Posts Tagged ‘Inequality’

Imagine being a poor person and getting to choose your country. Which one would you select?

The answer probably depends on your goals in life. If you want to emulate “Lazy Robert” and be a moocher, you could pick Denmark. You’ll surely get more than enough money to survive.

Denmark’s also not a bad choice if you have a bit of ambition. It ranks #16 in the latest edition of Economic Freedom of the World, largely because it has a very laissez-faire approach on trade, regulation, and other non-fiscal policies. So there’s a decent chance you could climb the economic ladder.

But if you have lots of ambition and definitely want a better life for your children and grandchildren, you’d presumably pick a nation such as Singapore, which routinely gets very high grades from Economic Freedom of the World.

There’s a lot of economic liberty, which has resulted in huge improvements in living standards. Indeed, people in Singapore are now much richer than Americans.

The last thing you would do, however, is pick a stagnant country such as Greece. Or a miserably impoverished nation such as Zimbabwe.

Unless you’re one of the buffoons at Oxfam. That “charity” just produced an inequality study that says Singapore is one of the world’s worst nations, ranking far below places where people are very poor with very bleak lives.

Here’s how Oxfam describes its report.

In 2015, the leaders of 193 governments promised to reduce inequality under Goal 10 of the Sustainable Development Goals (SDGs). Without reducing inequality, meeting SDG 1 to eliminate poverty will be impossible. In 2017, …Oxfam produced the first index to measure the commitment of governments to reduce the gap between the rich and the poor. The index is based on a new database of indicators, now covering 157 countries, which measures government action… The report recommends that all countries should develop national inequality action plans to achieve SDG 10 on reducing inequality. These plans should include delivery of universal, public and free health and education and universal social protection floors. They should be funded by increasing progressive taxation and clamping down on exemptions and tax dodging.

In other words, the study is a measure of whether nations have punitive welfare states, not whether poor people have better lives.

The assertion in the second sentence that poverty can’t be reduced without reducing inequality is especially absurd. Unless, of course, you choose a dishonest definition of poverty (which is what we get from leftist groups like the UN and OECD, not to mention the Equal Welfare Association, Germany’s Institute of Labor Economics, and the Obama Administration).

But let’s focus on Singapore. Here are some excerpts from a Reuters story on the controversy over that nation’s poor score.

Oxfam on Wednesday rejected Singapore’s defense of its low taxes after the NGO ranked the wealthy city state among the 10 worst-offending countries in fuelling inequality with its low-tax regime. Oxfam’s Commitment to Reducing Inequality (CRI) index ranked Singapore 149th of 157, below Afghanistan, Algeria, and Cambodia, and marginally higher than Haiti, Nigeria and Sierra Leone. …Oxfam’s head of inequality policy, Max Lawson, said the impact of Singapore’s tax policy went beyond its borders, serving as a tax haven for the rich and big corporations. …Singapore Social and Family Development Minister Desmond Lee said on Tuesday…“Yes, the income tax burden on Singaporeans is low. And almost half the population do not pay any income tax,”…“Yet, they benefit more than proportionately from the high quality of infrastructure and social support that the state provides,” he said. “In Oxfam’s view, Singapore’s biggest failing is our tax rates, which are not punitive enough.” Lee also said 90 percent of Singaporeans owned their homes and home ownership was 84 percent even among the poorest 10 percent of households. “No other country comes close,” he said.

Minister Lee is correct, of course.

Singapore is a great place to be poor, in part because the bottom 10 percent in Singapore would be middle class or above in many of the nation’s that get better scores from Oxfam’s ideologues. But mostly because it’s a place where it’s possible to become rich rather than remain poor.

There are some other aspects of the Oxfam study that merit attention, including the curious omission of some of the world’s most left-wing nations, such as Venezuela, Cuba, and North Korea.

In the case of North Korea, I’m willing to believe that there simply wasn’t enough reliable data. But why aren’t there scores for Cuba and Venezuela? I strongly suspect that authors deliberately omitted those two hellholes because they didn’t want to deal with the embarrassment of incredibly poor nations getting very high scores (which is what made Jeffrey Sachs’ SDG Index an easy target for mockery)

Also, I’d be curious to learn why Hong Kong isn’t ranked? Taxes are even lower and there’s even less redistribution in Hong Kong, so maybe it would have been last rather than merely in the bottom 10.

Was Oxfam worried about looking foolish, so they left prosperous Hong Kong out of the study?

That’s my guess. The last thing the left wants is for people to understand that poor nations only become rich nations with free markets and small government.

