Tuesday, April 17, 2012

Comment About NY Times Article On Inequality Economists Saez And Piketty

My posted comment to The New York Times, "For Two Economists, the Buffett Rule Is Just a Start" by Annie Lowrey: [The comment is shorter than I would like because The NY Times limits the number of characters one can post in a comment on their website.]
Saez and Piketty's research does not tell a complete story about income inequality in the US. Saez and Piketty use market based income for their research. It is IRS data on income before taxes, which leaves out the value of non-taxable fringe benefits such as health insurance, pensions, 401k matching contributions, etc. The IRS data is also based on a tax unit and not a family or household. Saez and Piketty also exclude the value of food stamps, medicaid, disability, medicare and other government transfers. And of course, all off the books and unreported income are excluded. Additionally, they use one measure of inflation of the several available and assume inflation across upper and lower income groups is identical. Their findings are also influenced by the influx of uneducated, older immigrants and by shrinking household size. Additionally, the benefit to lower income groups of declining tax rates, increased standard deduction and personal exemptions over the last several decades is ignored by Saez and Piketty.

When other economic researchers include fringe benefits, government transfers, adjust for changing household size, the benefit of lower taxes on lower income groups, and use other, valid inflation measures, the other researchers find opposite conclusions and find income inequality is not growing in the US over the same time.

The poor in the US do much better over time. The rich do better also, but not at the expense of the poor. Inequality has not increased.
Also, see my March 20, 2012, post, "Minimum Tax On The Rich, A Buffett Rule, Has Very little Impact On The Budget Deficit."

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