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Thread: What Increased Income Inequality the Most, 1996-2006?

  1. #1
    Havakasha is offline
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    What Increased Income Inequality the Most, 1996-2006?

    WED JAN 04, 2012 AT 07:30 PM PST
    What increased income inequality the most, 1996-2006: Capital gains? Bush tax cuts? Wages?
    byLaura Clawson

    The Congressional Research Service has released a report on income inequality between 1996 and 2006. While the middle 20 percent of people saw their average after-tax income grow from $35,255 to $39,301, the bottom 20 percent lost ground, going from an average of $9,016 to $8,461. The top 0.1 percent, meanwhile? Their average income nearly doubled, from $2,876,482 to $5,651,740. But more interesting than the growth of inequality are the causes (PDF):

    Changes in income from capital gains and dividends were the single largest contributor to rising income inequality between 1996 and 2006. Changes in tax policy also made a significant contribution to the increase in income inequality, but even in the absence of tax policy changes income inequality would likely have increased. Although earning inequality increased between 1996 and 2006, changes in wages and salaries appear to have had little effect on the increase in overall income inequality.
    In other words, the growth of income inequality isn't mostly about what people are actually earning through their work. Wages and salaries did get more unequal, but that inequality was dwarfed by two other factors: the increase in the share of overall income coming from capital gains and dividends—income that's highly concentrated at the top—and the Bush tax cuts, which were so overwhelmingly aimed at the very richest people. Jared Bernstein writes that:

    I think a lot of people sense that there’s something unsettling about this shift from labor income to capital incomes. It seems endemic of a society that devalues work while providing outsized rewards for speculation and asset accumulation. The CRS findings place that sensibility in the context of hard data.
    And the Republican presidential frontrunner (still, even after the Santorum surge) is Mitt Romney, practically the poster child for this system.

  2. #2
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    Click on link and scroll down to see the essential CHARTS.

    WED NOV 23, 2011 AT 05:15 PM PST
    Income inequality and tax fairness in three charts
    byJoan McCarter
    Occupy Wall Street has made a difference in the public narrative to the extent that the traditional media is at least now aware of the idea of income inequality. You don't need more proof of that than this "Reality Check" from the Washington Post.

    It’s true that the share of the tax burden paid by the rich has grown. The first chart shows that the share of the overall tax burden paid by the top one percent has risen some 12 percentage points since 1986:

    But here’s the rub: The overall income of the top 1 percent has risen significanly faster than that over the same time period. The second chart shows that the percentage change of the overall average income of the top one percent has risen by 119 percent. That’s more than twice the amount of the change in their income tax, which grew by 54 percent in that time:

    And finally, the third chart shows clearly what this means: The share of adjusted gross income paid by the top one percent dropped by 10 percentage points over that time period. The bottom line is that the amount of after tax income has risen at a much faster pace than the amount they pay out of it:

    So, look, here’s the disagreement in a nutshell. Conservatives say we should not raise taxes on the rich because wealthy people are already paying a disproportionate share of the tax burden. Liberals respond that the wealthy’s after tax income has exploded at a far greater rate than their rate of taxation has risen. Liberals are proposing only a tiny adjustment in that trend, as part of a broader solution to reduce the deficit that would also involve those of much more modest means making sacrifices.
    There's a finer point to put on this, though. Liberals aren't just arguing over the fairness of the tax burden. The tax issue is basically highlighted now because the Bush tax cuts have been the primary driver of the deficit that the powers that be in Washington want us to think is the country's biggest problem.

    It's not. The country's biggest problem is in chart 2, above. The big problem isn't that the rich are getting richer and not paying their share. It's the fact that income has remained stagnant for 90 percent of Americans for three decades. Most of the 90 percent don't begrudge the wealthy their wealth, though in poll after poll it's clear that the 90 percent think the 10 percent should pay more in taxes. It's not about them getting richer, it's about us getting poorer.

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    2011 AT 05:45 PM PST
    Millionaire's surtax no 'job killer,' would hit just one percent of small businesses
    byJoan McCarter
    Speaker John Boehner has a sad for America's "small" businesses, like Starbucks.
    So far, House Speaker John Boehner is still resisting the idea that the continued payroll tax cut for middle-class America should be paid for by the 1 percent. Actually, as it turns out, the proposed 3.25 percent tax on millionaires would be paid by about one-tenth of the 1 percent, but that won't keep Boehner from bleating about "job creators." Which he's done in this case, with his spokesman telling reporters that the idea is a "job-killing tax hike on small businesses."
    Except, as Suzy Khimm explains, it's not.

    The millionaire’s tax would indeed affect about 30 to 40 percent of business income that’s reported on individual tax returns, rather than on corporate tax returns. But that income is concentrated among a very small group of small businesses. The tax would only affect about 1 percent of those the Treasury Department classifies as "small business owners."
    Just 2 percent of all business owners who file taxes through individual returns—including sole proprietorships, limited liability corporations, S corporations, and partnerships—have taxable income that’s more than $1 million, according to an August 2011 Treasury report. And just about 1 percent of those Treasury categorizes as "small businesses owners" would be affected by the Democrats' proposed millionaire's tax —about 273,000 in total. That number drops even further—to 51,000—if you define "small business owners" as those earning at least 25 percent of income through their firm.

    Of course, it all depends on how you define "small business," and we know that Boehner's definition doesn't really correspond to reality as most of us know it, since he calls the world's largest coffee purveyor a small business.

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    "Eventually, socialism would give way to a communist stage of history: a classless, stateless system based on common ownership and free-access, superabundance and maximum freedom for individuals to develop their own capacities and talents. As a political movement, Marxism advocates the creation of such a society."

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