Ethics of Finance (Case studies)

Most politicians regardless of party affiliation promise to help the middle class and the working poor, but few deliver. Based on the posted articles about wealth and power in the U.S. what are the ethical implications of growing income inequality and what can be done about it? Make sure you also make some connection to Wilson’s chapter on Fairness. Textbook to use (Ruggiero 6) and “The moral Sense” by James Q.Wilson See bonus below.

Optional food for thought:
Our tax code is an example of institutionalized inequality that favors the rich over the middle class and working poor. For example, a hard working married couple together earn $125,000 per year. Both are nurses and contribute a net gain to the community by stamping out diseases, saving lives and improving the general fund of kindness in the world. This is not an unusual amount of money for two wage earners early in their careers in the health care industry in the Northeast. Now, they are taxed at roughly 25% because of the tax bracket they are in. So they pay $31,250 in federal taxes and therefore take home $93,750 (This is assuming they had no deductions as we will assume with the following case).

But a young man inherits a trust-fund from his wealthy parents worth $2,500,000 (two million five hundred thousand dollars). On an average year, he gets 5% interest on his investment fund. So his taxable income on his trust fund is $125,000, the same as the two nurses. Note: the 2.5 million is NOT taxed, just 5% the gain. Investment income, however, is taxed at 15%, not the 25% for salaried income. So he pays $18,750 in taxes (NOT the $31,250 of our two nurses pay), taking home $106,250 (NOT $93,750). The wealthy trust fund kid makes $12,500 more than the nurses, just because he comes from wealth and privilege. It did not use to be this way, but 30 years of policy changes by Congress have tipped the scales in favor of the rich. Even one of the wealthiest billionaires in the world, Warren Buffet, points out that he is taxed less than his secretary as a percentage of his income.

Is this ethical?

BTW the richest 1% of US citizens have more wealth than the bottom 90% of Americans combined. Of that 1%, 540 individuals are billionaires. 3 of the richest billionaires (Gates, Bezos and Buffett) have more wealth between them than the combined wealth of 160,000,000 US citizens – literally half the US population! In your assessment, avoid either/or responses. E.g., “Either we accept things as they are or we become Communists!” This is a false dichotomy that ignores the fact that income inequality is a choice made by politicians who change tax policies to favor the wealthy and who refuse to engage in meaningful campaign finance reform to prevent billionaires from choosing who gets elected (see the Princeton article).

BONUS Finally, to give you an idea how much one billion dollars is, we will do an exercise: 60,000,000 Americans are among the working poor and live in families that make $25,000 or less. Jeff Bezos in a three month period in 2017 made $26,000 every seven seconds! But he decides to be generous and give one family $25,000 a year as a free gift until they have a billion dollars. How many years would it take to add up to one billion dollars?