The bottom line is that Oxfam is an organization that has been hijacked by hard-left activists. Given it’s track record of shoddy reports, it’s now a joke rather than a charity.

P.S. The OECD also produced a shoddy study that grossly mischaracterized Singapore and totally ignored Hong Kong.

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I’m happy to discuss theory when debating economic policy, but I mostly focus on real-world evidence.

That’s because my friends on the left always have a hard time answering my two-question challenge, which simply asks them to name one success story for big government.

They usually point to Sweden and Denmark, but get discouraged when I point out that those nations became rich when government was relatively small.

And I’m embarrassed to admit that some of my fellow economists once thought that communist nations grew faster than capitalist nations.

But let’s not digress. I raise this topic because there are many critics of capitalism who admit that free markets generate more wealth, but they assert that society would be better off if incomes were lower so long as rich people suffered more than poor people.

This strikes me as morally poisonous. But it also gives me an opportunity to cite a new study from the International Monetary Fund that allows us to further analyze this issue.

The IMF report starts by noting that globalization (free trade, liberalization, etc) has been good for global prosperity.

Over the course of the last decades the world economy has witnessed rapid integration. Most countries have opened up their economies and experienced an unprecedented rise in the flow of goods and capital across borders. This phenomenon – now widely known as economic globalization – was coincident with rising living standards in a large number of countries. Many developing countries have experienced episodes of strong economic growth and substantial poverty reduction as they integrated their economies with the rest of the world.

Sounds like good news, right?

It is good news, but those who fixate on inequality are worried.

…while globalization might on average be good for growth, more might not always be better for all. …When we shift the analysis to how income gains from globalization are distributed within countries, we also find globalization to have different effects on different incomes…gains are, however, distributed unequally both across and within countries. …Within countries, income inequality increases as a consequence of globalization. The income gains resulting from globalization tend to go primarily to the top of the national income distributions.

In other words, rich people are getting richer at a faster pace.

This phenomenon is captured in these two charts, which show that globalization is associated with more growth and more inequality.

But what’s important is that poor people also are getting richer.

In the subsample of developing countries where the gains from globalization are generally larger, however, they also reach the bottom of the income distribution and reduce poverty. … We find…some evidence of a poverty reducing effect of globalization in developing countries.

Consider, for example, the remarkable data I shared about China. Income inequality increased at the same time that poverty dramatically declined.

And those results seem to hold for the rest of the world, especially in developing nations.

So now let’s look at the most important chart from the IMF study, which shows that all income groups enjoy more prosperity with globalization.

Yes, rich people benefit the most, so official inequality numbers will increase.

But put yourself in the shoes of a poor person. Would you be willing to forego your additional income in order to deny additional income for a rich person? I suspect the vast majority of poor people would think that’s a crazy question.

But, as Margaret Thatcher pointed out, there are plenty of folks on the left who think that’s a perfectly reasonable position. Including, incidentally, some of the people at the IMF.

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A few years ago, I shared an image that neatly summarized why the left’s fixation on income inequality is misguided.

Now I have something even better.

I don’t know who “JIMBOB” is, but this cartoon he created is a masterpiece. The car analogy is perfect.

I’ll have to recycle this cartoon every time I write on the issue (along with substantive analysis, including Max Roser’s numbers and the powerful Chinese data).

That being said, I’m going to suggest one possible revision to JIMBOB. I think it would be a slight improvement if both captions started with “some.”

For what it’s worth, I think that phrasing would better reflect how the left thinks.

Or, to be fair, it shows how some on the left think.

I’ve never forgotten a conversation I had with a friend from the other side of the spectrum. His support for class-warfare policies is based on the fact that some (many?) rich people got their wealth via government.

And those people obviously don’t deserve their loot.

The difference between me and my friend is that I’d rather keep tax rates low and get rid of the programs that provide unjust riches. In other words, we should be guided by this very powerful image.

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I’ve repeatedly argued that faster growth is the only effective way of helping the less fortunate.

Class warfare and redistribution, by contrast, are not effective. Such policies are based on the fallacy that the economy is a fixed pie, and proponents of this view fixate on inequality because they mistakenly believe that additional income for the rich means less income for the poor.

Today, let’s look at some numbers that prove that a fixation on inequality is misguided. The Census Bureau this week released its annual report on Income and Poverty in the United States. That publication includes data (Table A-2) showing annual inflation-adjusted earnings by income quintile between 1967-2017.

