Dividends and Is there a reckoning coming for income inequality in the US?

It is now official that Janet Yellen will be become the new Treasury Secretary under President elect Joe Biden’s administration. With every appointment, a search for how the person handle past crisis and past comments which could affect policy. Generally, most public figures do not say a great deal unless they really want to, the speeches have been vetted for reaction plus and minus and then the speech is made.

In an article by Rita Trichur, Janet Yellen as the Chair of the US Federal Reserve in October 2014, delivered a speech on income inequality that raised eyebrows in central banking circles. Ms. Yellen challenged policy makers to consider how the trend between the rich and the poor was affecting the financial well being of most American families.

Ms. Yellen left the US Federal Reserve when President Trump did not reappoint her, but President elect Biden wants to address the issue of income inequality.

In the past 40 years, the richest households have increased their share of the country’s total income. In 2019 the top 10% earned 45.4% of pre-tax national income, while the bottom 50% shared 13.5%.

In the past 40 years while the wealthier have been getting wealthier, the lower-income earners generally spent most of what they earned from their paycheck. 25% of Americans have no wealth.

While one solution is to start over again, because the tax system is very complex and generally benefits those that have wealth. Joe Biden has proposed an increased tax on those that make over $400,000; and possibly increasing the inheritance taxes. (in a country that stresses the best and brightest go the top, it does not make sense that if you inherit money you are 3/4’s of the way before the lowest income starts). Biden has also stated the minimum wage should rise to $15 a hour, but unless it is written into grants from the federal government, it may be wishful thinking on behalf of the President.

Linking to dividend paying stocks, there will be greater taxes but the world will continue because the economy of the US is dependent on people shopping and more people will have resources to spend money. If some of the ideas proposed by President Biden and more people move from spending every pay check to actually have savings that is a good thing, it is the reason why one wishes to invest in dividend paying stocks.

There are more questions than answers, till the next time – to raising questions.

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