Are We More Unequal than Other Countries?
We all know that the United States has the highest level of income inequality of any high-income country. Right? But at least according to OECD statistics, this claim is only true if one looks at inequality after taxes and transfers. If one looks at inequality before income and taxes, the U.S. economy has less inequality than Germany, Italy, and the United Kingdom, and about the same amount of inequality as France. The OECD data also offers a hint as to why this unexpected (to me, at least) outcome occurs…
One theme of the report is that the extent of government redistribution across populations is driven much more by the widespread provision of government benefits than by the progressivity of taxation.
Full Timothy Taylor post worth reading.
Interesting.
The welfare state creates income inequality – who would have thought.
The critics of inequity in the United States often don’t even bother to count income transfers — making the problem appear much worse than it is.
I would argue that a fair amount of inequity is a good thing so long as there is also a significant amount of income mobility. The most extreme examples of income inequity are the result of opportunity. This includes the opportunity for immigrants to better their lives by coming to the United States to work despite having few job skills. It also includes the opportunity to create wealth by those with brains and capital. Our goal should not be to decrease inequity. Rather, it should be to boost income mobility. To reduce inequity for the sake of equity itself is to reduce mobility and opportunity.
Any need or want that government deceids people are entitled to receive, but that is not provided as a function of their productive economic activity, requires taking resources from others productive activities to fund it. These restaurateurs ought to get the notion that there is no free lunch. The ability to externalize costs amounts to subsidies that hide the true price of its goods or services. Markets work when consumers make choices based on the real price of what they buy. That’s why limiting the tax-exemption of health insurance, which subsidizes the buying it, was generally seen by health economists as the most effective cost-cutting measure, though it was unfortunately weakened in the final health bill.