To see if my left-leaning friends are right about the rich getting richer at the expense of the poor, I calculated the annual percent change for each quintile. Lo and behold, the data actually show that there’s a very clear pattern showing how all income quintiles tend to rise and fall together.

The lesson from this data is clear. If you want policies that help the poor, those also will be policies that help the middle class and rich.

And if you hate the rich, you need to realize that policies hurting them will almost certainly hurt the less fortunate as well.

One other lesson is that all income quintiles did particularly well during the 1980s and 1990s when free-market policies prevailed.

P.S. Many people (including on the left) have pointed out that the Census Bureau’s numbers under-count compensation because fringe benefits such as healthcare are excluded. This is a very legitimate complaint, but it doesn’t change the fact that all income quintiles tend to rise and fall together. For what it’s worth, adding other forms of compensation would boost lower quintiles compared to higher quintiles.

P.P.S. Here’s an interesting video from Pew Research showing how the middle class has become more prosperous over the past few decades.

P.P.P.S. The Census Bureau’s report also has the latest data on poverty. The good news is that the poverty rate fell. The bad news is that long-run progress ground to a halt once the federal government launched the ill-fated War on Poverty.

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The good news about China is that economic liberalization has produced impressive growth in recent decades, which has helped bring hundreds of millions of people out of poverty.

The bad news is that China started from such a low position that per-capita income is still quite low compared to rich nations.

So what does the economic future hold? Will China continue its upward trajectory?

That’s certainly possible, but it depends on the Chinese government. Will there be additional liberalization, giving the economy more “breathing room” to grow?

Not if the government listens to the bureaucrats at the International Monetary Fund. I wrote three years ago about an IMF study that recommended huge tax increases in China.

And now there’s another IMF report pushing for big tax hikes. Only instead of arguing that higher taxes somehow will produce more growth by financing a bigger burden of government (which – no joke – was the core argument in the 2105 study), this new report claims higher taxes will produce more growth by reducing inequality.

Here’s the basic premise of the paper.

…economic growth has not benefited all segments of the population equally or at the same pace, causing income disparities to grow, resulting in a large increase in income inequality… This is especially of concern as the recent literature has found that elevated levels of inequality are harmful for the pace and sustainability of growth… The paper discusses what additional policies can be deployed to improve equity in opportunities and outcomes, with particular focus on the role for fiscal policy.

But a key part of the premise – the blanket assertion that inequality undermines growth – is junk.

As I noted in 2015 when debunking a different IMF study, “..they never differentiate between bad Greek-style inequality that is caused by cronyism and good Hong Kong-style inequality that is caused by some people getting richer faster than other people getting richer in a free market.”

Let’s dig into the details of this new IMF study.

Here’s the problem, at least according to the bureaucrats.

Income inequality in China today, as measured by the Gini coefficient, is among the highest in the world. …Furthermore, the Gini coefficient has rapidly increased over the last two decades, by a total of about 15 Gini points since 1990.

And here’s the chart that supposedly should cause angst. It shows that inequality began to rise as China shifted toward capitalism.

But why is this inequality a bad thing, assuming rich people earned their money honestly?

When markets are allowed to function, people become rich by providing value to the rest of us. In other words, it’s not a zero-sum game.

Ironically, the IMF study actually makes my point.

…much of China’s population has experienced rising real incomes. …even for the bottom 10 percent incomes rose by as much as 63 percent between 1980 and 2015… This has implied that China reduced the share of people living in poverty immensely. Measured by the headcount ratio, the population in poverty decreased by 86 percentage points from 1980 to 2013 (see figure 6), the most rapid reduction in history.

And here’s the aforementioned Figure 6, which is the data worth celebrating.

Any normal person will look at this chart and conclude that China should do more liberalization.

But not the bureaucrats at the IMF. With their zero-sum mentality, they fixate on the inequality chart.

Which leads them to make horrifyingly bad recommendations.

…several reforms could be envisaged to make fiscal policy more inclusive, both on the tax and expenditure side. …revenues from PIT contribute only around 5 percent of total revenues, a much lower share than the OECD average of 25 percent. Increasing the reliance on PIT, which more easily accommodates a progressive structure, could allow China to improve redistribution through the tax system. …While the PIT in China already embeds a progressive schedule with marginal rates increasing with income from 3 to 45 percent, …redesigning the tax brackets would ensure that middle and high income households with higher ability to pay contribute more to financing the national budget… Property and wealth taxes remain limited in China. Such taxes are broadly viewed as progressive, because high-income households usually tend also to have more property and wealth. …Consideration should therefore be given to adopt a recurrent market-value based property tax.

