W. Michael Slattery

For USA TODAY NETWORK-Wisconsin

Occupy Wall Street lit a fire for the disenfranchised 99 percent that Bernie Sanders capitalized on and which he had championed for decades, but Donald Trump played it to arouse segments of society that felt left behind and alienated because of declining real wealth and income, among racial and other issues.

The Census Bureau, under the Department of Commerce, has tracked income distribution based on survey, census and IRS data for years.

Their data reveal that lower-earning households fall further behind annually and cannot compete with the massive accumulation of wealth that geometrically multiplies for the highest-earning households.

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For 2016, Census Bureau data reveal a rough average household income by quintile grouping (20 percent grouping) that demonstrates the tremendous disparity by class. The bottom 20 percent of households do not earn enough to survive at $9,800, and must rely on welfare and charity, and must experience desperateness.

The next two groupings, respectively, earn about $35,000 and $59,000 — enough, on average, to barely break even (if at all).

The bottom 60 percent, on average, then, just struggle to maintain their existence.

This situation worsens annually. The annual increase in income by grouping magnifies the disparity over time. Between 1979 and 2004, for example, the Census Bureau calculated that the change in real after-tax average household income tremendously benefited the highest-income earners, while the lowest quintile grouping barely scraped by.

Change in that household income ballooned for the top 1 percent at the rate of 176 percent, but the bottom two groupings hardly budged.

Growth of household income for the bottom 20 percent increased over that 25-year period by only 6 percent.

For the next three groupings, after-tax average real household income grew at a better pace at 17, 21 and 29 percent, respectively, but nowhere near that of the top 1 percent of households or the pace of 69 percent for the top-20 percentile of households.

Since the Great Recession of 2008, while it took a couple of years before the top 10 and 1 percent of households saw income growth, the pace has accelerated — but took years to return, at best, to where households were in 2007.

The greater the income received, the faster the growth in income. The lesser the income received by households, the more people rightfully feel left out and behind and conscious of the maldistribution of income.

U.S. society is experiencing a magnification in income disparity that is undermining confidence in both the economic and democratic form of government. The supporters of Bernie Sanders specifically, and Trump as well, have been looking for the federal government to address this disparity.

In laissez-faire, free-market capitalism in the U.S., income disparity has not been corrected in the market, but must be addressed by government through taxation.

The Republicans’ federal tax reform (Tax Cut and Jobs Act) of 2017 does not seem to ameliorate these disparities, but engages in social engineering with income redistribution that percolates up, not trickles down.

Supply-side economics with tax reform failed to work under Ronald Reagan, Kansas’ Sam Brownback, and under Milton Friedman’s Chicago School’s attempt in Chile in the 1980s.

The principal objective of the Act focuses on reducing corporate taxes. This is amazing! Given that the actual corporate rate is about 21 percent, in line with or below effective rates of our trade partners, despite the fact that the nominal rate is 35 percent, why change the corporate rate for multinationals and major C-corps when they are already competitive on tax rates?

Admittedly, small and mid-size corporate effective tax rates have been about 28 percent. Congress lowers the rate to 21 percent, but does not seem to eliminate the loopholes that multinational corporations have used to reduce their liabilities.

U.S. Rep. Glenn Grothman claims U.S. corporate income held offshore will be taxed as an excise tax on the transfer pricing between foreign affiliates and U.S. domestic operations, but the IRS has attacked excessive transfer pricing for years. That tax, on offshore incomes greater than $100 million, will be taxed at rates between 8 and 15.5 percent, only slightly higher than the 5 percent the George W. Bush administration taxed in 2004, but far less than the 21 percent applicable for domestic income.

U.S. Sen. Ron Johnson tried to apply a tax rate of 25 percent on pass-through income where 96 percent of corporations are pass-through. That was rejected, but pass-throughs will be able to exempt 20 percent of their income from tax.

While U.S. corporations paid federal income taxes in roughly the same amount as individual income taxes in the 1950s, by 2000, individual income taxes nearly quintupled those of corporations. This is despite the tremendous increase in corporate net income.

Which groups will then be responsible to fill the $1.5 trillion shortfall in forecasted federal deficits? Given that proposed corporate rates are permanent, but changes in individual tax rates and credits are effective only for eight years, it seems future individual tax burdens may increase through a combination of elimination of welfare spending, not to mention health care subsidies and increasing individual liabilities.

This, in all probability, will worsen income maldistribution for households while tax burdens and effective rates for the wealthiest households shrink.

Community columnist W. Michael Slattery is a Maribel resident.