Tag: Income Inequality

Contributor Post Created with Sketch. Inequality Is Exploding, Except That It Might Not Be

 

A long piece in The Economist about inequality research (“Economists are rethinking the numbers on inequality”) ends with this question: “Will this flurry of new research change people’s minds about inequality?” Well, maybe some change among some academics, probably not much among most activists or politicians. As for the latter, too much of the current political environment seems driven by the idea that massive inequality signals “late capitalism” and the end of the American Dream as we know it. Mostly on the left, but also on the populist right.

But even if minds are hard to change, perhaps strong evidence can at least make certain beliefs less strongly held. Has income inequality surged to record levels? As the below chart shows, adjusting for taxes and transfers finds the income share of America’s top 1 percent “has barely changed since the 1960s,” The Economist points out. From the piece:

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Contributor Post Created with Sketch. Elizabeth Warren’s Unconstitutional Wealth Grab

 

As part of her populist presidential campaign, Senator Elizabeth Warren has unveiled a proposal for an annual wealth tax of 2 percent for ultra-rich families whose net worth is between $50 million and $1 billion. That tax would increase to 3 percent for families whose net worth exceeds $1 billion. The tax is on top of many other taxes to which such a family would be subject, including, presumably, the progressive ideal of a 70 percent income tax as well as state and local taxes. The wealth tax would even apply to people whose net worth has declined during the past year so long as they remain above the stated threshold. Cumulative taxes could easily exceed 100 percent of income. That result is not an unanticipated bug but rather an essential feature: Warren wants to mandate greater income equality through tax policy, even if it means leveling down, not up.

In a future column, I shall address the economic ramifications of this proposal. But for now, I turn to the question of the constitutionality of this novel wealth tax. On that topic, Senator Warren offers in support two short letters signed by sixteen prominent American constitutional law scholars that vouch for the constitutionality of her plan.

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Contributor Post Created with Sketch. Elizabeth Warren’s Theory of America’s ‘Freeloading’ Billionaires

 

Sen. Elizabeth Warren says she wants “billionaires to stop being freeloaders.” It’s a statement akin to the idea that billionaires need to “give back” to society. Which is not how I immediately think about the wealth inequality issue. Surely Microsoft co-founder Bill Gates didn’t begin to “give back” or generate value for society only when he began “giving back” via the Gates Foundation to boost education and reduce global poverty. Society benefited from his role in revolutionizing home computing, generating massive wealth for retirement plans everywhere, and creating hundreds of thousands of jobs over the decades.

Oh, and Gates became superrich in the process. And he should pay taxes. Lots of them. Does he or other wealthy Americans pay anywhere near enough? Warren and many Democrats don’t seem to think so, (although paying for new spending does seem to be the primary concern here). Thus the talk of a wealth tax or a higher top income tax rate. There’s less talk on the left, however, of possible tradeoffs from such ideas. A wealth tax would certainly be a theoretically powerful — though difficult to administer and possibly unconstitutional — way to break up or diminish concentrated wealth. (Many nations that have tried them have since abandoned them.) But there is another side of the story. My AEI colleague Alan Viard notes that wealth taxes of the sort Warren advocates “would be a drain on the pool of American savings, [which] finance the business investment that in turn drives future growth of the economy and living standards of workers.” Something to consider at a time when the American economy faces historically low economic growth due to demographics and low productivity.

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On this week’s episode of Banter, Brookings Institution Senior Fellow Richard Reeves discusses his book “Dream Hoarders: How the American Upper Middle Class Is Leaving Everyone Else in the Dust, Why That Is a Problem, and What to Do About It.” The book argues that the top 20 percent of income earners in America are increasingly […]

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Member Post

 

Amity Shlaes joins Seth Barron to discuss the competing goals of economic growth and income equality, and to take a look at how American presidents in the twentieth century have approached these issues. Polls show that support for income redistribution is growing among younger generations of Americans, but such policies have a poor track record of achieving their goals. As Shlaes writes in her feature story in the Winter 2018 […]

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Contributor Post Created with Sketch. The Income Inequality Obsession

 

One of the great political divides in the United States concerns the role of the state in redressing income inequality across individuals and groups. Recently, the outspoken conservative commentator Dennis Prager noted that in one representative debate during the 2016 presidential campaign, the words, “Wall Street”, “tax,” “inequality,” and “wealthy” were used 59 times by Democratic candidates. In contrast, “ISIS,” “terrorism,” “free,” “debt,” “liberty,” and kindred terms gathered a scant 10 mentions.

