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That blog post looks highly suspect to me. The AEI is reposting the work of a blogger who has taken data from two different sources: a paper on the GINI of ind

by lawtguy 12y ago

That blog post looks highly suspect to me. The AEI is reposting the work of a blogger who has taken data from two different sources: a paper on the GINI of individuals, and GINI as calculated for households and families by the CBO. There are two big problems I see: The data on families and households includes capital gains, but the data on individuals doesn't (it includes only regular income). He hand-waves that away by saying, without proof, that capital gains are proportional to income, so that part doesn't matter. Given the differences in how we tax income vs. capital gains, I think excluding them from a GINI calculation is a big deal. Frankly I could simply interpret his chart as showing that rich are increasingly moving their gains away from income and towards capital gains to avoid taxes. Second, for his graph of GINI for individuals, he's picked the GINI only for people that have an income. So again we're not comparing the same kinds of numbers. In that same paper, the one that includes everyone (not just income earners) shows increasing inequality in the last 30 years. The idea is an interesting one: is the way we're structuring our families and households leading to increased income inequality? But unfortunately, the data he has is not good enough to show us one way or the other.

glenra 12y ago
You left off the other side of the equation. He says the CB income data understates income on the high end because it exclude the value of capital gains, but it ALSO understates income on the low end because it excludes the value of non-cash benefits. These effects work in opposite directions; it does thus seem plausible that the resulting Gini is in approximately the right ballpark. Furthermore, note that we don't actually care about the Gini AMOUNT here, we just care about the TREND. So unless the ratio of normal income to capital gains is changing quite a lot (and in the appropriate direction) it's not going to produce the result you want. > Frankly I could simply interpret his chart as showing that rich are increasingly moving their gains away from income and towards capital gains to avoid taxes. You are expressing a hunch. Got any data to back it up? > Second, for his graph of GINI for individuals, he's picked the GINI only for people that have an income. Isn't that the normal way of calculating it? > In that same paper, the one that includes everyone (not just income earners) shows increasing inequality in the last 30 years. Do you happen to have a link for that paper? (Or even just a chart showing that result?)

by lawtguy 12y ago

glenra 12y ago

You left off the other side of the equation. He says the CB income data understates income on the high end because it exclude the value of capital gains, but it ALSO understates income on the low end because it excludes the value of non-cash benefits. These effects work in opposite directions; it does thus seem plausible that the resulting Gini is in approximately the right ballpark. Furthermore, note that we don't actually care about the Gini AMOUNT here, we just care about the TREND. So unless the ratio of normal income to capital gains is changing quite a lot (and in the appropriate direction) it's not going to produce the result you want. > Frankly I could simply interpret his chart as showing that rich are increasingly moving their gains away from income and towards capital gains to avoid taxes. You are expressing a hunch. Got any data to back it up? > Second, for his graph of GINI for individuals, he's picked the GINI only for people that have an income. Isn't that the normal way of calculating it? > In that same paper, the one that includes everyone (not just income earners) shows increasing inequality in the last 30 years. Do you happen to have a link for that paper? (Or even just a chart showing that result?)