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Tony Quain
Tony Quain is a commentator on free-market economic theory and policy. He has a Ph.D. in economics from George Mason Univ. More >>
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Inequality today
Redistribution today
Taxes today

Link: http://www.foxbusiness.com/economy-policy/2015/09/29/what-income-inequality-critics-ignore/

Elizabeth Macdonald from FOX Business shows in numbers how the upper income brackets pay more than their share of taxes, and deserve a bigger tax cut. Good article.

Link: http://www.brookings.edu/research/papers/2015/09/28-increase-in-top-income-tax-rate-not-substantially-alter-income-inequality-gale-kearney-orszag?rssid=fiscal+policy

William Gale, Melissa Kearney, and Peter Orszag of Brookings tried out a typical left-wing robin hood scheme. And the results show that you can't beat income inequality by soaking the rich.

They tried to see if raising the top income tax rate to 45% and even 50% (from 39.6%) and then sharing the loot among the bottom 20% of households (always households ... don't they ever learn?) results in a reduced Gini coefficient of the American economy. The results were almost zilch (as they put it, "exceedingly modest").

Only as an afterthought do they include any behavioral adjustments to this tax-and-redistribute scheme, and then only to the taxed. Rather than reporting how much income and tax revenue is lost due to changes in behavior, they bemoan that this doesn't reduce income inequality (because the rich work less) either. What a shame.

They conclude with this:

This analysis, coupled with [a previous study about education], in turn leaves us with the open and important question: if neither a substantial expansion in education nor a big increase in the top marginal tax rate would significantly affect measured income inequality, what would?

How about this question instead: If new and more unfair ways of re-arranging earned property doesn't further your academic desire for a nicely patterned breakdown of annual income statistics among arbitrarily grouped workers, why don't you look for a better way to spend your time that actually provides something of value to people?

Link: http://www.deirdremccloskey.org/docs/pdf/PikettyReviewEssay.pdf

Deidre McCloskey has a good essay here on Piketty. A little late, not very timely, so forth.

Link: http://www.city-journal.org/2015/eon0731fm.html

Saw this article over the weekend.

Francis Menton's thesis is summarized in these paragraphs:

Last year, Bloomberg Rankings published a national study on income inequality, using U.S. Census Bureau income data to rank each of the 435 congressional districts by economists’ standard measure of inequality, the Gini coefficient. The study found high levels of income inequality in areas of the country known for their political progressivism ... Of the top 25 spots, 23 went to Democratic districts ... All of those congressional districts have long been associated with progressive politics; most have long since adopted at least some of [New York Mayor Bill] de Blasio’s policy prescriptions, including extensive public and affordable-housing programs, generous welfare programs, relatively high and progressive state and local income taxes, and higher minimum wages.

Could it be that progressive policies intended to reduce income inequality actually cause it to increase? Quite likely, yes. The reason has to do with the effect of these policies on the low end of the income distribution. The government doesn’t count the distribution of in-kind benefits as income—and means-tested handouts create incentives for recipients to keep their measured incomes low. Further, where higher minimum wages—another progressive agenda item—cause higher unemployment, we see even more zero-income earners. Having lots of low-earners or zero-earners doesn’t help reduce inequality. Meanwhile, at the high end of the income distribution, taking money from high earners through higher marginal tax rates is not counted in official statistics as a cut in income—which means that income inequality again doesn’t shrink.

A very good hypothesis, one I am inclined to agree with. However, to be fair, the coincidence of high inequality in areas dominated by progressives might be because progressive policies cause greater income inequality or it might be because high inequality causes people to vote progressive. I think it's some combination of both.

Link: https://www.minneapolisfed.org/research/economic-policy-papers/on-the-ethics-of-redistribution

The linked paper applies the "If you want redistribution, see how you like global redistribution ..." argument to John Rawls' theory of justice (veil of ignorance, so forth), exposing the muddled ethics.
It specifically cites globalization and world trade as a policy example which hurts the lower-income citizens of developed countries but helps the incomes of people in developing countries; if a true Rawlsian system were employed, these policies would be supported for their global effects, despite their local effects in the developed world.

Link: http://www.realclearpolitics.com/articles/2015/08/03/minimum-wage_madness_127616.html

I wholeheartedly agree with this article except for the following paragraph:

Let's be clear. Some increase in the federal minimum is justified. It's been at $7.25 since 2009. Inflation has eroded its value 10 percent since then and 24 percent since its peak year of 1968, says the left-leaning Economic Policy Institute. But raising it to $15 (a doubling), or even $12 (a two-thirds increase), would be a radical act that front-loads the benefits and back-loads the costs.

Weak. He spends the whole article explaining that the minimum wage doesn't work, then says here that it should be raised. Stand up for your beliefs, damn it.

Link: http://www.nytimes.com/2015/07/30/opinion/congress-should-reauthorize-the-export-import-bank.html?ref=todayspaper&_r=0

Their argument is basically that other countries subsidize their exports, so we should also to avoid losing in the global marketplace.

Not buying it. If other countries subsidize their exports, our consumers are the beneficiaries. Why waste our own (tax) money trying to compete if we get the benefits of their unfair competition?

If country A exports airplanes and A's government subsidizes them to sell at a 50% discount, that benefits American consumers (or businesses like airlines, as may be the case here) by cutting their cost of business. If our own aerospace companies can't sell them for that cheap, then let capital re-allocate to a different industry where we are competitive. We're already getting the cheaper goods (at the expense of country A), so why pay the expense ourselves too?

Link: http://www.realclearmarkets.com/articles/2014/11/10/the_hidden_truth_behind_inequality_statistics_101381.html

A good article, particularly for readers who are new to the inequality debate.

Summary paragraphs:

These CBO reports are well known, as are plenty of other analyses of the distribution of consumption or purchasing power rather than income. Thus, while the Occupy-style protestors may not know the difference, many of the academic and political voices from the left that you hear bemoaning the increase in income inequality know the difference between pre-tax and post-tax, post-government benefits inequality. They are making a conscious choice to overstate the problem in order to claim support for their preferred political outcome.

Until the government disappears and everyone's pre-tax income is the same as their purchasing power, the distribution of pre-tax income would seem to be of little value. Many people probably cannot even tell you their gross pay; they only know the net amount they take home in their check. Anyone who wants to have a serious discussion about inequality should be focused on how much people are able to consume and save since those are the things that matter. Concentrating on the proper facts will make the debate better and a solution to any problem more likely.

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