Why is income distribution first described as unequal? Is
there a desire for some to have complete equality?
Income inequality could be a sign of real pathology in authoritarian
societies where entrenched groups use government-granted privileges to
protect themselves from competition.
By and large, that's not the case
in the U.S., where most see the market actually increasing the
competitive advantages of the educated, skilled, hardworking and
talented.
Are some advocating "from each according to his
ability to each according to his need?"
Why is it in America's interest to persuade the rich to report less
income?
If it were learned that the car driven by the average American is 10
times more likely to burst into flames than the car driven by the
richest 1%, what should the policy response be? Should it be to mandate
that cars driven by the rich burst into flames more often?
Income inequality is a strange obsession, at least to the extent the
obsessives focus their policy responses on trying to adjust the
condition of the top 1% rather than improving the opportunities of
everyone else.
Income inequality could be a sign of real pathology in authoritarian
societies where entrenched groups use government-granted privileges to
protect themselves from competition. By and large, that's not the case
in the U.S., where most see the market actually increasing the
competitive advantages of the educated, skilled, hardworking and
talented.
Though it's always good to be on guard against political favoritism,
the U.S. exhibits mostly a giddy process of wealth creation by people
from middle-class backgrounds who start companies or become Wall Street
traders or CEOs or celebrity performers in entertainment and sports.
Generalizing about the distribution of incomes is an academic
specialty seemingly incapable of freeing itself from tendentiousness.
Take a popular study by Thomas Piketty and Emmanuel Saez, two
French-born researchers, claiming U.S. income inequality is higher than
anytime since the 1920s.
Their result comes from choosing to look at income that leaves out
transfers. Unlike the 1920s, Americans today have the opportunity partly
to live off Social Security and Medicare. They can decide to do without
reportable income. Also left out of the calculation is the large share
of compensation accounted for by untaxed health insurance.
Too, the tax code has changed. Income is realized under today's code
that wouldn't have been realized under previous tax codes. Owners of
capital buy and sell much more easily, and the tax system creates much
less incentive for them to sit on their holdings and report less income.
For the record, so sensitive are the inequality generalizations to
how you define income, and whether household size is taken into account,
that the claimed shift toward greater inequality can be made easily to
disappear, especially when consumption rather than income is measured.
And, as always, the solution to income inequality amounts to
persuading the rich to report less income. As CNBC's John Carney has
shown, Facebook founder Mark Zuckerberg could avoid ever reporting any
income simply by borrowing against his assets to meet his living
expenses. "Perhaps most bizarrely, Zuckerberg might be eligible for an
Earned Income Tax Credit if he keeps his personal income under $13,000,"
writes Mr. Carney.
This would make America a better place how? Yet, at bottom, such
cosmetic fixes are the main outcome from using higher tax rates to
"correct" income inequality.
Obsessing about income disparities might be productive if it led to
policies that improved opportunity for all. It's hard to exaggerate the
movement on school reform over the past 20 years, to the point that the
New Yorker, that bastion of Upper West Side propriety, contributed one
of the most damning polemics against excessive teachers-union power.
Ditto the return of tax reform to the agenda. Tax reform promises to
improve the opportunities of all while sponsoring less tax evasion, less
distortion of investment priorities and less politically corrupting
pursuit of loopholes, all of which are the certain and inevitable
corollary of high tax rates enacted to salve inequality neuralgia.
One can only wonder how much faster progress on tax reform or school
choice would have been if the political capital devoted to income
inequality had been devoted to fighting entrenched institutional
resistance to useful reforms.
One factor is a certain human soul-sickness that's impossible to put
a constructive gloss on. Why is the New York Times disproportionately
given over to cataloging the consumption of the rich in a tone even more
cringing for its pretending to be snarky? Why do some of our dreariest
journalists spend all their time writing about Goldman Sachs, except to
associate themselves with the status object they attack in order to
raise their own status?
That goes doubly for the inequality obsessives. How society
stimulates the creation and distribution of income is an important
topic—so important that one could wish it were less infected with the
pathology Freud diagnosed as "group spirit" and which he said was
ultimately founded on envy.
As Freud put it, "Everyone must be the same and have the same.
Social justice means we deny ourselves many things so that others may
have to do without them as well."