Fortifying the Circle of Prosperity as a Means to Reduce Economic Inequities

In 2013 the US ranked as the 6th worst country for income inequities among 173 countries. Worse still these economic inequities translate into inequitable political influence which, as we saw with the Trump Tax Cut of 2018, will further shift economic rewards away from the many and to the wealthy few.

From 1979 to 2015 the top 1% of Americans increased their after-tax income more than 4 times as much as America’s middle class. More telling, if the 2012 incremental pretax income for America’s top 1% was redistributed to the bottom 80% of Americans based on the US’s 1979 income distribution, each family would see their income rise by almost $1,000/month while an equitable income redistribution would also provide a greater economic stimulus than allowing the further concentration of wealth in the hands of the few.

Until recently, America was seen as a beacon for the world largely because we had a history of both political stability and economic growth. The formula for our success was, in part, our recognition that political stability encourages entrepreneurial endeavors, entrepreneurial endeavors are a pre-condition to economic growth and an equitably distributed growing economic pie is essential for political stability… the Circle of Prosperity.

Left uncorrected, our current economic inequities has the potential to break the Circle of Prosperity.

Recently Elon Musk was paid $2 billion for his creation of Tesla. I greatly admire Mr. Musk and his unquenchable entrepreneurial spirit. However, getting paid $2 billion is unreasonable on many levels and decimates the third leg of the Circle of Prosperity.

Yes, it was Mr. Musk who created Tesla. But he was only able to create Tesla because: he was well-educated by US colleges, he lived in a safe society, which has an appropriate infrastructure, a highly educated scientific and engineering workforce which created the scientific knowledge he required to build Tesla. None of that would exist had it not been built and supported by Federal and State tax dollars. In short, if Mr. Musk had lived in most other countries of the world, he would not have created Tesla.

I believe it is morally appropriate that we heavily tax extremely wealthy individuals precisely because we have created a society which gave them the tools to become extremely wealthy. They reaped rewards beyond the comprehension of most Americans, asking them to share the wealth is only reasonable. To do otherwise will break the Circle of Prosperity and that will hurt everyone in America.

Recently, Senator Elizabeth Warren proposed a wealth tax as a means of reducing wealth disparities, which I applaud.

We also need the Federal Government to discourage businesses from giving their executives unconscionable compensation packages which promote economic inequities. As an example of such an incentive, I believe Federal law should mandate that certain businesses be required to equally distribute ~30% of their profits (or ~1% of gross income, whichever is greater) to all of their (FT and PT) employees, temporary workers and independent contractors. I include the latter two types of workers because some businesses now refer to many of their non-executive workers as “independent contractors” and “temporary” workers for fiduciary reasons when in fact they are effectively “employees.” I would suggest that this mandated-employee-profit-sharing plan would be required of a business if the ratio of the annual compensation of the highest paid employee/owner to the lowest paid FT employee/independent contractor exceeds ~200 and the business employs more than ~100 employees, temporary workers and independent contractors. While one could argue the specifics of my proposal, as a template, I think it will strengthen the Circle of Prosperity and is both a moral and rational response to our current situation.

Some will argue that income inequities are not an important problem and my proposal will reduce American innovation. It is obvious to me that ensuring the continuation of the Circle of Prosperity will benefit America and all Americans. It should be equally obvious to all that entrepreneurs like Mr. Musk will not cease to be American entrepreneurs simply because they are “only” going to earn several hundred millions of dollars.

We owe it to our children and grandchildren that we leave them a world that is at least a little better than the world we have inherited. Strengthening the Circle of Prosperity is a step in that direction.

Hayward Zwerling