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  • Income Inequality: Left Distorts the Facts, Again

    Earlier this month, University of California economist Emmanuel Saez released his latest installment on income inequality. Predictably, the media is trumpeting its message without considering crucial facts.

    In this newest update, Saez argues that in 2010, “the top 1% [of income earners] captured 93% of the income gains in the first year of recovery.”

    Assailing these figures, economist Alan Reynolds points out that the study defines income in this way:

    Our income definition is…before individual income taxes and employee payroll taxes, and income excludes all government social transfers such as Social Security retirement and disability benefits, government health care insurance (Medicare and Medicaid), unemployment insurance, welfare assistance programs, the earned income tax credit, etc. The importance of taxes and transfers has grown over time.

    In other words, since taxes are heaviest on the rich and transfer payments most favorable to the poor, excluding these paints a misleading picture of income disparity. But that’s not all. It also leaves out other forms of employee compensation, such as health benefits, which have been a growing form of low- and middle-income compensation.

    That’s why a better measure is to look at total wealth, which sums an individual’s total financial worth—assets minus liabilities. In fact, Saez conducted a study on wealth distribution in which he and his coauthor state that wealth distribution is more equal than it was at the beginning of the 20th century:

    Top wealth shares were very high at the beginning of the period but have been hit sharply by the Great Depression, the New Deal, and World War II shocks. Those shocks have had permanent effects. Following a decline in the 1970s, top wealth shares recovered in the early 1980s, but they are still much lower in 2000 than in the early decades of the century.

    It is curious that Saez’s studies on income inequality create a racket in the media while his study on wealth inequality receives scant attention. It would be nice if the left dropped its obsession over income inequality and instead joined the right by focusing on policies that best enable all Americans to reach their maximum earning potential.

    Posted in Featured [slideshow_deploy]

    16 Responses to Income Inequality: Left Distorts the Facts, Again

    1. The Federalist says:

      America was built on this philosophy– you do for me and I will do for you " The Golden Rule" –A fair days work for a fair days pay and the only thing an American is entitled to is Life, Liberty and The Pursuit of Happiness and nothing more!

    2. Bobbie says:

      Since the last part of the 20th century, profits have become everyone's business? Not to learn for ones own interests of gaining ones own wealth but interests to destroy the opportunities that people have built for themselves within their own guidance of their own governing at their own expense, by insisting unfair judgment on people Saez doesn't know! (1%ers whom many reside in the democratic house, unmentioned!) People have worked very hard by their own accord to gain their wealth and Mr. Saez thinks he and those he insights, should have it?

      just don't get how Mr. Saez isn't happy with his livelihood he provides from his earned wages he agreed to? thinking he deserves a greater one without merit by tearing down the 1% when he can work to add to the 1% that earned it through the hard work of their own without burdening the government and tax payers? Mr. Saez sounds like he gets more than he's sharing! Shame on America for allowing this narrow mindset influence the public! Learn what freedom is Mr. Saez! It doesn't include the need for government attention to guide your way through your life!

      • Pragmatic says:

        Actually, he is just doing research related to economics. Also, the author uses Mr. Saez's research to refute the claims by the left, that is that the wealth gap isn't widening so I wouldn't throw Saez under the bus and label him a "freedom-hater". Saez isn't judging anyone – people are misinterpreting his work to judge people.

    3. Bobbie says:

      the real problem is government taxing inequality with the same employment, same pay, same benefits offered but taxed or tax exempt, through race priority. Very Unamerican governing! Lets say Saez makes 39000.00 a year and doesn't have to pay a penny to government through exemption or deduction. Where as another man of the same income but pays by government force $2000 in state taxes, $4000 in federal taxes, $3000 in government frivolity here and everywhere and saez knows it, but isn't fighting for these innocent soles because these innocent soles are paying the taxes government favors saez not to have to. Unfair, bias, discriminative taxing! Extremely unAmerican where rule of law is divided by misinterpretations amongst race priority! This is so wrong under the intelligence and common will of the founders who were of native and African decent also! 21st century and man needs protection under government class of protection? what a poor and sickly display of the weakness of American mans' many giving into government ruling instead of fighting together to rule ones own! Those that favor unconstitutional government are all government favored!

      • Pragmatic says:

        Way to throw in the race card. See my comment above, but Saez isn't advocating for anything. He is simply providing research. Also, there is no race exemption in your tax forms.

        Also, it's 'souls'. Unless of course you are referring to the poor, overtaxed shoe bottoms.

        • Bobbie says:

          Saez is bias if he isn't regarding all factors to show the whole picture advocating for attention on issues without all considerations that manipulates the minds thinking through his poorly written or half researched report.

          There are deductions and exemptions in many forms.
          Thanks for the correction on "souls."

    4. Deloris Linam says:

      Another factor seldom discussed in relation to income inequality is the issue of personal choice consequences. My husband is an eligibility counselor for the food stamp and Medicaid programs administered by the state of Tennessee. The application process not only determines an applicant's income but also often reveals some of the reasons for a low income. My husband encounters a large percentage of applicants who are suffering income disparity because of the consequences of their poor life style choices. For example, many of them are single mothers who choose to continue having children with multiple fathers who will not assume any responsibility for the care of the children they have fathered. Very often, irresponsible live style choices are being enabled and perpetuated through wealth redistribution social service programs.

