Since 2007, today's deep recession has done more to chop wealth – maybe to a lesser extent income – than any government intervention. A survey by the Spectrum Group, a Washington consulting firm, finds the number of US households with a net worth of $1 million or more, not including their primary residence, falling to 6.7 million in 2008, down 27 percent from a record 9.2 million the year before. The number of Americans with a net worth of $5 million or more declined 28 percent to 840,000.
The key culprit is the drop in the price of stocks and most other financial assets. The richest 1 percent of households own nearly half of all individually owned investment assets (stocks and mutual funds, financial securities, business equity, trusts, nonhome real estate). The bottom half of the population, 150 million Americans, own less than 1 percent, note Gar Alperovitz and Lew Daly in a new book, "Unjust Deserts."
Of course, many of those with little financial wealth have also been hit by pay cuts, unemployment, housing losses, and bankruptcies.
The Obama budget would make the tax code "far more progressive," that is, taxing the rich more than the middle class or poor, states the Committee for a Responsible Federal Budget. It would allow the 2001 and 2003 tax cuts for richer Americans to expire in 2011, raising their marginal income-tax rate back to the Clinton era level (39.6 percent). The estate tax would be fixed at the 2009 level, not hitting anyone who inherits less than $3.5 million, and block the Bush plan for this tax to disappear entirely in 2010. It would not allow hedge fund managers to assume that all their income was capital gains and thus taxed at a low 15 percent rate. It would create or expand a number of "refundable" tax credits that are targeted toward lower earners, including some who do not pay income taxes at all.