Warm Southern Breeze

"… there is no such thing as nothing."

American Income Disparity and the ideal of Equality

Posted by Warm Southern Breeze on Sunday, October 30, 2011

The report by the Congressional Budget Office  is based upon data provided by the Internal Revenue Service and the Census Bureau, and was requested several years ago. The official report may be downloaded from the CBO via the link provided in the story in the first sentence of the first paragraph in the words “new report.”

It is my opinion that Republicans – which party has been hijacked by the radical element commonly known as the “TEA Party” – are Hell-bent on destroying this nation by eliminating – bit by bit, piece by piece – every vestige of rule, regulation and protective service that benefits the American people.

Their ideology is “tear down,” rather than “repair, rebuild.” It’s like tearing down the house just to replace the toilet.

Their political philosophy is disguised as “small government, less regulation” which on it’s face, sounds nice – which is almost like asking “if you could satisfy your hunger by eating half as much, would you mind if your food was greasy?” And at 9 calories per gram, fats, oils and greases, of course, are more than twice as calorically dense than proteins or carbohydrates, which each contain 4 calories per gram. Of course, fats are an important part of any healthy diet, and are necessary to metabolism, and the production and utilization of certain hormones. But too much fat – a good and necessary thing – can cause diarrhea, and other unpleasant symptoms, and in the long-term, such an imbalanced steady intake of grease, oils and fats can lead to depletion of vitamins and minerals, even dehydration.

Their long-standing modus operandi is to “starve the monster” – which is the colloquial terminology meaning cut off/eliminate the source of operations (money), and the “monster” (the agency/bureau/department) will die. Among the radicalized Republicans, such hated and despised governmental agencies include the Department of Education, the Department of Energy, the Bureau of Land Management, the Department of the Interior,

But then, you don’t have to take my word for it. Read the words of Lew Rockwell – a utopian idealist whom TEA Partiers idealize – whom posted on his website September 20, 2008 04:52 PM a blog entry entitled: “I Hate Government.

This observation and my commentary is based upon the elements which we Americans have cherished and held as true for many years – equality.

Regarding the question “how to we find our way out of our morass?,” it’s not as if we don’t have any idea of what works. If we allow history to be our guide, we can see that the most productive time in our nation’s history was in the post WWII era, when significant advancement was made in our nation’s economic infrastructure – the construction of highways, roads, bridges, electrical grid, sewerage & water treatment, and more. All we have to do to repeat the process is to return to the levels of taxation and policy we once had.

The significant problem that plagues the federal government is that there is little consumption of material goods. From a governmental perspective, that means the purchase of materials and goods that are used to produce the things that government provides – infrastructure. The government obtains it’s revenue from taxation, the greatest portion of which is income based.

Concerning income, there is money that one works to earn – also referred to as “earned income” – and income one did not work to earn, which is called a “capital gain.” An easy explanation of the concept is thus: the pseudo-celebrity Paris Hilton is a rich young woman from her father’s work. She has done nothing to earn her money, and all the income she has is from interest earned on her inheritance. That is called a capital gain. Thus, to reduce the capital gains tax is to effectively reduce the taxes she must pay on money she did not earn. It’s also like telling a lottery winner that they don’t have to pay taxes on their winnings.

So, with regard for equality, is that good, fair or just?

But the argument of equality is one used for the so-called “flat tax” – about which I have previously written. Conclusion: It is a bad idea. Why? As I have analogized quite simply, “if it costs $500 annually to live, and you make $1000, that’s 50% of your income. If it costs $500 annually to live and you make $10,000 that’s 5% of your income.” The research may be found with my corresponding blog entry, which is entitled The Impact of the Flat Tax Reform on Inequality.

 

Top Earners Doubled Share of Nation’s Income, Study Finds

By
Published: October 25, 2011

http://www.nytimes.com/2011/10/26/us/politics/top-earners-doubled-share-of-nations-income-cbo-says.html

WASHINGTON — The top 1 percent of earners more than doubled their share of the nation’s income over the last three decades, the Congressional Budget Office said Tuesday, in a new report likely to figure prominently in the escalating political fight over how to revive the economy, create jobs and lower the federal debt.

In addition, the report said, government policy has become less redistributive since the late 1970s, doing less to reduce the concentration of income.

“The equalizing effect of federal taxes was smaller” in 2007 than in 1979, as “the composition of federal revenues shifted away from progressive income taxes to less-progressive payroll taxes,” the budget office said.

Also, it said, federal benefit payments are doing less to even out the distribution of income, as a growing share of benefits, like Social Security, goes to older Americans, regardless of their income.

The report, requested several years ago, was issued as lawmakers tussle over how to reduce unemployment, a joint committee of Congress weighs changes in the tax code and protesters around the country rail against disparities in income between rich and poor.

In its report, the budget office found that from 1979 to 2007, average inflation-adjusted after-tax income grew by 275 percent for the 1 percent of the population with the highest income. For others in the top 20 percent of the population, average real after-tax household income grew by 65 percent.

