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Monday, February 25, 2013

Johnston: Income Inequality: 1 Inch to 5 Miles

Tax Analysts David Cay Johnston (Syracuse), Income Inequality: 1 Inch to 5 Miles, 138 Tax Notes 1007 (Feb. 25, 2013):

The average increase in real income reported by the bottom 90% of earners in 2011, compared with 1996, if measured at one inch, would extend almost five miles for the top 1% of the top 1%.

138TN1007_Page_2

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Comments

I love these kinds of things, it makes me take a walk down memory lane.

I reflect where I was 15 years ago, I (think) I was in the bottom 90%, but 15 years later, I would hope I'm in the upper 10%. Isn't that the goal, that after working & saving over a long period of time, one keeps moving up? Then I keep walking back and reminding myself I actually did double my salary in under 10 years a very long time ago. But wasn't that the goal when I was young, as well? I've come a long way, baby!

We all make choices, Mr. Johnston. Some choose to live in sucky one bedroom apartments & save, others choose the pool & health club and don't.

Posted by: Sandy P. | Feb 25, 2013 10:59:08 AM

Be careful of what you ask for. The "take from the rich, give to the poor" mentality espoused by the law prof community, of course in vogue in the Obama era, is the same mentality that has people questioning why law school is so expensive in absolute and relative terms. Occupy law school! Profs overpaid by any metric, especially compared to the poor students who can't find work. Why not enact a tax on law profs to help unemployed law students pay their loans? Makes sense to me. Income equality is at best only in part a function of tax policy just as the law school crisis is at best only in part a product of law school excess. Fix the tax policy and the excess and you still have a problem. We have been in a stagnant economy for a decade with a depression-like financial crisis still in recent memory. Less jobs and less income growth breed more income inequality and exposes the teflon tenure types to criticism. The top 20% income earners still pay more than 80% of all taxes. The logical conclusion of the thinking in this article is simply to change to a socialist or communist state but then who do you take from?

Posted by: Jay | Feb 25, 2013 11:21:56 AM

Income equality of private citizens should be no business of our government, much less manipulated through the Tax Code. Mainly the poor don't get richer because they keep doing the same stupid things, and the rich do get richer for making better choices. If government wants to address that inequality, it simply has to continue to make schools so horrible that everyone comes out stupid.

Posted by: Woody | Feb 25, 2013 1:59:07 PM

Why was there no mention that an ever-increasing fraction of employee compensation takes the form of health care benefits? That fraction does not appear in Adjusted Gross Income. Including it would make the results look much less dramatic.

On the other hand, state and local tax burdens on the middle class have increased greatly over recent decades. Including taxes might make the results look much more dramatic.

I get the feeling that sometimes the search for the truth takes a back seat to the search for a dramatic result.

Posted by: AMTbuff | Feb 25, 2013 2:48:19 PM

I haven't looked at the original, but the chart looks like they are plotting dollar amounts. Wouldn't it be more reasonable to compare percentage increases? In any event, this shows a pareto efficient outcome. This would seem to show that all income groups are better off now than they were in 1966 (assuming that the chart is comparing real dollars).

Posted by: Mike C | Feb 25, 2013 3:40:47 PM

You are missing the point. The odds are stacked in favor of capital, and against labor. Of course the 1 percent think they've succeeded out of sheer genius and pluck, when in fact the system is slanted in favor of those who can afford the tax deductions.

Tell us why you think the carried interest bracket should remain? Why should Warren Buffett's secretary pay tax at a higher rate than he does? And let's not forget Mitt Romney paying 12 percent tax, and likely far less in previous years.

Posted by: johnqpublic | Feb 26, 2013 9:06:39 AM

Let's see that chart depict after tax income and transfers, and maybe the skip the histrionics, too.

Posted by: yo Gabbatpour Gabbatpour | Feb 26, 2013 11:04:32 AM

You are missing the point, John. If WB is such a terrible boss and pays so poorly, why is she working for him? Why hasn't he rewarded her for her loyalty by giving her stock options or reward her another way?

Maybe if people like Buffet & Edwards were forced to take higher salaries?

Posted by: Sandy P. | Feb 26, 2013 1:02:17 PM