So much for that argument

Greg Sargent is one of my favorite bloggers, because he makes good catches:

In a rational world, a new study that came out today on income equality would constitute a major blow to the GOP argument on the sequester.

The new study was performed by Thomas Hungerford of the non-partisan Congressional Research Service. Though the study is not a CRS product, Hungerford’s data is widely cited on both sides; he’s an impeccably objective analyst.

Here’s what Hungerford found: The single greatest driver of income inequality over a recent 15 year period was runaway income from capital gains and dividends.

This finding is directly relevant to the current debate, because Obama and Democrats want to offset the sequester in part by closing loopholes enjoyed by the wealthy, such as the one that keeps tax rates on capital gains and dividends low. Dems want to do this in order to prevent a scenario where the sequester is averted only by deep spending cuts to social programs that could hurt a whole lot of poor and middle class Americans. Republicans oppose closing any such loopholes and want to avert the sequester with only deep spending cuts.

Hungerford’s report, like all serious examinations of inequality, is very complicated. He looks at a bunch of recent data on inequality from the period from 1991-2006 — measured by the so-called “Gini index” — and calculates the degree to which various factors exacerbated it. Hungerford found that over that period, the rise in the Gini index (a story that’s been widely told elsewhere, one that’s largely been driven by the runaway wealth of the top one percent and top 0.1 percent) was driven mainly by the rise in capital gains and dividends income.

“By far, the largest contributor to increasing income inequality (regardless of income inequality measure) was changes in income from capital gains and dividends,” the report concludes.

Or, as Hungerford put it in an interview with me: “The reason income inequality has been increasing has been the rising income going to the top one percent. Most of that has come in capital gains and dividends.”

In other words, wealthy beneficiaries of low tax rates on capital gains and dividends are doing extremely well — and their runaway wealth is a major driver of income inequality. There’s a lot of that money out there that could be taxed as ordinary income — as Obama and Dems want — as a way to avert the sequester, which could badly damage the economy. Republicans oppose this.

6 Responses to So much for that argument

  1. imhotep February 20, 2013 at 1:56 pm #

    We have two problems. 1)The lack of good paying jobs. 2)Wealth inequality. Our deficit “problem” can only be solved by adding more jobs to the economy. If we reduce unemployment by adding new jobs the deficit “problem” will solve itself. It won’t be solved by cutting spending or by increasing taxes. Ever. Income inequality can only be solved by a progressive income tax. The higher the income the greater the tax percentage on that income. A 70% tax rate on all incomes over $1 million dollars should do the trick. We need jobs and more jobs and far fewer Republicans and Capitalists.

  2. lless February 20, 2013 at 4:31 pm #

    Sorry the Republicans only line of attack doesn’t wash. Carried interest has lain buried in Chuck Schummer’s committee forever and the Dem’s are in the majority. Favored treatment of capital gains and dividends is truly bi-partisan.

  3. Ron February 20, 2013 at 6:32 pm #

    Fuck ’em. Return the tax on unearned income, which is what we’re talking about here, to the 90% rate it was when REPUBLICANS first proposed it. These leeches didn’t DO anything to EARN their wealth, they bleed it from the 99.9% of us who actually work for a living. BTW, this 90% rate began the creation of the largest middle class and the strongest democracy in the world. Eat the Criminal Class!

  4. quixote February 21, 2013 at 12:58 am #

    It’d be nice if they remember that it’s the total income that counts. A retired person who gets some dividends that supplement Social Security shouldn’t pay 90% tax on them.

    90% at $500,000 annual income, on the other hand, sounds about right.

  5. jawbone February 21, 2013 at 12:40 pm #

    Steven Rattner, Obama’s Auto Czar, was on WNYC’s Brian Lehrer Show yesterday and, while he talked about the wealth transfer, lower income for the middle class, much lower purchasing power for the middle class over the past three decades, and long term unemployment, he said the vastly higher income for the top 5 to 1 Percenters was simply because the people who earn so much more are just so damn good they of course will accrue all the wealth!!

    He also said there’s too much worry about people without jobs (really, he said that), but more important is concern about income. That’s why college presidents’ incomes have increased 75% over those past decades. Lots of reasons, but, hey, it’s again because they’re so damn good. Winner take all mentality. He then said that since Brian Lehrer was such a good radio host, his income must have increased faster over the same time frame. (Not as much as Limbaugh’s, idiot.)

    He said Right to Work legislation will be brought to bear against public sector workers more and that the public, made up of people who have lost good paying jobs and that purchasing power, will more and more support pulling them down, to make public workers suffer because they are suffering.

    Good grief.

    Audio at the link, no transcript — but the segment is only about 14 minutes.

  6. jawbone February 21, 2013 at 1:05 pm #

    News today is that a Pew survey finds younger people in the US are reducing their debt dramatically.

    Also, fewer of them buy cars or houses than previously.

    Good for them, not so good for the consumer based economy, eh?

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