Those two taxes, specifically, hit middle- and lower-income households harder because they have little wiggle room to pay for the necessities of food and shelter.
Economists deem all three sources of revenue critical to a state’s well-being, which is why Moody’s once again downgraded the state’s credit rating earlier this summer.
CLEARLY, Kansas is addressing the problem in a backward manner by giving the wealthy overly generous tax breaks.
Or, as columnist Mark Shields said, “This is a rising tide that lifts all yachts.”
As a state, we must do our best to lift all boats — including life rafts.
— Susan Lynn