Bloomberg: Why Income Inequality Went Missing in the 2012 Campaign
Why did inequality never become the defining issue of the 2012 campaign? It appears that voters, intuitively, don’t see it as the problem some politicians would have us believe.
Even economists disagree over how bad inequality is, the correct way to measure it, why it’s increasing and what to do about it. And most Americans, no matter how humble their circumstances, don’t resent the wealthy so much as strive to get rich, too. One point on which economists do seem to agree is that income inequality by itself isn’t harmful — except when it’s so great that the scales of opportunity tilt. On that score, the U.S. has reason to worry.
Median household income is lower than it was a decade ago. At the same time, the gap between rich and poor has widened. Economists recently reported that the top 1 percent receive about a fifth of the national income — up from less than a 10th in 1970 — and control about a third of the country’s wealth.
The data, however, overstate inequality by not counting government transfers such as food stamps, unemployment insurance and Social Security. When these things are included, every income group shows modest gains from 1997 to 2007. When health benefits are also calculated, income disparity really drops off, with the bottom 20 percent registering income growth of about 26 percent. The top 5 percent show a 63 percent increase. …
… Where does this leave us? If income inequality by itself isn’t bad, and if it’s not a zero-sum game, it’s debatable whether the tax system should be used to close the rich-poor chasm. Redistributing income might choke off growth. But with the opportunity gap growing, the tax code certainly shouldn’t encourage more inequality, as it now does. In that spirit, here are three tax and education reforms that might help rebalance the opportunity scales:
The estate tax is a good starting point. …
Restricting these breaks would help make the tax code more progressive without redistributing income by raising rates. …
Another idea catching on with lawmakers in both parties is education savings accounts, which work like 401(k) retirement plans. …
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