And why do IMF bureaucrats want all these additional growth-stifling taxes?

To finance a larger burden of government spending.

China still lags other emerging economies and OECD countries in public spending on education, health and social assistance. …social expenditure will need to be boosted.

In other words, the IMF is suggesting that China should copy welfare states such as Italy and France.

Except those nations at least enjoyed a lengthy period before World War II when government was very small. That’s when they became relatively rich.

The IMF wants China to adopt big government today, which is a recipe to short-circuit prosperity.

P.S. I don’t think the IMF is motivated by animus towards China. The bureaucrats are equal-opportunity dispensers of bad advice.

P.P.S. The OECD also is trying to undermine growth in China.

P.P.P.S. There are some senior-level Chinese officials who understand the downsides of a welfare state.

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Writing a column every day is a recipe for making an occasional mistake.

Sometimes the errors are minor, such as when I put Tucson in New Mexico rather than Arizona.

And sometimes they are less trivial, such as when I mischaracterized subsidies for the Postal Service or when I incorrectly criticized the Committee for a Responsible Federal Budget.

In an event, I always try to acknowledge and fix my mistakes.

And that’s why I want to write today about Oxfam. Early last year, I wrote a column criticizing the group’s statist orientation, asserting in my title that the group was a leftist joke instead of a real charity.

Time to correct the record. But I want to begin by noting that my title was only partly wrong. Oxfam is very much a left-wing organization. In prior columns, I’ve shared critiques of the group’s statist ideology from Tim Carney, Marian Tupy, and Tony Travers.

And before I get to the part about fixing my mistake, I want to augment this list by sharing the views of two more experts. We’ll start with some excerpts from a column in the Wall Street Journal by David Henderson.

Oxfam recently published a 76-page report, “Reward Work, Not Wealth,” that advocates taxing the rich to reduce inequality and help the poor. …There are two ways to close the gap. The first is to concentrate on making the poor better off. Mostly that has happened, thanks to liberalized international trade and reduced costs for shipping goods. Just as Walmart and Amazon have cut costs for Americans, the introduction of container shipping crushed transportation costs for the world. The second way to reduce inequality is to make the rich worse off.

Needless to say, Oxfam prefer the approach that gives more power and money to government.

Any guess which method Oxfam’s report emphasizes? “Governments should use regulation and taxation to radically reduce levels of extreme wealth,” the authors conclude. …The document’s title, “Reward Work, Not Wealth,” is strange: Wealth is one of the main rewards for productive work. High taxes on wealth and the wealthy reduce the incentive to produce.

And Oxfam, to its credit, understands that confiscatory taxes will require a global tax cartel.

…the report…effectively advocates…the creation of a tax cartel. Since capital is extremely mobile and will go where it is lightly taxed—witness the corporate “inversions” of American companies—the report suggests “a new generation of international tax reforms.” Negotiating tax rates would take place under the aegis of “a new global tax body that ensures all countries participate on an equal footing.”

Reading Henderson’s column, we have additional confirmation that Oxfam is a run-of-the-mill statist organization that myopically believes in class warfare.

So you might think the group is no different that other leftists groups such as the United Nations or the Organization for Economic Cooperation and Development. Or no different than politicians such as Barack Obama or Hillary Clinton.

But Oxfam also has a reputation for beclowning itself with shoddy analysis.

Johan Norberg mocked the group’s ideology-over-results approach when he noted that Oxfam is distressed about an era of “neoliberalism” in the world (meaning, in this case, the European definition of pro-market classical liberalism), yet that’s also the period of time when the poor enjoyed huge gains.

For what it’s worth, I wrote a study 17 years ago debunking some of Oxfam’s sloppy work.

And here’s some of what Tim Worstall just wrote for the U.K.’s Adam Smith Institute.

Buried in Oxfam’s latest report about how disastrously unequal the world is we’ve got an assumption which is so breathtakingly foolish as to kill off any belief in the sense or sensibility of the organisation’s mindset. They’re trying to insist that the minimum wage in a place should be very much higher than GDP per capita in that same place. …the garment trade in Bangladesh…minimum wage there is…5,000 taka a month, or £50. …Yes, a low sum and most assuredly we’d all like it to be much higher. But Oxfam’s claim is that this should be a living wage of more like £250 a month (perhaps $250). Something which simply cannot happen. GDP per capita in Bangladesh is some $1,500 a year or so. We cannot have a minimum wage twice that. This would be the same claim as insisting that the UK minimum wage should be $80,000 a year (say, £60,000). …It’s a demand based upon the most aggressively stupid misunderstanding of what ails Bangladesh, isn’t it? ……to get this so wrong seriously calls into doubt Oxfam’s right to anything more than a contemptuous sneer. …Sorry folks, but Oxfam is deluded.

