EPI.org:"Income inequality in the United States—already well above that experienced in other advanced economies—has surpassed Gilded Age levels, and the Great Recession and ongoing jobs crisis will exacerbate this trend until full employment is restored (Bivens, Fieldhouse, and Shierholz 2013). While market forces are the primary driver of rising inequality, recent economic research suggests that tax policy has contributed as well, both by exacerbating after-tax income inequality since the late 1970s and by spurring a shift of pretax income toward high-income households. To be sure, government policy has surely contributed to inequality growth through other, more hard to quantify channels: policies related to labor protections, collective bargaining, minimum wage erosion, and trade—or lack thereof, what political scientists Jacob Hacker and Paul Pierson refer to as “political drift” (Hacker and Pierson 2011)...Reductions in marginal tax rates, both for capital gains and ordinary income, have statistically significant relationships with rising income shares of the top 0.1 percent and 0.01 percent of households, as well as the decline in labor income as a share of total income (Hungerford 2012)."...The rising share of investment income—heavily concentrated at the top of the income distribution—at the expense of labor income explains much of the rise in income inequality in recent decades. Roughly one-third of the rise in the total share of income accruing to the top 1 percent of households, which more than doubled from 9.6 percent in 1979 to 20 percent in 2007, is attributable to the shift from labor income to capital income (Mishel et al. 2012). Increasingly preferential tax treatment of capital income over this period almost certainly played a role in this shift."
Posted on: Sat, 15 Jun 2013 22:13:23 +0000
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