Is the “Increasing Income Gap” a Myth?

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.

Ten for Tuesday, March 13, 2012

Greetings! Here are ten articles I think are worth sharing:

1. This first post is off topic from most of ths stuff we talk about here at AFM, but it’s still intersecting. I can’t say that I agree with the closing paragraphs of the article but it is something we have to discuss. Why John Stewart Mill Matters
2. MoneySavingMom’s grocery savings tips.
3. Ramit has some great advice (with scripts) on how to stop paying credit card fees.
4. Three pillars of charitable giving.
5. Cheap ways to stay fit and healthy.
6. Ask Liz Weston: Don’t buy life insurance if you don’t need life insurance. (Makes sense to me.)
7. RetireBy40 is hosting the 146th edition of the Best of the Money Carnival.
8. Enter Faith and Finance’s Stewardship Bible Giveaway.
9. how to make the most of a liberal arts degree.
10. Finally, my friend, Paul, sold his blog in order to move on and do something different. I wish him the best.

Do Low Tax Rates Lead to Destruction of Jobs?

This comment was left on the WSJ article I referenced in the last post:

Small companies create jobs, and large companies destroy jobs. Large companies are, by and large blue chip companies. Blue chip companies are the ones that the wealthy invest in with all of the money they’ve saved in taxes over the four decades.

The obvious implication is that low taxes stimulate destruction of jobs. So much for the wealthy being job creators.

Wow! This is so crazy I’m at a loss as to how to respond.

So if low taxes stimulate job destruction, that must mean high taxes stimulate job growth, right?

How does that work?

Not only that, this guy also forgot about all the money that ordinary Americans have poured into blue chip companies over the years via 401(K) plans. And, how does investing in a company lead to job destruction?

One thing is clear: Recessions are job destroyers.

WSJ: Americans are Getting Their Finances in Shape

From Today’s WSJ:

U.S. households’ net worth—the value of homes, stocks and other investments minus debts and other liabilities—rose $1.2 trillion to $58.5 trillion from October through December, the first improvement in two quarters. The increase came as the Dow Jones Industrial Average rallied nearly 12%. A measure of households’ disposable personal income jumped, helping Americans keep a lid on debt, which fell to 113% of disposable income from 118% at the end of 2010.

Ten Books I’m Thinking About Paying My Kids to Read

Below are ten books that I think my kids would benefit from reading before they venture off to college. In fact, I think they are worth reading enough that I would be willing to pay my kids $50 – $100 per book to read them (feel free to discuss below whether or not you think parents should pay their kids to read).

So, what books am I talking about? Well, off the top of my head, I assembled the following list in no particular order along with the amount I would be willing to pay my kids to read them in parenthesis.

Success God’s Way by Charles Stanley ($50). This has become one of my favorite books on success because it’s written for Christians.


Think and Grow Rich by Napoleon Hill ($50). A classic. The language and some of the ideas are dated but the message is still very good.


Basic Economics (4th Edition) by Thomas Sowell ($200). Thomas Sowell is one of my favorites. This is a pretty large book. I would pay $200 for this one.


Economics in One Lesson by Henry Hazlitt ($50). This one’s an oldie but a goodie. Written in a very easy-to-understand way. One of my favorites.


Common Sense Economics (Revised Edition) by James D. Gwartney, Richard L. Stroup, Dwight R. Lee, and Tawni Hunt Ferrarini ($50). I thought about not including this one in the group because it might be overkill. However, it’s a great book and could serve as compliment to Hazlitt’s book. Therefore, I want my kids to read both.


How to Win Friends and Influence People by Dale Carnegie ($50). A classic if there ever was one. This is an excellent book on how to relate to other people. This book was first published in 1936 and the information it contains has never gone out of style.


Goals! by Brian Tracy ($50). This is the best book I have ever read on goal setting—one of the best things your kids can ever do for themselves.


How an Economy Grows and Why it Crashes by Peter and Andrew Schiff ($50). This is a fictional story about an economy that starts out with three fishermen alone on an island. Start it and you won’t be able to put it down. Excellent illustration of an economy.


Wooden on Leadership by John Wooden and Steve Jamison ($50). Just an all-around good book by an all-around good man.


Dig Your Well Before You’re Thirsty by Harvey Mackay ($50). A book on networking. Remember: it’s not what you know as much as it is who you know. Sure you, have to have both. You know what I mean.

Ten for Tuesday, March 6, 2012

NOTE: While putting this post together, I noticed that several blogs are no longer dating their posts. This is irritating to me. I also noticed that some bloggers are using annoying pop-ups to try to get people to sign up for newsletters. What the heck is going on?!?!

I didn’t write about it Friday, but March 2nd marked the 4 year anniversary of my Dad’s death. Four years. Wow. I think of him often. Usually when I see a cool car or something like that.

Here are this week’s Ten for Tuesday:

1. I bet there’s something to debate in this old article I found on the Crown Ministries’ website: Tough Questions on Tithing

2. Teaching Kids to Save by Making Them Spend

3. Don’t Lie to Your Car Insurance Company

4. Why You Should Check Your Credit Score and Credit Report

5. Viewing Stock Market Changes with Perspective (humorous)

6. Ten Words You Need to Quit Misspelling

7. Budgeting is not Complicated (at least it doesn’t have to be)

8. Turbo Tax vs. Tax Act (a review)

9. Focus on Factors That Help (short and sweet)


10. Tactical Asset Allocation: Another Rip-Off (gotta love Larry Swedroe)