Income inequality today may be higher today than in any other era

[FreakinDJ]

A few years ago, economists Peter Lindert and Jeffrey Williamson uncovered a startling fact about the origins of inequality in America.

We know, of course, that incomes are highly unequal today. We can trace the rise and fall of the 1 percent back to the early 1900s, when robber barons ruled and Jay Gatsby partied. But that’s pretty much where the data peter out.

To go back further, Lindert and Williamson spent the better part of the last decade piecing together tax records, local directories and historical accounts in a painstaking effort to reconstruct an economic portrait of the nation’s past.

What they discovered was that we started out from a remarkably egalitarian place. “Incomes were more equally distributed in colonial America than in any other place that can be measured,” Lindert and Williamson write in their new book, Unequal Gains, which traces how inequality surged and receded in American history.


https://img.washingtonpost.com/wp-apps/imrs.php?src=&w=1484



https://www.washingtonpost.com/news/wonk/wp/2016/07/01/income-inequality-today-may-be-the-highest-since-the-nations-founding/

Question: Why does it seem income inequality in the Netherlands is going down when every where else it is going up ??

[KamaAina]

1. Well, since serfdom, anyway

[liberalmuse]

2. "Let them eat Trump Steaks"

I swear most times I have to click away from these articles. The truth can be so depressing.

[bhikkhu]

3. Looking at before and after tax GINI coefficients, there is the impact of tax policy on inequality

From https://en.wikipedia.org/wiki/List_of_countries_by_income_equality

There is a lot of worthwhile information, but note that the current estimate of the GINI Coefficients for the US and Netherlands before taxes are .456 and .426, respectively. The after-tax estimate for the GINI Coefficient for the US and Netherlands is .378 and .294, respectively.

Which is to say the progressive tax policies of the Netherlands reduce the basic measure of inequality there by .132. while the "progressive" tax policies of the US reduce the basic measure of inequality by .078. We begin worse, and we end much worse.

[FreakinDJ]

5. You see the chart a period in history when the USA had progressive tax rates

[Igel]

14. Before you look at the data in the chart, you read the labels and understand them.

The y-axis says gini coefficient pre-fisc.

That "pre-fisc" is telling you ...

1. This is pre-tax income. Progressive taxation, regressive taxation, no difference. I make $500k/year for my gross unadjusted salary, my income for this chart is $500k. I make $5k, that's my income. We're not talking differences in sales tax or property tax, we're talking income tax and FICA. Just not there.

2. This is pre-distribution income, because the analysis would deduct taxes before adding in other elements of government fiscal policy. If there's subsidized housing or welfare programs, if there's social security those aren't included. So if I make $5k and get Medicaid and WIC, that's also not included. The fiscal policies affect those closer to $5k/year than those making $500k/yr. The effect is to narrow the coefficient.

You may see the time period in the chart when the USA had progressive tax rates, but you don't see the immediate impact of those (more) progressive tax rates on net income. How can I know this? Because I can read the labels.

It pays to notice that the US income tax rate is progressive. It's not flat. It's not as progressive as it was, but let's not say 0% to 35% based on income is "flat." My family could make $20k or more per year and pay no "federal income tax." We'd pay FICA and Medicaid. At our current income level we're in the 33% marginal tax bracket (I think), but in fact pay more like 5 or 6% of our income (plus FICA, Medicaid, sales tax, property tax). However, we're pretty much maxed out for tax avoidance deductions and credits without having more kids.

In many countries, pre-fisc vs post-fisc gini coefficients lead to a higher post-fisc inequality. In the US, the post-fisc inequality is a bit smaller which is precisely why US gini coefficients are usually pre-fisc. It makes the problem seem worse. For countries were pre-fisc coefficients show less inequality than post-fisc coefficients, it's all post-fisc. People like bad news.

