In the course of the presidential primary debates, both Barrack Obama and John Edwards made continued references to the growing inequality of income and power in the United States, and in his acceptance speech, Obama singled out the “wealthiest” five percent of Americans for heavier taxes. While I’ve also been concerned about what Edwards called “the two Americas,” the idea of addressing it by increasing taxes on the “wealthy” worries me greatly for a number of reasons.

First, as I noted in an earlier blog post, real “wealth” varies widely by geography and economic setting, and defining who is wealthy by an arbitrary number or percentage is every bit as erroneous as claiming that every member of one ethnic group is money-grubbing or that most young Black inner-city males are gang-members. Claiming that a New York City or San Francisco family [or families in any other number of high-cost cities] where both parents work full time and bring in a combined income of $200,000 are wealthy is absurd. That income can bring a very good life-style in much of America, but in New York and many other cities where tens of millions of Americans live, it’s definitely middle-class and nowhere close to “wealthy.”

Second, using taxation to address income inequality doesn’t work very well, because those who are truly wealthy have the assets and abilities to avoid increased taxation, while those who are merely affluent are the ones who find themselves bearing the burden of lost income. For example, someone who makes, say $5 million a year, and who would face increased taxes of 10%, can pay an accountant $100,000 a year to find away to avoid the taxes, and save $400,000. It makes no sense for family making $200,000 a year and facing $20,000 more in taxes to hire that accountant, nor do they have the financial assets to deploy in alternative strategies, yet for purposes of the politicians, both families are “wealthy.”

According to recently released IRS statistics, less than one half of one percent of Americans are “wealthy,” meaning that they have assets including houses, of more than two million dollars. When a middle-class house in many cities can easily cost over $500,000 for less than 1,500 square feet, having $2 million in assets may make you “affluent,” but it’s far from “wealthy.” Put another way, the “upper five percent” of Americans that Obama wishes to tax more heavily amounts to roughly fifteen million. According to the IRS, only ten percent of those are wealthy.

But the bigger problem with all of this is the assumption that taking money from those who are presumed to have it and putting that money into federal programs will do something to reverse the recent trends in income inequality.

Some claim that greater education will accomplish such a reversal, but during the last three quarters of a century educational opportunities and achievement for the less advantaged have improved, and yet the income gaps between the richest and the poorest have widened. Others suggest that great improvement in reducing barriers to women will help, but while not all of the barriers to women in high positions or in fields historically dominated by men have been removed, women have seen improvements in the opportunities and income available, and the income gap between rich and poor has still widened. The poorest Americans have far better housing than did the poorest Americans of a century ago and far better amenities in those dwellings. Even for the poorest of Americans, life is better than it was a half century ago.

So, with so many improvements, why has the income gap widened?

Have we become a more greedy society? That’s hard to measure, but I find it difficult to believe that people are inherently greedier today than in the time of the Robber Barons.

Is it because of a “winner-take-all” culture that praises and rewards disproportionately those at the top in whatever field? That this has occurred isn’t subject to debate. The pay received by the “average” business CEO is more than 300 times that of the “average” employee, a spread ten times what it was a half-century ago. In my own field of writing, look at the disparity between J.K. Rowling, with income of hundreds of millions, to any starting novelist with an average first-time advance of perhaps $5,000 to $10,000 for a year’s [if not many years] worth of work. Look at the difference between the pay of the average actor [circa $10,000] and the $20 million plus per film for the top names. Or the NFL minimum compensation versus the tens of millions for glamour quarterbacks. Now… the counter is that the superstars “earn” that money; they bring in the readers that buy the books, the fans who fill the seats and purchase the DVDs. But… the superstars always did. It’s just that with the growing purchasing power of Americans and the concentration of exposure through technology, the revenues that the superstars bring in are so much greater than in the past. In a very real sense, the combination of technology and greater disposable income means greater opportunity to make more money.

Add to that a culture where “worth” is measured more and more by money, by compensation, where business professors make twice what music and science professors do, all because they claim they can earn more in business. They doubtless can, but the comparative earning power in another field doesn’t necessarily translate into teaching effectiveness. Nor do high salaries or compensation in one company mean that everyone in every other company is worth that. And when some of the highest paid corporate CEOs in the financial industry have racked up the largest all-time losses for their corporations, it’s pretty clear that high compensation doesn’t always translate into excellence… but it does translate into a significant income gap between those at the top and those in the middle and on the bottom.

Given these factors and a number more, I have real difficulty in seeing how greater taxation of the upper middle class and the affluent to fund government policies and programs is likely to have much impact on the income gap. It might reduce the deficit, but given the habit of politicians always spending more than they have, I have even greater doubts about that as well.

But… it’s a great political issue, and I’m sure we’ll hear a whole lot more about it over the next eight weeks.