    5. Stella says:

      . It would be nice if the left dropped its obsession over income inequality and instead joined the right by focusing on policies that best enable all Americans to reach their maximum earning potential.
      yup…expect that to happen just before my corornation as Queen of England.

    6. Kevin says:

      But the left does not want all Americans to meet their maximum earnings potential. They would lose their faithful heard of sheep, following them around, 'bahhhhh'ing' out their retoric. How can they maintain power if their flock is not being spoon fed by their handouts.

    7. Bill Jensen says:

      If your position is that wealth disparity is more meaningful than income disparity (although in reality, both are equally meaningful in terms of what they measure, and the conclusions to be drawn), then the author had better take a look at the United States' Gini score for wealth disparity – and compare it with that of other developed nations. And for that matter, even the great majority of underdeveloped or "emerging" nations – show less wealth disparity than the US on the basis of the Gini values, as used by the World Bank, the UN, and the CIA.

      I realize you have a mission to promote the right wing perspective, while I do not. My only "mission" would be to suggest to the far right that facts are not their enemy, and are even helpful every once in a while.

    8. Lloyd Scallan says:

      The left's ideology is that government can make everyone equal. Not through encouraging people to achive, but to discourage those that produce by taking away the fruits of their efforts. Wealth equality is impossible unless the desire to achive is distroyed.

    9. Michael Dawson says:

      Hilarious post, David. So, the income-gain share of the top 1 percent wasn't 93? What was it? 50%? Wow, how egalitarian!

      Meanwhile, it seems especially funny that you feel pressed to apologize for, rather than defend, wealth and income inequality. I thought you people were capitalists? Isn't more money for the already rich supposed to be the best possible answer to all problems? So, why the defensiveness?

      P.S. Are you admitting that excessive inequality caused the Great Depression?

    10. kverdeck says:

      The point of the income inequality figure is to illustrate that even though the economy is in recovery in terms of GDP growth, the lion's share of that recovery in terms of income has gone to the wealthiest 1%–and in fact a disproportionate amount has gone to the top one-tenth of one percent. Leaving out so-called entitlements makes sense from that perspective since those remain relatively constant from one year to the next. The portrayal here of the wealth distribution is also disingenuous. Wealth inequality now is "more equal than it was at the beginning of the 20th century"? So what? The early 20th century was the days of the robber barons, no civil rights, no women's suffrage, no labor unions–in short, no defense at all for the working class from the whims of the captains of industry. Further, the inequality in income and wealth at the beginning of the 20th century in no small part precipitated the Great Depression–and it's worth noting that the repeal of the financial regulations instituted after the Depression in no small part precipitated the Great Recession we're currently trying to wander out of.

      I can't speak for every liberal in America, I can only speak for me. I am not against the accumulation of wealth, nor do I suggest that anyone who works harder and smarter shouldn't be entitled to reap the rewards of their work. Everything else being equal, I believe the wealthy should stay wealthy, and everyone in this great nation should have the opportunity to get a good education, to work hard and make their own fortune. What I AM against is profit above all other concerns. What I AM against is the privatization of profit and socialization of risk. What I AM against is ripping the social safety net to shreds so that someone already earning several hundred times more than the average worker can get a bigger tax break. What I AM against is those who make their millions by destroying value rather than creating it. What I AM against is the undue influence of money on our politics, with wealthy corporations and individuals buying our politicians with campaign contributions, influencing our public discourse by sponsoring propaganda "think tanks" like Heritage, and even writing our laws themselves under the auspices of groups like ALEC.

      Enough with the left/right nonsense, people–both sides are equally corrupt so long as them that has the money make the rules. As long as they can get us to see each other–fellow Americans–as enemies, to bicker over nonsense and trivia, the real enemy goes on unchallenged.

    11. Tim says:

      Dave,

      We went over this a year ago. Even if you include taxes and transfer payments as Reynolds suggests, the income inequality picture is still there (if not maybe even worse since tax rates on the rich have fallen drastically, much faster than the growth in transfer payments). I even provided you numbers on this.

      Also, I have no problem with using wealth as an indicator of economic inequality, but this actually hurts rather than helps your position since wealth is more concentrated in the hands of those at the top than income. Even the paper you cite from Saez states that, "Wealth tends to be much more concentrated than income because of life cycle savings and because it can be transmitted from generation to generation."

      Finally, pointing out that the wealth distribution is more equal in 2000 than it was in 1900 is sort of a silly comparison to make considering that Saez argues that the reason this is so is because of "the development of progressive income and estate taxation which has dramatically impaired the ability of large wealth holders to maintain their fortunes." Last I checked, Heritage was in favor of making the tax code less progressive and getting rid of the estate tax. Gilded Age here we come.

    12. PeskyLiberalFacts says:

      Its curious as to why the author fails to cite the numbers from Saez's wealth share report : The top 1% used to have 40% of the wealth, now it fluctuates between 20-25%. That 40% has extended to the top 10%, not the top 1%. That is still a pretty significant disparity and it is an interesting omission, especially after calling the income report "misleading."

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