Moreover, a number of countries have redistribution programs that further reduce the gini coefficient. Britain and much of Western Europe do more in this regard than the US, but the US isn't a piker. I once saw a masterful deconstruction of a gini-based critique of US household income by pointing out that the sources used also indicated that the average listed expenses for a goodly sized portion of those households exceeded their gross income, year after year, by something like $5k or $6k. It's what happens when your expenses include a lot of subsidies and redistributed income but your income measurement excludes those. The only rebuttal possible was "underground economy," but that further demolished the critique because not only did it mean they didn't include unearned income but the analysis grossly underestimated earned income. The writers self-parodied magnificently.

My high school juniors repeatedly screw up this required Texas science standard--paying attention to the labels in data presentation.

[FreakinDJ]

16. Obviouly US Tax rates are progressive - but moving Flatter at this time

Not the right direction

And attempting to judge from "Tax Rates" alone is PURE BULLSHIT as everyone knows it doesn't address the "Effective Tax Rates" which become vastly much lower the more income (or what ever you call it for tax purposes) a person earns

So much for "Selective" preaching down to the commoners

[Albertoo]

4. While I agree with the general idea, there are problems with the OP

1- the graph is before income redistribution
2- inequality grew not just in the US. In the UK too.
3- inequality was greater in Victoria's Britain than today's America

This having been said, the GW tax cuts have widened income disparity beyond reason.

[Nye Bevan]

6. Obama ended the GW tax cuts for the 1%, and then some (nt)

[Albertoo]

8. Obama hardly touched the tax rates. Far from enough.

Need to get back to the Reagan bracket of 50%.

[rusty quoin]

7. I read somewhere that Ancient Rome started off egalitarian.

But they liked war so much, the soldiers, after many years of fighting for Rome, found their lands stolen. In the end, the greediest amoung us are always looking for ways to steal from us.

I remember the 1980s when Democrats thought they were in tune with the upper class here. There were so many ways to get rich quick on television, I think it may have begun the start of the infomercial days. But it all was a scam of course. They wanted your money, nothing more.

Now we realize that it was all bullshit, and we are trying to change it from the bottom up..again.

The American 13 colonies certainly had good sense. I wish there was a way to make that good sense last longer than it historically does.

[Bohunk68]

9. Caught the last few minutes of a program on C-span last evening on this very

subject. The one person said that 1. low growth, 2. economic inequality, and 3. political extremism leads to upheavals and we are on the verge now. #2 is the highest since the Gilded Age. If #1 should fall farther, the stage will be set.

[pampango]

10. "a lot has to do with taxes ... taxes and public programs are doing much less than they used to ..."

Many factors have contributed to growing income inequality, but a lot of them have to do with taxes. Since the late 1990s, income inequality has been driven by the rich getting more and more of their money from returns on investments, something the less well off are less likely to benefit from, and that money is taxed at a lower rate. Overall, taxes and public programs are doing much less than they used to to mitigate the growth of income inequality as taxes have been lowered on the rich while lawmakers have withered the social safety net.

You don't do what FDR did and Scandinavia does, bad things happen.

[FreakinDJ]

12. Less then 2% owned slaves

So how did they get all those people to fight for them ...

[FreakinDJ]

15. I see your point

The authors used "Tax Records" and attempted to extrapolate the data as best they could. Obviously Enslaved Workers didn't file taxes. While the American Society has attempted to correct this Wrong there still remains an income divide.

Seen plenty of responses attributing this to education levels, which would only address a fraction of the problem.

I work in Richmond Ca. which is best known for the Iron Triangle where poverty, crime and drug addiction run rampant. 40 years ago the same area was a bustling industrial center with good paying blue collar jobs for all who applied. Since then Industry and Blue Collar jobs have vanished leaving poverty, and despair behind.

Sure are lots of Real Estate speculators across the bay who wish they could vacate the whole lot and make a killing on the Bay Area's Newest Yuppy Village - which again would do nothing to solve the problems which have plagued people from the beginning.

I don't believe long term answers are found in Social or Training programs as these only address the current displaced workers. The Working Class (especially those of AA descent) are a resilient lot. Given the opportunity they will rise to the calling. Given a "Moving Target" manipulated by Moneyed Corporations and the Wealthy Elite, you have what we have here in Richmond Ca.