The choice of words reflects legislative priorities. As Michael Tanner of the Cato Institute observes, the Democratic position resonates broadly in the electorate given the increasing inequality of wealth. By noting the diminishing marginal utility of wealth, progressives hope to increase social welfare by taxing the rich in order to support the poor. Today, the top 1 percent of taxpayers, who earn just under 20 percent of total individual income, also pay just under 40 percent of all individual income taxes. So ironically, redistribution programs depend on continued successes at the top. In light of the relatively low economic growth and prolonged wage stagnation of recent years, what price is presently paid for the increase in social equity?

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I’ve been a free-rider on this site now for much longer than an introductory period, and perhaps more notably, my own podcasts have proven from time to time to be essentially responses to various things I’ve found here. In short, fairness and self promotion both suggested that I join. For my first post, here’s my […]

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Contributor Post Created with Sketch. The Hidden Virtues of Income Inequality

 
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Norwegian Cruise Line’s newest ship Escape features a private area for the wealthy named “The Haven.”

There is little doubt that income inequality is one of the great issues of our time. A new front has opened in the battle over whether the richer and the poorer should have differential access to various forms of common facilities.

The New York Times recently ran a front-page exposé of segregation by wealth in the booming cruise business. The article, by Nelson Schwartz, was entitled “In an Age of Privilege, Not Everyone Is in the Same Boat.” The gist of the story is that Norwegian Cruise Line has constructed one of its newest vessels to provide separate luxurious quarters (the “Haven”) to some 275 elite guests out of the 4,200 total passengers the ship can carry. These guests pay a premium, which in addition to an upgraded cabin, grants them preferential access to the rest of the ship with a simple flash of a gold card.

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The minute I find out a famous actor is the son/daughter/brother/sister of another famous actor, my respect for them drops 25%*  More

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Contributor Post Created with Sketch. More on Housing, Inequality, and Economic Growth

 

twenty20_ed1a3b03-c953-4f77-ae69-d5b73c72acc8-e1460750194459As I wrote in my latest The Week column, inequality worriers should take a hard look at what’s happening in US cities. Turns out poorer Americans who live in some of the country’s most unequal places, such as New York and San Francisco, have some of the best longevity outcomes.

Researchers speculate that “low-income individuals who live in high-income areas may also be influenced by living in the vicinity of other individuals who behave in healthier ways.” Behaviors were found to correlate more closely with longevity than access to health insurance. As I also noted, “Economists on the left and right have begun to deeply examine how zoning regulations and other regulatory barriers artificially inflate home prices in some high-income cities.” Including such as New York and San Francisco.

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Promoted from the Ricochet Member Feed by Editors Created with Sketch. Why Rich Celebrities Love Democrats

 

Last week, my wife told me that Michael Stipe, the lead singer for one of the favorite bands of my youth, had opened a rally for Senator Bernie Sanders. I knew the guy was an insufferable lefty, but it still got me thinking about why rich celebrities love to support socialists, seemingly against their own interest.

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Contributor Post Created with Sketch. The Toxic Populism of the Democrats

 

Bernie SandersAs his campaign roars into New York State, Bernie Sanders has been on a roll. He has won eight of the last nine primary contests, most recently the ones in Wisconsin and Wyoming. His impressive performance has emboldened him to take on Hillary Clinton in her adopted home.

Sanders has attracted wildly enthusiastic audiences by pushing his program of economic populism. He loudly proclaims that, unlike Clinton, he has never received support from Wall Street or corporate interests—and that his impressive financial support comes from tens of thousands of small contributors, each of whom shares his vision. If elected president, he points out, he would be held accountable to these supporters and will make good on his program that includes massive tax increases largely targeted at the super rich.

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Contributor Post Created with Sketch. Link Between Health and Income Not What Most Assume

 

040516ShealthSo there’s a major new study out that looks at health inequality. Among the findings are that (a) the very rich live a lot longer than the very poor, and (b) geography matters. From the Health Inequality Project:

The richest American men live 15 years longer than the poorest men, while the richest American women live 10 years longer than the poorest women. The gaps between the rich and the poor are growing rapidly over time. The richest Americans have gained approximately 3 years in longevity since 2000, but the poorest Americans have experienced no gains. … Life expectancy varies substantially across cities, especially for low-income people. For the poorest Americans, life expectancies are 6 years higher in New York than in Detroit. For the richest Americans, the difference is less than 1 year.

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Contributor Post Created with Sketch. Worried about Income Inequality? Get Government Out of the Way.

