Inequity of the Progressive Income Tax

http://www.futureofcapitalism.com/2011/04/inequity-of-the-progressive-income-tax

The Hoover Institution has published an essay by Kip Hagopian arguing against a progressive income tax, that is, a tax that imposes higher rates on those with higher incomes. It's a long essay. Readers who don't have the time for the whole thing can just enjoy the opening anecdote about "triplet brothers named Tom, Dick, and Harry Class."

In addition to the tax stuff, the essay is valuable for its treatment of income inequality, the amelioration of which is part of the case for progressive taxation:

It has been widely reported that income inequality in the U.S. has been rising for "decades," and by implication, that the rise is ongoing. These reports are arguably misleading. From 1967 to 2008 the Gini for money income rose from .397 to .468 (17.9 percent), about four-fifths of which occurred from 1967 to 1993. Roughly three-tenths of this increase occurred between 1992 and 1993 due to a change in the way data were collected. This change in methodology biased the Gini calculation upward. Accordingly, figures from the period before1993 are not directly comparable with the period from 1993 to the present. During the 16 years between 1993 and 2009, the Gini increased from .454 to .468 (3.1 percent), and from 2001 to 2009 there was virtually no change in income inequality as measured by the Gini coefficient.

A more comprehensive measure of income yields a very different picture. The Census Bureau's so-called "15th measure of income" adds to money income, transfer payments, insurance supplements, capital gains, Medicare, Medicaid, net imputed return on equity in owned homes, and subtracts taxes. This measure indicates that inequality declined 1.8 percent during the last 16 years (1993 to 2009) from a Gini of .395 to a Gini of .388.

by Editor  |  Apr 4, 2011 at 1:20 pm Related Topics:  Income Inequality, Non-Profits, Taxes receive the latest by email: subscribe to the free futureofcapitalism.com mailing list