By contrast, the budget office said, for the poorest fifth of the population, average real after-tax household income rose 18 percent.

And for the three-fifths of people in the middle of the income scale, the growth in such household income was just under 40 percent.

The findings, based on a rigorous analysis of data from the Internal Revenue Service and the Census Bureau, are generally consistent with studies by some private researchers and academic economists. But because they carry the imprimatur of the nonpartisan budget office, they are likely to have a major impact on the debate in Congress over the fairness of federal tax and spending policies.

Also cited as factors contributing to the rapid growth of income at the top were the structure of executive compensation; high salaries for some “superstars” in sports and the arts; the increasing size of the financial services industry; and the growing role of capital gains, which go disproportionately to higher-income households.

The report found that higher-income households got a larger share of the pie, while other households got smaller shares.

Specifically the report made these points:

¶ The share of after-tax household income for the top 1 percent of the population more than doubled, climbing to 17 percent in 2007 from nearly 8 percent in 1979.

¶ The most affluent fifth of the population received 53 percent of after-tax household income in 2007, up from 43 percent in 1979. In other words, the after-tax income of the most affluent fifth exceeded the income of the other four-fifths of the population.

¶ People in the lowest fifth of the population received about 5 percent of after-tax household income in 2007, down from 7 percent in 1979.

¶ People in the middle three-fifths of the population saw their shares of after-tax income decline by 2 to 3 percentage points from 1979 to 2007.

The study was requested by Senators Max Baucus, Democrat of Montana and chairman of the Finance Committee, and Charles E. Grassley of Iowa, when he was the senior Republican on the panel.

Representative Sander M. Levin of Michigan, the senior Democrat on the Ways and Means Committee, said the report was “the latest evidence of the alarming rise in income inequality.”

House Republicans pushed back Tuesday against President Obama’s complaint that they were blocking bills to create jobs. Speaker John A. Boehner said he agreed with Mr. Obama’s new slogan, “we can’t wait,” and he said that 15 House-passed bills were “sitting over in the Senate, waiting for action.”

On Tuesday, the White House endorsed another bill, which is likely to be passed by the House this week with bipartisan support. The bill would repeal a requirement for federal, state and local government agencies to withhold 3 percent of certain payments to suppliers of goods and services and to deposit the money with the Internal Revenue Service.

This requirement was originally adopted as a tax-compliance measure, and the Congressional Budget Office said its repeal would reduce federal revenues by $11 billion over 10 years.

House Republicans would offset the cost with a bill that reduces federal spending on Medicaid under the 2010 health care law. The White House said it supported the bill, intended to fix an apparent error in the law, under which hundreds of thousands of middle-income early retirees can get Medicaid coverage meant for the poor.

The joint Congressional committee on deficit reduction is considering changes in a wide range of benefit programs.

Representative Steny H. Hoyer of Maryland, the No. 2 House Democrat, said Tuesday that he was hopeful but not entirely confident that the panel would succeed in reaching a bipartisan agreement to reduce federal deficits by $1.2 trillion over 10 years.

“Hopeful is not confident,” Mr. Hoyer said.

A version of this article appeared in print on October 26, 2011, on page A20 of the New York edition with the headline: It’s Official: The Rich Get Richer.

2 Responses to “American Income Disparity and the ideal of Equality”

  1. I totally agree that the flat tax is a bad idea and you are right to discuss it in terms of the economic realities middle class to low income individuals face (the current poverty level, etc). We need however to get out from underneath the political rhetoric. If we had people in government today as we did in the post war era, infrastructure programs might indeed be helpful but you have surely seen the results of current day government infrastructure programs in terms of wasteful stupidity and campaign paybacks. It’s the corruption that’s killing us and it’s been coming from both sides of the political aisle for decades. Unfortunately, I don’t think we can right the ship. It’s been who you know rather than what you know for too long. Crony Capitalism has become the accepted American Way. We’re so indoctrinated to it… so numb to it, that we don’t even recognize it as a failing of our society. What can we expect from our elected legislators but to be mirror images of ourselves?

    • Warm Southern Breeze said

      Mark, thanks for stopping by to read – AND for sharing your thoughts! Opining further… once, I opposed Term Limitations for Congress, but now, I support them. A total of two terms in the Senate (12 years total) and 4 terms in the House (8 years total) – for a Grand Total of 20 years – ought to be enough for anyone. It would be wise as well, I think, to limit the so-called “revolving door” of leaving government/public service/elected office and going into lobbying – so that there must be mandatory waiting period of at least a year – perhaps more – before entering such employment afterward. And while it may be a small part of our overall national budget, I further think that lifetime pensions for Members of Congress should be eliminated. Sure, healthcare while they’re in office I could agree with, but not while they’re gone. Further, there is increasing evidence supporting one-payer system of health insurance for numerous reasons, not the least of which is that it is cost effective, and continues to demonstrate as much, and more. Thanks again for your readership, and your response!

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