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Media Info Flawed, Deficient, Incorrect, Incomplete, or Wrong

In a study, dated November 13, 2007, by Gerald Auten and Geoffrey Gee of the Office of Tax Analysis, U.S. Treasury Department looked at “Income Mobility in the U.S. from 1996 to 2005” (requires Adobe). Auten and Gee write, “While many studies have documented the long-term trend of increasing income inequality in the U.S. economy, there has been less focus on the dynamism of the U.S. economy and the opportunity for upward mobility. Comparisons of snapshots of the income distribution at points in time miss this important dimension and can sometimes be misleading.”

Auten and Gee explain how their study differs from the others:

“This study examined income mobility of individual taxpayers age 25 and over for the period from 1996 through 2005 using information reported on individual income tax returns. The key findings are that there was considerable income mobility of individuals in the U.S. economy during the 1996 through 2005 period and that the degree of income mobility among income groups is unchanged from the prior comparable period (1987 through 1996).”

University of Michigan at Flint economics and finance professor Mark Perry explains it this way on Friday at Carpe Diem, writing:

“In other words, almost everything we hear in the media about increasing income inequality, the disappearing middle class, the rich getting richer and the poor getting poorer, and the lack of income mobility is either flawed, deficient, incorrect, incomplete or wrong. (emphasis added)

“The data show that there is significant income mobility up and down the income quintiles over longer periods of time, e.g. 1996-2005. Many of today's poor are tomorrow's rich, and many of today's rich are tomorrow's middle class or poor. The top income quintiles are not private clubs closed to new members, but are shifting, dynamic quintiles composed of an ever-changing group of different individuals from year to year. Consider that 75% of the individuals in the richest group of Americans in 1996, the top 1/100th percent, moved down into a lower income group by 2005, making room for a completely different group of individuals in that super-rich category.”

The topic of income inequality is important since liberals base much of their belief in the need for income redistribution on it, or in the words of then-candidate Barack Obama who told “Joe the Plumber” last year, he wanted to “spread the wealth around.” We see once again that a free market does the job of spreading the wealth around” quite well without the political class choosing winners and losers. Forget a progressive income tax. What we need is a flat tax.


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