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THEM THAT'S GOT SHALL GET

MONEY

Who Has How Much and Why

By Andrew Hacker

Scribner 254pp $25

Americans have an ambivalent attitude toward money. Many people never talk about how much they earn, even with friends or colleagues at work. Yet we're fascinated by how much everyone else makes and spend plenty of time following the conspicuous spending of the Donald Trumps of the world.

Andrew Hacker feeds Americans' fascination with the power of the purse in Money: Who Has How Much and Why. Hacker, a political science professor at Queens College in New York City, draws broad conclusions that are well-known: Wealth and income in the U.S. are distributed unequally and sometimes almost arbitrarily, trends that have become more extreme in recent decades. As a snapshot of American society, Money does not treat questions of economic mobility. Still, Hacker has done an excellent job of gathering a wealth of facts and stats and bringing the numbers to life.

Not surprisingly, Hacker looks most at the wallets of those at the top. He defines the rich as those pulling down $1 million or more a year, a group made up of 68,064 households in 1994, the last year for which he had data available. That works out to one-twentieth of 1% of all Americans who filed a federal income-tax form that year.

So do the rich pay their taxes? Sure do, Hacker finds, contrary to the impression left by public figures who've paid no taxes in some years. They forked over 32% of their declared income to the feds, a larger percentage than the less fortunate (assuming that the wealthy actually declared all their income). On the other hand, that's way below what the $1 million club paid before President Reagan ushered in an era of tax-cutting. In 1979, the group coughed up 47% to the Internal Revenue Service. Another nonsurprise: The rich don't work for their money. They get just a third of their income from employment, with the rest coming from earnings off the assets they hold, such as interest, dividends, and rent.

What is surprising is who the rich are. Sure, they include all the types you'd expect: a few hundred movie and rock stars and sports figures, perhaps 1,500 Wall Street bankers, a sprinkling of lawyers and doctors and, of course, top execs. But even the last group numbers only 2,500 or so, Hacker says. The other 60,000-odd millionaires are anonymous, mostly owners of small businesses and heirs to fortunes. A big chunk are retirees: About 10,000 cashed Social Security checks, which anyone, even billionaires, can do once they hit age 70 (when all income limits disappear).

Hacker's sleuthing has unearthed plenty of other tantalizing tidbits about the lifestyles of the rich, if not always famous. They seem to value family, since 88% of millionaire households include married couples, vs. 55% for the country as a whole. But cast-off spouses don't exactly get the royal treatment. The 3,454 rich households that paid alimony dished out an average of $61,000 a year--less than 3% of their average annual income. Nor are the rich more generous when it comes to giving to those other than family. Charitable donations averaged $61,000 a year as well, less in percentage terms "than many Americans of lesser means," Hacker says.

Millionaires also are happy to accept subsidies from other taxpayers. Sixty percent take mortgage deductions. These average $33,000 a year, "which means that other taxpayers are underwriting a lot of tree-lined driveways and tennis courts," Hacker says. A few even take child-care credits and deduct moving expenses from taxes.

So what about the rest of us? Physicians have held the best-paying jobs for most of this century, Hacker notes. Three-quarters of private practitioners net more than $100,000 a year, and a third of all doctors make at least double that. Lawyers are a more diverse lot, with a third making above $100,000 but 22% earning $40,000 or less. College professors are even more unequal. They make just $44,000 on average. But tenure has divided their ranks. "Because of their top-heavy pay, senior professors consume so much of the college budget--in some schools, three-quarters of instructional costs--that little remains to hire junior people," Hacker writes. And even full professors are split. Just 3% earn more than $100,000 a year, while five universities average that much for their senior professors: Harvard, Stanford, the California Institute of Technology, Princeton, and Yale.

Hacker shows how this trend toward heightened inequality has spread throughout the economy. Perhaps the most glaring example involves race. The ranks of black families earning more than $50,000 a year have jumped dramatically in the past two decades, from 14% to 21%. But this happened because blacks in the middle moved up, not because the bottom changed. In fact, 30% of black families earn $15,000 or less today, scarcely different from the 32% stuck at that level in 1975, after inflation adjustments. And blacks are still often shut out of higher-wage occupations. For example, they comprise about 11% of all workers but less than 5% of dentists, architects, engineers, and lawyers.

As a result, black families on the whole have lost ground, despite affirmative action. Today, black families make $577 for every $1,000 that white families earn, vs. $605 two decades ago. Only half of the gap can be attributed to differences in education, marriage rates, and other demographic factors. The rest presumably lies with prejudice and discrimination. "Something like this should not happen," Hacker asserts.

Hacker laments today's heightened inequities. But he doesn't think they're likely to reverse any time soon.BY AARON BERNSTEINReturn to top


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