The Creation of the Wealth Gap

Recently on Last Week Tonight with John Oliver, there was a segment examining the growing income disparity in America, which is currently at its highest level since the 1920s. According to Oliver, the highest earning 1% of Americans is currently making nearly 20% of all available income, and controlling 35% of all wealth. The numbers are staggering, however, the more interesting aspects of this income inequality are the reasons why it exists.

Oliver claims that such inequality exists because of policies in America that benefit wealthier people. These include "cutting income tax and capital gains tax for the richest in half". He believes that these policies, which favor the few over the majority, exist because of "one of America's greatest qualities: optimism". This is a broad and general claim, however, Oliver backs it up. He explains that, according to a poll from Pew Researcher, 60% of Americans believed that they can "get ahead" if they are "willing to work hard".

Supporting low capital gains tax perfectly exemplifies American's confidence in hard work. According to a Wall Street Journal article, some experts believe that the low capital gains tax should stay low because it encourages investments in growing businesses by increasing the payoff. This may make both business owners and investors happy, but it really only effects people of the middle upper to upper echelons of society. There is a very low portion of individuals receiving direct benefits from a lower capital gains tax. So who voted for it?

Maybe this is where John Oliver's theory comes in. As he sarcastically put it, people know "the game is rigged" and believe that is "why it's going to be so sweet when [they] win the thing", meaning that people understand that low capital gains tax favors few people, but they don't care, because 60% of Americans believe they will "get ahead" once they start working hard. However, that is an unrealistic expectation for Americans. With nearly 15% of Americans beneath the poverty line, and the upper class drifter farther and farther from the middle, perhaps American voters should convert a little bit of their optimism into realism.