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A Closer Look at Income Inequality

March 31, 2014
4Andrew Syrios writes in today's Mises Daily: 
There are many other factors that need to be considered when discussing wealth inequality as well. For example, while the entitlement systems in the United States are embarrassingly underwater, they should be considered. According to Bankrate.com, “A male average earner who retired at age 65 in 2010 paid out $345,000 in total Social Security and Medicare taxes, but will receive $417,000 in total lifetime benefits ($464,000 for a woman).” If the government simply mandated people to have a health savings or retirement account (or better yet, let people keep their own money), that would smooth out the curve. Since payroll taxes are capped at $113,000, most of the increase would go to the lower and middle classes. Furthermore, Norton and Ariely’s study compares households instead of individuals — a tried and true way of distorting income and wealth data. Households vary in shape and size and cannot be directly compared. As Thomas Sowell has said, “... there are 39 million people in the bottom 20 percent of households, and 64 million in the top 20 percent. So you’re saying, yes, 24 million additional people do tend to have more money.” When we further take into account that many in the bottom 20 percent are recent immigrants from poor countries, in prison, single parents, on welfare, disabled, drug addicts, etc., it becomes clear that dividing the country into such groups is simplistic at best.

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