Wealth Disparity

By: Ron Sartena

The growing gap between the rich and the poor is a destabilizing and detrimental force to our overall economy. When disproportional amounts of money is accrued by a few, as can be seen in the fact that the top 1% of earners garnered 20% of disposable income for the 2013 fiscal year, it can lead to a slowdown in the velocity of money and weaker employment. One of the main reasons that wages haven’t risen, and wealth disparity is continuing to increase, is in part due to our current labor market. When there is an overabundance of workers and few jobs to be filled, employers do not feel the need to competitively bid and raise their wages. The difference in income gap does not necessarily have all to do with the diminishing standards of the middle class. In today’s globalized economy, the earning potential for highly skilled people and entrepreneurs has never been better. There has never been another time in human history in which there has been the potential to reach all markets, and produce your goods or services at the cheapest and most efficient levels. The businesses that utilize modern capabilities are the leaders and innovators in our world which should profit from their endeavors. However, in light of the growing wealth disparity, there is something fundamentally wrong with our current system.  The current tax intake to GDP is historically low, around 15%. Amazon UK paid $1.7 million in taxes on $6.5 billion in 2012. Apple, who offshores a majority of its operations to Ireland where they pay 2% taxes, paid an effective 14% rate, which is just a smidgen lower than IBM at 15% and Google at 17%. And Apple's hardly on the lowest rung: Amazon's rate is just 6%, Ford's 3%, and Carnival's just 1%. The most startling observation is not the tax rate itself, but that none of these companies are doing anything wrong in the eyes of the law. Corporations, whose main objective is profit, cannot be expected to voluntarily pay more taxes. In a hearing on tax evasion against Apple, Senator Rand Paul spoke out against the core issue: “If anyone should be on trial here it should be Congress for creating such a complex tax code.” This systemic issue plays the most major role in the fact that we as a nation, have about $1 trillion being kept offshore by corporations in order to evade or minimize taxes. However, it is wrong to think in terms of black and white and look down upon financially successful organizations. They provide invaluable goods, services, and jobs that keep our society functioning and our world growing. But in an economy, sustainability must be just as critical as the potential for maximum profits. Until we make systemic changes, the income gap will continue to widen, and our economy will fail to operate at potential.

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Ron Sartena is a finance major of Pace University's class of 2017. Ron has been a writer for On the Margin since his freshman year.

Ron Sartena is a finance major of Pace University's class of 2017. Ron has been a writer for On the Margin since his freshman year.