Tuesday, January 28, 2014

What about income tax inequality? And other inequality links

1. Thomas Sowell on inequality

Too many discussions of large fortunes attribute them to "greed" -- as if wanting a lot of money is enough to cause other people to hand it over to you. It is a childish idea, when you stop and think about it -- but who stops and thinks these days?

2. Greg Mankiw and Tyler Cowen discuss the new assortive mating paper.

The abstract:

Has there been an increase in positive assortative mating? Does assortative mating contribute to household income inequality? Data from the United States Census Bureau suggests there has been a rise in assortative mating. Additionally, assortative mating affects household income inequality. In particular, if matching in 2005 between husbands and wives had been random, instead of the pattern observed in the data, then the Gini coefficient would have fallen from the observed 0.43 to 0.34, so that income inequality would be smaller. Thus, assortative mating is important for income inequality. The high level of married female labor-force participation in 2005 is important for this result.

This finding makes sense and has enormous implications.  To put it crudely, the smart people are marrying each other and having super-smart kids.  Dumb people are marrying each other (or not) and having really dumb kids.   This will lead to increases in inequality than what we saw 40+ years ago when the marriage market was different.  

3.  What about income tax inequality?


"We are now at a point where the top one percent pay more in federal income taxes than the bottom 90 percent," said Tax Foundation economist Kyle Pomerleau.
That means roughly 1.36 million taxpayers pay a larger share of the federal income tax than the bottom 90 percent -- or 122 million taxpayers, according to data compiled by the nonpartisan Tax Foundation.

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