Coyote Blog » Blog Archive » Wow. Thanks Capitalism!
And yet it seems that no data will convince most progressives that things haven't gotten steadily worse since the 1970s.
But.... the difference in what the top has vs the bottom is the more important measurement!!! We don't want people to feel bad because they have less!!
"you didn't build that. Somebody else made that happen."
On the other hand "at this point, what difference does it make?".
It is an extraordinary achievement.
But before we rest on our laurels reflect on the fact that the number of people living in poverty (not as a percentage) has not changed a great deal.
Poverty measured in what way?
The World Bank database has quite a bit more information, but digging it out would be too much work for a blog comment today.
To some extent the apparent increase in income inequality is more in appearance that in reality. Researchers use tax data to calculate statistics in income equality, but the tax code changes cause the statistic to look worse even when it is not. First, lower marginal tax brackets encourage the rich to REPORT more income on tax returns. When tax rates are 91%, wealthy invest in tax free municipal bonds, and that income does not show up on line 38. Also, when capital gain rates were 40% or more, the wealthy did not realized their capital gains, rather they waited until death to escape that tax, and that income never got reported. Second, also on the tax code, the double taxation of corporate income (and the rise of LLCs) has encouraged the wealthy to structure their businesses more and more as personal income rather than corporate income . . . again increasing reported income that actually already existed. Third, Reagan and Bush gave the poor many reasons to file taxes. Even if the poor are not legally required to file returns, these two presidents credited incentives for them to do so because of tax credits such as Earned Income Credit, etc. Now more lower income tax returns are being filed. Fourth, the increase in benefits for the poor has encouraged more of them to take income under the table -- never report it because the costs of reporting it is extremely high and the penalties for hiding It are infrequent. Fifth, society used to encourage the young to concentrate on studies and extra curricular activities and concentrate on earning money later; now society expects the young to get a part time job -- creating more filing of low-income people.
Again, to some extent the apparent increase in income inequality is more in appearance that in reality. We do not know to what extent . . . world wide competition, the importance of education and skills, and the winner-take-all mentality have contributed to the reality of increases in income inequality.
If you define "poverty" as "not as rich as the top 85%", then you'll always have a 15% poverty rate. But in the past, that meant starving in a hovel. Now in the USA, usually it means obesity, fewer TV sets and new cars than desired, and living in a high-crime neighborhood.