Tim concludes with some very wise words.

Bangladesh’s problem is not global inequality, the thing Oxfam is whining about, it’s Bangladesh’s poverty. …The cure for poverty is economic growth, the very thing which has reduced that global absolute poverty from 40% of all humans to under 10% in just these past three decades of that very neoliberal globalisation.

Now it’s finally time for my correction. When I wrote last year that Oxfam was “not a real charity,” I was merely implying that the group was a bad charity since it advocated policies that hurt poor people.

But thanks to new revelations about Oxfam’s involvement in horrific sex-crimes scandals, I’ve learned it doesn’t deserved to be called a charity of any kind. Check out these excerpts from a CNN report.

Oxfam’s deputy chief executive has resigned amid a growing sex crimes scandal involving the organization’s aid workers in Haiti and Chad. …Oxfam announced the resignation after a meeting with UK government officials Monday, at which it had fought to keep millions of pounds in public funding. …Oxfam received about £32 million (about $44 million) from the government last financial year, according to public records.

And the money from British taxpayers is just the tip of the iceberg.

Here’s a shocking bit of information from the conclusion of  David Henderson’s column.

Oxfam’s annual budget exceeds $1 billion, and it gets almost half of that from governments and the United Nations. So maybe it’s time for a new name. Oxgov.

Almost half of its budget from taxpayers?!? At best, that makes them a government contractor rather than a charity.

I’ll conclude with two points.

  • First, I think Oxfam should lose public funding. But not because some of its employees engaged in sexual predation. Yes, that’s bad, but I certainly don’t think sex abuse was ever part of the organization’s mission. Instead, it should lose funding because taxpayer money should not go to leftist organizations that advocate for bigger government (the same argument I use, by the way, when urging an end to OECD handouts).
  • Second, instead of telling people that “Oxfam is a letist joke rather than a real charity,” I’ll have to changes the second part of the sentence. Maybe “Oxfam is a leftist joke and it mooches from taxpayers.” I’m not sure that rolls off the tongue gracefully, so I’m open to other suggestions.

P.S. You probably won’t be surprised to learn that the International Monetary Fund partners with Oxfam. I guess the old saying is right that birds of feather flock together.

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The left’s fixation on reducing inequality is misguided. If they really care about the poor, they instead should focus on reducing poverty.

And that means pushing for more growth. We know from U.S. evidence and global evidence that better economic performance is the effective way to boost living standards for the less fortunate (I also recommend a look at the data from China).

Unfortunately, many folks on the left pursue policies that undermine prosperity and actually exacerbate inequality. I put together some examples back in 2015, and now it’s time to expand that list.

A report from the left-leaning Brookings Institution looks at how regulations protect – and enrich – the top 1 percent.

The real cause of elite inequality is the lack of open access and market competition in elite investment and labor markets. To bring the elite down to size, we need to make them compete. …people working in the securities industry (which includes investment banks and hedge funds) earn 26 percent more, regardless of skill. Those working in legal services get a 23 percent pay raise. These are among the two industries with the highest levels of “gratuitous pay”—pay in excess of skill… Using microdata from the Census Bureau, I find that the “gratuitous pay” premium in certain industries has increased dramatically since 1980. …The accredited investor…rules contribute to inequality by giving the richest investors privileged access to the best investment strategies. …If the law was changed to allow mutual funds to offer hedge fund portfolios, hundreds of billions of dollars would be transferred annually from super-rich hedge fund managers and investment bankers to ordinary investors, and even low-income workers with retirement plans. …politicians and intellectuals often champion market competition—but what they mean by that is competition among low-paid service workers, production workers, or computer programmers who face competition from trade and immigration, while elite professionals sit behind a protectionist wall. …For lawyers, doctors, and dentists— three of the most over-represented occupations in the top 1 percent—state-level lobbying from professional associations has blocked efforts to expand the supply of qualified workers who could do many of the “professional” job tasks for less pay.

Matt Ridley, a columnist fo the U.K.-based Times, writes about the pernicious impact of cronyism, licensing, and industrial policy.

