I read an interesting piece yesterday about the supposedly increasing income gap. Yes, I said “supposedly.” Now, before you dismiss this post, I urge you to read this short piece. The author makes an interesting case as to why the gap is not increasing like some politicians would have us believe. From the article:
Data from the Census Bureau shows that the rise in the number of two-income couples has powerfully influenced the relative wealth of the upper-end. In 1990, median income for a family with one earner was roughly $40,000; in 2010 that figure had increased by only 5 percent. However, families with two earners saw their fortunes improve, with income rising from $67,000 to $81,000, up more than 20 percent. The bottom group, by contrast, has seen the number per household shrink, in part due to a rise in single parenting and also the increased longevity of seniors living alone. Single females constituted 46 percent of the lowest income quintile compared to 4 percent of the highest.
One other important event happened in 1986 with the change in the tax code (bold mine):
…the Tax Reform Act of 1986, which lowered the top income tax rate to 28 percent and the corporate rate to 35 percent, creating an incentive for business owners to file as individuals rather than companies. That flow of income bloated personal income tax filings, pushing up the earnings of the highest categories.
That last paragraph is interesting to think about in light of the fact that Obama wants to lower the corporate income tax rate. Perhaps he knows that by lowering the coporate income tax rate and raising the individual rate, people will have the incentive to file as corporations rather than individuals, thereby “reducing” the wealth gap (or at least giving that impression). Of course, this hinges on the what exactly those tax rates are.
As always, I want this post to foster a discussion. So, read this piece and tell me what you think.