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Firstly inequality growth is mainly an American phenomenon, it's not really a factor in the developed world generally. The problem is the Pickety/Zucman analys
by simonh 5y ago
Firstly inequality growth is mainly an American phenomenon, it's not really a factor in the developed world generally.
The problem is the Pickety/Zucman analysis didn't fully take into account taxes and transfers, so it overestimated 1%-er incomes and underestimated low wage earner benefits. Within the US, CHIP and Medicaid expansion have made a huge difference. After all it's hard to argue Medicaid expansion has no effect on inequality.
Another major area of anomaly is that the P/Z analysis assumed income from pass-through businesses was capital gains. It turns out, this includes a lot of doctors, lawyers, etc whose income comes form these kinds of business structures. That made it look like their income was capital gains from investments in businesses, where in fact it's really labour income. This is not a small discrepancy, there are a lot of these sorts of people and they earn a lot. Correct for these sorts of things and the inequality largely evaporates.
Anyway, it's a messy problem with a million details and there are still distortions in the economy that disproportionately benefit the wealthy and always have done.
I disagree tax evasion is such a big factor, it's a problem but a relatively constant one. I think the main problems are mostly structural distortions in the tax system that encourage passive incomes. Income from rents and inheritance are significant issues. The drastic rise in property prices across the developed world is a huge problem that disproportionately hurts low income groups.
- yunohn 5y ago> inequality growth is mainly an American phenomenon Where do you get this from? It’s quite dismissive, given the large amount of study about wealth inequality increasing globally. This is definitely an issue throughout Europe too and even Asia, in my experience.
- simonh 5y agoThe P/Z figures estimate pre-tax income for the top 1% in the US has more than doubled. Pre-tax though, that's always been a gaping hole in their analysis. As I pointed out what really matters is post-tax and transfers. That's one reason the Obama era health care reforms are so significant, it doesn't show up as a headline economic or wealth figure and now it's just become the new normal, but taking health care provision off the table as a critical risk for tens of millions of low income Americans was a huge game changer. More of that please. I don't have figures for the top 1% in Europe, but for the top 10% it's gone up by a few percent (except Eastern Europe which is much higher). The World Inequality Lab at the Paris School or Economics published a report on this in 2020. https://wid.world/document/bcg2019-full-paper/ https://wid.world/document/bcg2019-full-paper/ Inequality in Asia, particularly China is definitely up but then it's just gone through a massive program of industrialisation. There's little point comparing inequality in China now to what it was in the 1970s. What would you even be measuring? Similarly for Eastern Europe, their whole economic system has changed so you're not comparing like for like.