The history of industrial strategies is littered with attempts to pick winners that ended up picking losers. Worse, it is government intervention, not laissez faire, that has done most to increase inequality and to entrench wealth and privilege. For example, the planning system restricts the supply of land for housebuilding, raising property prices to the enormous benefit of the haves (yes, that includes me) at the expense of the have-nots. …Why are salaries so high in financial services? Because there are huge barriers to entry erected by government, which hands incumbent firms enormous quasi-monopoly advantages and thereby shelters them from upstart competition. …Why are lawyers so rich? Because there is a government-licensed cartel restricting the supply of them. …Our current “industrial strategy” for energy — to subsidise offshore wind, solar, biomass and nuclear — is responsible for the fact that domestic electricity prices are the seventh highest… Domestic electricity bills are a higher proportion of household budgets for the poor than for the rich, so this policy is regressive; doubly so, because the wind and solar subsidies mostly go to the rich. 

Let’s consider health policy. Folks on the left favor the healthcare exclusion in the tax code because government supposedly should play a role in encouraging health insurance. What’s the impact of this policy? Well, let’s peruse a Robert Samuelson column on health policy and inequality, which is based on a study from the Mercatus Center.

…add health care to the causes of growing wage inequality in America. There’s a largely unknown paradox at work. Companies that try to provide roughly equal health insurance plans for their workers — as many do — end up making wage and salary inequality worse. …It’s simple arithmetic… Paying for expensive health insurance squeezes what’s left for wage and salary raises. Economic inequality increases, because health insurance typically represents a larger share of total compensation for lower-paid than higher-paid workers. Their wages are squeezed the most. …Even though the company raised its compensation package by 5 percent for all workers, the wage and salary gap between the best- and worst- paid workers widened. Pursuing one type of equality (health coverage) inadvertently worsened another type of inequality (wages and incomes). …From 1992 to 2010, about half the increase in wage and salary inequality is explained by rising health costs.

We’ll close with a new study by an economist at the University of Michigan for the National Bureau of Economic Research.

The three major reforms that I will analyze are: (1) the state income tax introduction, (2) the introduction of withholding, bundled with the introduction of third-party reporting, and (3) the intergovernmental agreement between the federal and the state governments for coordinating auditing practices. …the introduction of the income tax raised the Atkinson inequality index by 0.015, which is about 7 percent of the sample mean, statistically significant at the 1 percent level. …The income tax introduction raised the Gini coefficient by 0.014, which is about 3 percent, significant at the 5 percent level. …All of the three reforms raised the Theil index in a statistically significant way, at least at the 5 percent level. The introduction of the income tax and of the withholding raised it by about 0.06… In other words, the fact that the only effect that these reforms had in common was raising the revenues from income tax and making the government bigger and the private sector smaller, suggest that a bigger government, at least in the recent history, had the effect of higher inequality.

Here’s a chart from Professor Troiano’s research. Note how the rich got richer at the point (“0”) the income tax was implemented.

And here’s a look at what happened to various measures of inequality. Again, pay attention to the point (“0”) where the income tax was imposed.

Writing for PJ Media, Simon Constable discusses some implications of the NBER report.

Income taxes don’t reduce income inequality. Instead they do quite the opposite, according to December-dated analysis published by the National Bureau of Economic Research. The paper looked at three major 20th century U.S. tax reforms and found that they did nothing to decrease income inequality and everything to increase it. …Why did income inequality increase when that wasn’t the goal of the reforms? …bigger government ends up retarding the private sector and reducing the size of the wealth pie. Naturally, the poorer come out worst in such a situation, while the well-heeled can get top tier advice to dodge the tax bullet. Hence, the rich get richer and the poor stay skint. …Nobody who believes in liberty, or public choice theory, will be surprised to learn that higher taxes lead to more inequality,” says Robert E. Wright, professor of political economy at Augustana University in South Dakota. The problem is that the elites in any society, including the U.S., control the government and they quite naturally take care of themselves first, he says.

The bottom line is that our statist friends claim that they’re shooting at the rich, but the poor tend to suffer the most damage.

If you want more evidence, look at what happened to income for various groups during the pro-free market era of the 1980s and 1990s compared to what’s happened so far this century.

P.S. The most twisted look at inequality was produced by the IMF, which implied that radically lower living standards would be acceptable if everyone was more equally poor.

P.P.S. The most satirical look at inequality comes from David Azerrad.

P.P.P.S. The most insightful comment on inequality comes from Johan Norberg, who reminds us that we should be upset by unfairness, not inequality.

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