by Neeta Delaney

The old adage of “the rich get richer and the poor get poorer” has never rung so true. America’s rapidly expanding wealth gap is the root cause. When CEOs receive more than 344 times the average annual salary of production and nonsupervisory workers in their industry (Economic Policy Institute 2022),  and when, despite working long hours and multiple jobs, one-third of American adults report they can’t earn enough to make ends meet (2024 Census), it should get our attention. Fighting for a living wage for everyone is absolutely essential, but in the long run, the more serious problem we face is a wealth gap caused by the combination of the income gap and unfair tax policy.  Of all the factors contributing to this chaotic and dangerously divided moment in which we find ourselves, the wealth gap is the most critical, and here’s why.

People need to connect the dots between our huge and growing wealth gap and the lack of affordable housing and health care for their families, the likelihood that their adult children will never own their own homes, as well as the outsized influence of the rich on their elected officials and on the media.

It’s all about who has money, who is spending money and on what, as well as who is paying their fair share in taxes—the pool of revenue we all rely on to fund all those things that make us a developed country… roads, bridges, schools, public health, scientific research, technological advances, etc.  Low-and middle-income people (62 percent of Americans) are already earning disproportionately less than their rich and super rich counterparts (1 percent of Americans), and poor people are spending those earnings on goods and services such as food, transportation, housing, clothing, and health care.

Low- and middle-income Americans nationally and locally are shut out of building the wealth they need to protect their families, or to invest in their own futures. Nearly half of Americans say they live paycheck to paycheck, and don’t get ahead. In Ann Arbor, 13.9 percent of the city’s residents live in poverty, that’s higher than the state-wide 13.5 percent level. In Ypsilanti, poverty is even more pervasive: 27.3 percent of the 17,000 residents in that small city live in poverty.

On the other hand, the rich and super rich–the top 1 percent of households that typically own around 30 percent of the total wealth in the United States—have far more money than they could possibly spend on basic goods and services—even luxury goods and services. They invest on accumulating assets such as real estate. Then, they “rent” those assets to the rest of us, to people in Ann Arbor and Ypsilanti looking for an apartment, or spaces to rent for their business.

While Ann Arbor’s Mayor preens about the building boom that has brought us hundreds of new rental apartments, the majority those apartments are market rate units, priced at $2000-$5000 per month, and condos priced at half a million dollars and up. The reality is that elected officials in Washtenaw County, particularly in Ann Arbor, help their rich friends and campaign donors to create new rental assets and use their existing rental assets. Our monthly rent (if we can rent in Ann Arbor at all) becomes little more than additional streams of revenue for the rich.

Yet, when it comes to paying taxes, the rich and super rich, whose wealth consists primarily of investments, not wages, are taxed at a lower rate (flat 15 percent capital gains tax) than Americans whose wealth does primarily consist of wages which are subject to a progressive tax based on total earnings. The rich have the resources to ensure that these tax policies remain in place by buying the support of our elected officials and the media, who can choose to ignore voices of the rest of us whose future depends on a fair system of taxation.

Closing the ever-growing wealth gap in Ann Arbor, whose business owners enjoy taxpayer subsidies including cheap bus basses for their workers bussed in from their (for now) more affordable Ypsilanti rentals, will take truly committed, forward-thinking politicians.

Nationally, one powerful step we can take is to lobby for doing away with the 15 percent across-the-board capital gains (investment earnings) tax and instead tax all earnings ( wages and investment income) on the same progressive scale we currently tax wages. Short of changes like this, the wealth gap will continue to grow, with the 1 percent getting richer and the rest of us getting poorer with access to fewer and fewer assets and resources.  If left unchecked, history tells us that the end result of this growing gap will be the kind of broad scale poverty that Americans experienced in the Great Depression of the 1930s.

In the 1950’s, my Dad, a mail carrier and my Mother, a work-at home Mom were able to own their own home, provide for seven children, all of whom went to college, and to retire with dignity. This is no longer the case for many people, and it is because of America’s wealth gap. We have to put in place a living wage and the fair tax policy for this grand American experiment to survive.