The Myth of American Income Inequality
Introduction
This report examines the issue of income inequality in the United States and challenges the prevailing narrative surrounding this topic. It explores the findings of a research conducted by Phil Gramm, a former professor of economics and a prominent figure in Congress, along with Robert Ekelund and John Early, experts in U.S. economic statistics. The report aims to shed light on the true extent of income inequality in America by considering government transfer payments and taxes.
The Impact of Government Transfer Payments
The research reveals that the official measurement of income inequality fails to account for the full extent of government transfer payments. The Census Bureau only includes a fraction of these payments, omitting programs such as refundable tax credits, food stamps, Medicare, and Medicaid. When all transfer payments are considered as income for recipients, the measurement of income inequality is significantly altered. The ratio of income for the top 20 percent of households to the bottom 20 percent is found to be 4.0 to 1, rather than the previously reported ratio of 16.7 to 1.
The Role of Taxes
Furthermore, the research highlights the omission of taxes paid when measuring income inequality. Americans pay a substantial amount in federal, state, and local taxes, with the top 40 percent of household earners contributing 82% of the total tax revenue. However, these taxes are not deducted from household income in the official measurement. When taxes paid are considered as income lost to taxpayers, the measurement of income inequality is further impacted.
The Need for Accurate Reporting
The report emphasizes the importance of accurately reporting income inequality. It argues that the current narrative surrounding income inequality, as perpetuated by individuals like Sen. Bernie Sanders, fails to consider the full picture. By accounting for all transfer payments and taxes, a more accurate understanding of income inequality can be achieved. This is crucial for informed policy discussions and decision-making.
Policy Recommendations
The report suggests that addressing income inequality should focus on promoting self-sufficiency rather than redistributing wealth. It advocates for reshaping policies and programs to empower individuals and encourage economic independence. The authors argue that government subsidies alone are insufficient in lifting people out of poverty and can often perpetuate dependency.
Conclusion
In conclusion, this report challenges the prevailing narrative on income inequality in America. By considering government transfer payments and taxes, the true extent of income inequality is revealed to be significantly different from the official measurements. Accurate reporting is essential for informed policy discussions and effective solutions. The report emphasizes the need to promote self-sufficiency and reshape policies to address income inequality in a sustainable manner.
SDGs, Targets, and Indicators
1. Which SDGs are addressed or connected to the issues highlighted in the article?
- SDG 10: Reduced Inequalities
The article discusses the issue of income inequality and its impact on society, which aligns with SDG 10, which aims to reduce inequalities within and among countries.
2. What specific targets under those SDGs can be identified based on the article’s content?
- Target 10.1: By 2030, progressively achieve and sustain income growth of the bottom 40 percent of the population at a rate higher than the national average.
- Target 10.4: Adopt policies, especially fiscal, wage, and social protection policies, and progressively achieve greater equality.
The article discusses the measurement of income inequality and the need for accurate reporting. These targets focus on achieving income growth for the bottom 40 percent of the population and adopting policies to promote greater equality.
3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?
- Indicator 10.1.1: Growth rates of household expenditure or income per capita among the bottom 40 percent of the population and the total population.
- Indicator 10.4.1: Labour share of GDP, comprising wages and social protection transfers.
The article mentions the measurement of income inequality and government transfer payments. These indicators can be used to measure progress towards the targets by tracking the growth rates of household expenditure or income for the bottom 40 percent of the population and analyzing the labor share of GDP.
SDGs, Targets, and Indicators
| SDGs | Targets | Indicators |
|---|---|---|
| SDG 10: Reduced Inequalities | Target 10.1: By 2030, progressively achieve and sustain income growth of the bottom 40 percent of the population at a rate higher than the national average. | Indicator 10.1.1: Growth rates of household expenditure or income per capita among the bottom 40 percent of the population and the total population. |
| SDG 10: Reduced Inequalities | Target 10.4: Adopt policies, especially fiscal, wage, and social protection policies, and progressively achieve greater equality. | Indicator 10.4.1: Labour share of GDP, comprising wages and social protection transfers. |
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Source: vtdigger.org
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