US Income Inequality

Discussion in 'Economy' started by Kuros, Sep 19, 2011.

  1. Kuros
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    The GINI coefficient measures income inequality in a given country or locality. The lower the GINI coefficient the more equal income across the country or locality.

    [​IMG]

    US compared to other countries. Red countries have greater income inequality, the blue countries less.

    [​IMG]

    Source
     
  2. Wiseacre
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    Wiseacre Retired USAF Chief Supporting Member

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    The GINI coefficient is based on data that is pretax and doesn't count gov't transfer payments such as SS and medicare and the like. So, rich guys income is not adjusted for the taxes they pay and the data for the low income people doesn't reflect the money and benefits they get from the gov't.

    Which is not to say there isn't any income inequality, of course there is. But it is somewhat overstated. They changed the way they collected data for the GINI in 1993, so the results are somewhat skewed for data before then compared to after. And the data collection in one country may not be the same as in another, so comparing 2 countries may not be an exact indication o actual inequality. And in many cases, the total amount of income is not that great, so the inequality is less if only because there's less wealth to accumulate in that country.

    I'm not going to say that income inequality isn't an issue, but I do think it's overblown by politicians who want to build support for raising taxes and redistributing wealth. They go for short term policies that get them re-elected rather than long term solutions that address the roots of the issue.
     
  3. sparky
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    sparky VIP Member

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    I've been told our governments CIA pays a lot of attention to the GINI coefficent

    if so, i suspect they've good reason....

    ~S~
     
  4. California Girl
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    So we're all supposed to earn the same now? 'Income inequality' - a left wing tool to divide people for political purposes.

    Fuck 'em.
     
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  5. sparky
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    sparky VIP Member

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    i think equal opportunity is the term you're looking for UK Girl

    ~S~

     
  6. editec
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    editec Mr. Forgot-it-All

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    THE above is actually a very valid complaint. The GINA coefficient does, however, Include Social security payments.

    I don't think it's really overblown.

    Our society depends on the gini coefficient to be within a range where the supply side (basically the investment classes) has enough money to invest AND the demand side (basically the working classes) has enough money to BUY what the SUPPLY side makes.

    Right now, thanks in large part to unwise tax policies, the USA's GINA coefficient appears to be out of balance.
     
    Last edited: Sep 20, 2011
  7. Dragon
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    Dragon Senior Member

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    Correct. I'll add here that in any industrialized economy, the first of those (availability of capital) has never been a problem. No mature industrialized economy has ever experienced an economy-wide capital shortage arising from excessive equality.

    (I'm not actually sure that's possible. In the extreme case of everyone having an exactly equal income, the aggregate savings by all households might provide enough capital for all investment needs. But whether that's true or not, even if there is a level of equality that is "too equal," no capitalist economy has ever come within shooting range of it in actual history.)

    Capitalist economies tend to err on the other side, and all of them do, the variable being by how much. When the U.S. is more unequal in income than any other advanced economy, which is obviously the case, we're doing something seriously wrong.
     
  8. Wiseacre
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    Wiseacre Retired USAF Chief Supporting Member

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    You sure the Gini coefficient includes SS payments? From what I read, it excludes benefits that the lower incomes get, and does not discount taxes, so the rich guy's incomes look bigger and the low income guys look smaller than their real incomes. Can naybody show me a link where it says SS is excluded?

    You do realize they changed the way the Gini is computed back in 1993, so it looks worse than it did up until then. Not so say we don't have income inequality, but it's not the big deal it's made out to be. Especially if you consider the huge advances in investments since 1980, when the market was at 800 and now it's 11,500 or so. That's a huge increase in wealth, earned by those who risked their money on startups and new ideas like Windows and PCs. And who got the lion's share? Te people who had the most money to invest, the rich people. No big mystery about it, that new wealth did not come at the expense of anybody else either.

    Unwise tax policies, what would that be? You know why Buffet pays a lower tax rate than his secretary? It's cuz most of his income is capital gains and dividends, which is taxed at 15%. I see that Obama wants to raise that up to about 23% in total, does anybody really think you can do that without economic consequences? Especially when there are so many other countries with more advantageous business climates relative to taxes and regulations and everything else. If that tax change goes into effect, you can plan on one hell of a bad depression.
     
  9. Kuros
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    I found some support for this in wiki:

    Also important: GINI coefficient measures income only, not wealth.

    Simpson-Bowles would've unified the rate for capital and ordinary income, raising the marginal rate on the former and lowering it on the latter. Obama should've unified capital and ordinary income.

    The best argument for a favorable LTCG rate: the income is spread out over time, so upon realization of income, it shouldn't be taxed at the full rate. I understand this. But at the same time, we should tax passive income at a higher rate, because sweat labor should be favored over capital investment. By my calculus, this means capital gains rates should be even with ordinary income. Note that unifying the characterization of income also simplifies the tax code.
     
  10. Wiseacre
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    Wiseacre Retired USAF Chief Supporting Member

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    If you equate capital gains income with ordinary personal income for tax purposes, you are in effect disincentivizing investments here in the US. I can't say this often enough, we live in a global economy, and if you do not incentivize investments here then all that money WILL flow elsewhere. Make no mistake, there IS an economic consequence if you do that.
     

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