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The rich live longer and the wealth gap among older households is growing

Vox.com logo Vox.com 9/10/2019 Tara Golshan
a group of people wearing costumes: Tax cut protesters rally in front of Trump Tower to protest against the proposed Republican tax overhauls on November 21, 2017 in New York City. © Spencer Platt/Getty Images Tax cut protesters rally in front of Trump Tower to protest against the proposed Republican tax overhauls on November 21, 2017 in New York City. 

A new federal report puts the stakes of rising income and wealth inequality in terms of life and death: Poorer Americans are dying younger than richer Americans.

While average life expectancy has overall risen in the United States, people with lower incomes tend to have shorter lives than those with higher incomes, a study from the Government Accountability Office, commissioned by Sen. Bernie Sanders (I-VT) in 2016, found. About 74 percent of Americans in the top fifth percentile of mid-career wealth lived into their 70s and 80s, whereas only 52 percent of adults in the bottom fifth lived that long. The study found that disparities in income and wealth among older households have become greater over the past three decades.

“If we do not urgently act to solve the economic distress of millions of Americans, a whole generation will be condemned to early death,” Sanders said in a statement.

a screenshot of a cell phone© Government Accountability Office
About 74 percent of Americans in the top fifth percentile of mid-career wealth lived into their 70s and 80s, whereas only 52 percent of adults in the bottom fifth lived that long.

The study is yet another data point in a vast field of research around the impacts of inequality. As Vox’s Julia Belluz has reported, there are several studies on the life expectancy gap and income, and mortality rates and education attainment, that have all reached this same well-established conclusion: Being poor is a health risk in the United States.

This GAO analysis controlled for race, ethnicity, gender, age, education level, and self-reported health status. Sanders, who has centered both of his presidential campaigns around wealth inequality, cited the report in his call for increasing the minimum wage, enacting universal health care, and strengthening retirement security — all pillars of what his campaign has called an “Economic Bill of Rights.”

The United States is among the most unequal developed countries in the world — in large part because the wealthy are getting wealthier. And while the scale of this inequality remains a point of dispute, the fact that inequality has life-or-death implications has taken center stage as Democrats look to oust Trump from the White House.

Income and wealth inequality is getting worse in the United States

This summer, the United States hit a record for extended economic expansion — the longest period of economic growth in US history — a metric the Trump administration is using as a case for his reelection. But wealth and income inequality has also been rising in the United States; rich Americans are holding a greater and greater share of the wealth.

This trend has been well documented by economists Emmanuel Saez of UC Berkeley and Thomas Piketty of the Paris School of Economics, who used tax data on incomes and survey data on the cost of employer-provided health care, pensions, and other benefits to show that income growth hasn’t grown substantially for the middle class and has disproportionately gone to the wealthy. It should be noted, as Vox’s Dylan Matthews reported, the scale of inequality captured by Saez and Piketty has recently come under some dispute. But there’s little question that inequality has increased in the United States since the 1980s.

a close up of a map© Piketty/Saez/Zucman 2017
Recently, increases in income have gone overwhelmingly to the very wealthy, not the middle class.

And as the GAO study found, this wealth gap is specifically growing among older households. In 2016, 89 percent of the households in the bottom fifth of income had no retirement accounts, and another 10 percent had account balances of less than $50,000. By comparison, 86 percent of Americans that were among the highest earners by middle age had retirement savings. This growing divide was also present when it came to home ownership. The home ownership rate for households in the bottom 20 percent of wealth in 2016 was 19 percent, significantly lower than the rate of home ownership in that income group in 2007, which sat at 28 percent.

Policies under Trump, like Republican’s tax cuts, have certainly exacerbated this problem. The Tax Cuts and Jobs Act, which Trump signed in December of 2017, heavily benefitted America’s wealthiest and corporations, cutting the corporate tax rate from 35 percent to 21 percent and giving an estimated $17 billion in tax savings for millionaires in 2018.

And while Trump promised on the campaign trail to keep Social Security untouched, his administration has repeatedly offered budget proposals that would chip away at the program.

For example, Trump’s latest budget also specifically went after the program that gives assistance to those who have disabilities that prevent them from being in the workforce, amounting to $25 billion in cuts over the next 10 years: roughly $10 billion from the Social Security Disability Insurance (SSDI) program. The administration says the money will be found through cutting down on fraud — a common conservative talking point.

The GAO report puts added weight on the importance of Social Security for lower-income Americans, as retirement security is a major contributing factor in this life expectancy disparity.

“The bottom 20 percent have little in wealth, on average, but the estimated present value of future Social Security benefits provides them relatively significant financial security in retirement,” the report said. “On the other hand, for the top two quintiles, wealth was the most important retirement resource, as households in the top quintile have wealth that, on average, far exceeds the estimated present value of benefits provided by any future Social Security or pension benefits.”

Democratic presidential candidates have a lot of plans around inequality

Income inequality has taken center stage in the Democratic presidential primary. What was once a controversial proposal in the 2016 presidential race between Hillary Clinton and Sanders — raising the minimum wage to $15 per hour — has not been adopted by all the Democratic candidates across the ideological spectrum.

Candidates like Sen. Kamala Harris (D-CA) and former Texas congressman Beto O’Rourke have advocated for reversing Trump’s tax cuts on corporations. There have been several proposals to expand Earned Income Tax Credits. Sen. Amy Klobuchar (D-MN) has a bill that would make businesses pay at least 50 cents into a retirement plan for every hour worked, raise the corporate tax rate by a modest 2 percent, and also increase taxes for the highest income bracket from 37 percent to 39.6 percent.

Candidates like Sanders and Sen. Elizabeth Warren (D-MA), who have rolled out the most robust social programs — including Medicare-for-all and student debt relief — have tailored their tax proposals around serious wealth redistribution.

In Sanders’s plan — the For the 99.8% Act — the top estate tax rate would be brought up to 77 percent on wealth over $1 billion. As Vox’s Dylan Matthews explained, Sanders’s proposal establishes the same top rate that existed from 1941 to 1976 and is higher than the 65 percent top rate he proposed in the 2016 race. It would create a multi-tiered structure for taxing estates, taxing the richest Americans, and breaking up the large fortunes held by only a few Americans. Currently, the estate tax is much lower than the top marginal income tax rate.

Warren often touts her wealth tax, which would establish 2 percent tax on fortunes worth over $50 million and a 3 percent tax on fortunes worth more than $1 billion — which would hit an estimated 75,000 families and raise $2.75 trillion over a 10-year period.

This federal study adds another data point in the case for addressing serious income inequality.

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