Americans’ ownership of assets shrinks

When George W. Bush ran for president in 2000, one of his major campaign themes was creating an “ownership society,” in which a larger share of Americans owned homes, securities and other assets.

“Ownership in our society should not be an exclusive club,” he said at a Rancho Cucamonga, California, campaign stop. “Independence should not be a gated community. Everyone should be a part owner in the American dream.”

In 2003 he followed through on his promises by persuading Congress to cut tax rates on dividends by as much as 57 percent and reduce the top rate on capital gains from 20 percent to 15 percent, saying it would encourage more people to own stocks.

The next year, as he was gearing for re-election, he said, “If you own something, you have a vital stake in the future of our country. The more ownership there is in America, the more vitality there is in America and the more people have a vital stake in the future of this country.”

Bush sought to eliminate the estate tax, saying it would encourage more savings. He built his case largely on claiming estate taxes forced the sale of family farms — though his administration could never point to a single example. Today couples can shield more than $10 million from this levy and, with careful planning, can pass unlimited sums tax free.

He also urged Congress to approve mortgages with zero down payment, and banking regulators on his watch were told not to interfere when fee-hungry bankers made no-documentation real estate loans — what even those in the industry called liar’s loans — and then packaged them and sold them off as mortgage-backed securities to gullible investors.

So did his tax cuts and easy mortgage loans help make more Americans part-owners of the American dream? No. Instead what followed was a severe narrowing of ownership.

Home ownership last year fell to its lowest level since 1995, long before Bush took office. The rate is expected to drift further down because a weak job market and falling wages mean fewer people can afford to buy homes.

In the case of stocks and dividends, there has been an enormous concentration in the pockets of the richest Americans, my new analysis of official data from the Internal Revenue Service shows.  

In 2012 the number of taxpayers reporting capital gains plummeted to fewer than 9.8 million, a 39 percent decline from the 16.2 million taxpayers with gains in 2000. The dollar value of capital gains also fell sharply in that period, down almost 23 percent, to $644.9 billion. These figures come from IRS table 1.4, which one of my Syracuse University research assistants, Zhibo Zhang, adjusted for inflation to 2012 dollars.

That 6.4 million fewer taxpayers reported capital gains understates how much ownership narrowed, since population grew over those 12 years. In 2000, 1 in 8 taxpayers reported capital gains. By 2012, just 1 in 15 did.

Even among the top one-tenth of 1 percent of Americans, those making more than $2 million a year, ownership of stocks narrowed, with the number reporting gains falling almost 10 percent in that period.

In fact, only one income group showed an increase in the number of people with capital gains from 2000 to 2012: The rapidly growing segment of taxpayers who report negative incomes — meaning that while in reality salaries, dividends, capital gains and other income flowed to them, to the IRS these 2.1 million taxpayers legally reported income of less than zero.

Capital gains fell from $2,962 per American in 2000 to $2,054 in 2012 — a decline of $908, or 30.7 percent, my analysis shows. That decline almost equals the $930 fall per capita in salaries and wages that my recent analysis of the data showed. But most people felt only the loss of wages and not the boost in dividends, because ownership of stocks is highly concentrated among the very wealthiest Americans. This concentration increased tremendously from 2000 to 2012.

In 2000 roughly half of capital gains went to the top one-tenth of 1 percent of Americans (those making roughly more than $2 million a year). In 2012 this very thin and very rich slice of Americans collected a much larger share: 62 percent of capital gains. 

Another indicator of how narrowly America is an ownership society is dividends from stocks held outside of retirement accounts. Bush signed a 2003 law that cut the maximum tax on dividends from 35 percent to 15 percent.

More taxpayers report dividends than capital gains because the latter occur only when stocks are sold at a profit but dividend checks generally come four times a year.

Yet the number of taxpayers reporting dividends fell by 6.2 million, to just under 28 million. The decline is almost the same as the reduced number of taxpayers reporting capital gains.

Over those 12 years per capita dividends reported on tax returns more than doubled, rising from $693 in 2000 to $1,481 in 2012.

The $788 dividend increase offset most of the $930 decline in wages per capita over that period. While the vast majority of tax returns include wages, only 1 in 6 taxpayers collects dividends. And as with capital gains, the concentration of dividends at the top increased, which increased inequality.

In 2000 taxpayers making $2 million or more collected 18 percent of dividends, a share that grew to 38 percent in 2012.

That increased concentration of dividends at the top produced a stunning result. Among those making more than $2 million, average dividends soared from $246,000 to $1,169,600 — an eye-popping increase of 375 percent.

What all these numbers tell us is consistent with what I’ve shown in previous columns (here, here, here, here, here, here, here and here). It is a story of falling wages, falling incomes and of ownership increasingly concentrated at the top. In short, it contradicts what Bush sold to voters in 2000.

The data show that his tax policies failed to achieve the goals he stated for them, which was to increase the number of Americans who own assets. In fact, his policies led to Americans being worse off generally.

Instead of being better off, Americans had $48,010 less income per taxpayer over the 12 years the Bush tax cuts were fully in effect, a total of $6.6 trillion of income we never enjoyed. And his dividend and capital gains cuts saw a greater concentration of stock ownership, not a broadening.

He invited assessment of his record, saying on the White House website “citizens rightly judge a president on the proposals he makes and the laws he signs. Yet there is another standard they judge by as well: the economic and social condition of the country. Are things in America getting better or worse?”

The questions Americans should ask themselves is why this week they put in office more political leaders who want to double down on these failed policies — who call for more tax cuts for those at the top, for protecting loopholes and for tightening the handcuffs that keep IRS auditors and criminal investigators from catching big-time tax cheats.

Until we recognize that the answers to those questions require a change in policy that concentrates on investing in the future instead of austerity and tax cuts, one result is certain: The suffering that marked the start of the new millennium will continue for most Americans.