 

bureaucracyRent-seeking comes in many shapes and forms. From “Make elites compete: Why the 1% earn so much and what to do about it” by Jonathan Rothwell at Brookings:

For lawyers, doctors, and dentists— three of the most over-represented occupations in the top 1%—state-level lobbying from professional associations has blocked efforts to expand the supply of qualified workers who could do many of the “professional” job tasks for less pay. Here are three illustrations:

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Contributor Post Created with Sketch. Knowledge Base for Sanders Supporters: Understanding Income Inequality

 
1125px-Sanders_presidential_campaign_kickoff,_May_2015_(24317181804)
By Jake BucciBernie Sanders, CC BY 2.0.

The 2008 Economic Crisis spawned two, very different reactions in our ideologically-bifurcated nation. The first was the birth of the Tea Party following Rick Santelli’s impassioned speech from the floor of the Chicago Mercantile Exchange. Santelli’s disgust at those who irresponsibly took out loans they couldn’t repay — and the banks and government that underwrote such moral hazards — sparked a wildfire that drove the Democrats from control of the House in 2010 and proved decisive in wresting control of the Senate from Harry Reid in 2014.

The other reaction was the later birth of the Occupy Wall Street Movement which was organized along the opposite lines. The primary thrust of OWS was a complaint about the unequal distribution of income and wealth and, to some extent, an inchoate grouse about the immorality of being expected to repay loans that were irresponsibly taken out.

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Contributor Post Created with Sketch. Infographic of the Day: The Enemy All Around Us

 

From Steve Conover’s fascinating Twitter feed, comes this interesting way to look at America and its problems:

CbR-pcqWIAAWXvxAll in the details, I guess, but I do like the clarity of it.

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Contributor Post Created with Sketch. No, the US Economy Is Not a Rigged Game

 
011116forbes copy
Steven N. Kaplan and Joshua Rauh

In a 2014 a16z podcast from the Andreessen Horowitz venture capital firm, economist Larry Summers clearly analyzed the inequality theories of Thomas Piketty, author of the best-selling Capital in the Twenty-First Century. While Summers thinks Piketty’s description of “what” is happening is important, he is skeptical of the “why” of perpetually rising wealth inequality — particularly Piketty’s assertions about rates of return on capital and savings. These are criticisms which many other economists have since offered and expanded upon.

So rather than highlight that bit of the chat, here is Summers on Piketty’s fundamental misunderstanding about how American capitalism works:

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Contributor Post Created with Sketch. A Silicon Valley Investor’s Bold Essay in Praise of Income Inequality

 

Graham-cover3Venture capitalist Paul Graham has written a lengthy essay on the value of increasing income inequality — at least the kind that comes from founding startup firms that generate consumer-relevant value. Here is some of it:

Since the 1970s, economic inequality in the US has increased dramatically. And in particular, the rich have gotten a lot richer. Some worry this is a sign the country is broken. I’m interested in the topic because I am a manufacturer of economic inequality. I was one of the founders of a company called Y Combinator that helps people start startups. Almost by definition, if a startup succeeds, its founders become rich. And while getting rich is not the only goal of most startup founders, few would do it if one couldn’t. …

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Contributor Post Created with Sketch. Look at the Markets. Look at the Economy. Are Income Inequality and Immigration Our Two Biggest Issues?

 

RTX216VP_clinton-e1452185958451In my new The Week column, I highlight the weakness of three key policies — tax increases, raising the minimum wage, and universal preschool — in Hillary Clinton’s anti-inequality agenda. But the bigger point is that Clinton should focus more intently on policies to boost economic growth, rather than redistribute it. After all, it looks like the US economy (again) didn’t grow much more than 2 percent last year, according to official stats — with 2016 looking like more of the same. Even worse, right now it looks like a recession is more likely than a growth spurt.

William Galston makes a similar point in the WSJ, arguing that early in the Clinton campaign, “she delivered a well-crafted speech outlining her strategy for creating strong, sustained and inclusive growth. … Since then, however, she has been busy immunizing herself against attacks from the left, pursuing transactional politics with the Democratic Party base.” In short, blame Bernie.

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Contributor Post Created with Sketch. Why Raising Taxes on the Rich Doesn’t Reduce Inequality

 

shutterstock_107787821_RichTaxThe progressive/left-wing response to the new Brookings study on inequality is obvious, right? From “Would a significant increase in the top income tax rate substantially alter income inequality?”:

The high level of income inequality in the United States is at the forefront of policy attention. This paper focuses on one potential policy response: an increase in the top personal income tax rate. We conduct a simulation analysis using the Tax Policy Center (TPC) microsimulation model to determine how much of a reduction in income inequality would be achieved from increasing the top individual tax rate to as much as 50 percent. We calculate the resulting change in income inequality assuming an explicit redistribution of all new revenue to households in the bottom 20 percent of the income distribution.

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