Do You Mind Income Inequality?

By: ispeculatornew
Date posted: 08.10.2012 (5:00 am) | Write a Comment  (4 Comments)

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Ideally, each person in your family, your co-workers, friends former classmates would all be earning very good incomes. I guess in a way, if you compare their incomes with those of many other countries that is the case. But it’s much easier for us to always compare with the guy next door, our brother or best friend. In that sense, it’s true that the disparity seems to be increasing.

The Rich Are Getting Richer

The rich, for many different reasons, continue to gain more wealth than the average American making the discrepency worse and worse. I guess there are many reasons why. First off the rich have been able to invest money in the markets, to start businesses. They’ve sent their kids through private schools, Ivy league schools, etc. It’s not just a myth that it’s easier to make money once you’re rich. You’re also able to hire fiscalists, etc.

They Do Still Pay A Lot Of taxes Though

For all of the discussions about the rich not paying their faiir share, there are arguments that say they do. For example, the richest 1% in the US pay almost 20% of the taxes in the US every year. And actually about half of Americans do not pay taxes to the federal government. It’s so easy to pick on the rich or to say that basic problems could be solved by increasing taxes on the rich. To some degree it’s true but with capital being more global and mobile than ever before, simply increasing tax rates is not a winning strategy. Just watch France for the next few yeatrs after they gave full power at all 3 levels of the government to socialists which aim to tax any income over $1M/year at a 75% tax rate… In theory that works well but if you’re a wealthy individual or company, chances are that you will move your business elsewhere. In that case, it becomes a losing proposition.

We’ve Tried This Before

Many countries including the once great USSR have tried a model where there would be little to no income disparity. Needless to say that it wasn’t a big success. Of course, to say that both are the same thing would be a bit extreme but my main point is that the government is not effective, and certainly not anywhere as effective as the private sector. Just think of almost any interaction you’ve had with a government provided service and you’ll know exactly what I mean. Redistrubition of income usually means more state involvment which might help the poor but at what cost?

A Poorer “Equal” Society?

Is that what we truly hope for? I personally do not. My perception is that a few services should be considered essential and those should include a certain level of health care or education. But once that is achieved, then income inequality should not be considered a problem but rather a good thing that helps our economy prosper

What are your thoughts?

image credit: Econfix

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4 Comments

  1. Comment by pk de cville — August 10, 2012 @ 6:39 am

    I don’t mind income inequality.

    I prefer the level we had during 1950 to 1980, the most explosive growth decades in US history.

  2. Comment by IS — August 13, 2012 @ 1:18 pm

    @pk de cville – So how do you think this should be corrected?

  3. Comment by Jonathan — September 8, 2012 @ 9:59 pm

    I don’t mind income disparity at all. We are so focused on class warfare in this country that we no longer take responsibility for our personal financial situations.

    Can everyone be rich? Of course not, but the opportunity is there. You just have to go out there and find it. Blame and complain is a waste of mental effort and energy that can be put to better use.

    BTW, I’m not wealthy or even close to be being so.

  4. Comment by IS — September 9, 2012 @ 3:00 pm

    @Jonathan – Couldn’t agree more, we’re clearly not focusing on the right issues here

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