Musk's Trillionaire Status Highlights America's Lopsided Prosperity
As Elon Musk is anointed the world's first trillionaire following the public offering of shares of his internet-to-AI conglomerate SpaceX, the event underscores America's relentless rise in inequality. Just 10 years ago, the Obama administration bragged about its efforts to curb the nation's exorbitant income inequality, but today, those gains appear fleeting.
According to estimates from the Congressional Budget Office (CBO), by the end of 2016, taxes and transfers cut the share of income accruing to the richest 1% of households by just over a fifth—more than under any government since at least Jimmy Carter's. They raised the slice of income going to the poorest fifth from 3.9% to 7.9%, the highest share since at least 1979.
Obama's Equalizing Efforts Were a Blip in History
Benjamin Franklin liked to talk of America's "happy mediocrity," but the nation's history of combating inequality is grim. Obama's track record as the US's most committed equalizer in over half a century underscores the ultimate lack of interest of political coalitions in equitable distribution. Donald Trump's Tax Cuts and Jobs Act of 2017 offered massive tax cuts to the upper percentiles, and by the end of his first presidency, the share of income accruing to the richest 1% of households—after taxes and transfers—had drifted back up to 13.2%, from 12.5% the year Obama left office.
The $2.2 trillion CARES Act that Trump signed into law in response to the Covid pandemic improved the lot of the poor. In 2020, the share of national income accruing to the poorest fifth of households reached a multi-decade high of 8.2%. Yet by 2022, under Joe Biden, it had dipped to 7.4%.
Trump's Policies Worsen Inequality
Redistribution is nowhere to be found on Trump's priority list. His One Big Beautiful Bill Act slashed spending on Medicaid, food stamps, and health insurance subsidies, largely to pay for corporate tax cuts. According to the CBO, the legislation reduced the annual income of the poorest tenth of households by 3.1% on average—about $1,200—while boosting the income of households in the top decile by 2.6%, a cool $13,600. The tax blow came on top of tariffs that took a disproportionately large bite from the disposable income of the working class.
Yet, the US's deep inequality is hardly Trump's fault. The lopsided distribution of prosperity is a feature of American society that has persisted across administrations, whether Democratic or Republican. It is embedded in a simple truth: Americans dislike paying taxes, especially at the very top.
The Plutocracy's Tax Avoidance Tricks
Research by economists at the University of California, Berkeley estimated that the 400 richest Americans pay a smaller share of their income in taxes than the average Jane, largely due to the many ways oligarchs can move money to minimize tax bills. Over the past half-century, taxes and transfers have never trimmed the share of income flowing to the one percenters by much more than a fifth.
The Gini index, a common measure of inequality, ranges from zero (equal distribution) to one (a single individual takes all). America's Gini is among the highest in the OECD. Most concerning, taxes and transfers have done less to reduce inequality in the US than in almost every other OECD country.
Musk is surely happy with his trillionaire status in this landscape. The wealthiest 1% of Americans hold nearly 32% of the country's net worth. That money passes down generations largely untouched. The plutocracy's main trick is to have as little taxable income as possible. Steve Jobs famously took $1 in wages when he returned to Apple. Meta's Mark Zuckerberg, Oracle's Larry Ellison, and Google's Larry Page have done the same. Their wealth comes from appreciating stock; they finance their lifestyle with loans using stock as collateral. Unrealized capital gains account for 55% of the largest estates and are bequeathed tax-free.
Musk's accountants are more skilled than most. According to an investigative report by ProPublica, Musk's wealth increased by $13.9 billion between 2014 and 2018, but he paid only $455 million in taxes on reported income of $1.52 billion. In 2015, Musk paid $68,000 in federal income tax; in 2017, $65,000; and in 2018, he paid none.
AI Revolution Threatens to Widen the Gap
It is more than a little ironic that these experts at tax avoidance are at the helm of a technological revolution that could drive inequality to new heights. As artificial intelligence displaces much of human labor and further rewards the owners of capital, it is expected to further shrink the share of the nation's income that accrues to workers.
Will redistribution be up to the task of helping ordinary Americans cope? It's not heartening that Obama's efforts, the most strenuous since Lyndon Johnson's Great Society, look today like minor blips in the long arch of American indifference toward its massive disparities.
Eduardo Porter is a journalist focused on economics and politics. He writes the newsletter Being There on Substack.
