by Wesley Deans

Created on: March 04, 2009

Wealth Gap

In a free market society we expect competition, and in turn, for some individuals to rise above the rest of the pack. The wealth gap continues to widen and there looks to be no solution for the problem, in my opinion. CNNMoney.com stated that, "The top 20 percent of wealth-holding households, meanwhile, held 15 times the overall median wealth in the early 1960s. By 2004, that gap had grown to 23 times." With such wealth disparity, I want to analyze why the gap between rich and poor will continue to widen. Two underlying factors I want to focus on are legalized tax evasions by the wealthy and differences in financial literacy.

A measure the government tries, without success, is to tax the rich so that they can pay for the enterprises of the middle class and poor. Tax increases on the rich back fire, in my opinion, and end up hurting the middle and poor classes. They take the brunt of taxes intended for the rich. For example, let us look at former presidential candidate Ross Perot, estimated to have a net worth of $2.4 billion. Perot makes about $230 million a year, but what we would not expect is that Perot pays lower income taxes than the average American. He pays a paltry 8.5% income tax, while the average American pays a lavish 31.6% income tax. How does he do it? Tom Walker, of the Atlanta Journal-Constitution said, "Perot minimizes his tax bill by investing heavily in tax free municiples, tax-sheltered real estate, and stocks with unrealized gains." In other words, Perot has figured out that tax free investments allow him to pay less tax than the average American. Perot's example shows that wealthy Americans who understand the U.S.
economy can always find legal ways to evade taxes. I believe the gap between rich and poor cannot lessen if the rich are getting richer, while the poor stay relatively the same. The very taxes put upon wealthy investors, like Perot, are deferred and average Americans are left to shoulder the tax load. Thank our lucky stars not all millionaires are as intelligent with money as Perot.

"In 21st century America, wealth begets wealth, and those without wealth find it farther out of reach," reports CNNMoney.com's Jeanne Sahadi. In my opinion, there is usually a correlation between financial literacy and accumulation of wealth. Readings
for Diversity and Social Justice reports that the richest 10% of Americans own 88% of all stocks and mutual funds. I do not believe the average American family, supported by an income in the

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