Tag Archives: Income Inequality

Why Africa Should Worry Less About Income Inequality

Early this week, the South Africa Daily Maverick published an op-ed titled, “It’s not Zuma that we need protection from, it’s the market.” While the author rightly calls out the role of cronyism in destroying ordinary South Africans’ economic mobility, she doesn’t seem to make a distinction between economic freedom and crony capitalism.

This spotlights a crucial misunderstanding in the ongoing battle against capitalism in South Africa, and across Africa.The values of freedom will continue to take a back seat as anti-market forces demand more state control of the economy against “corporate” interests.

The Benefits Seem Unattainable

How is it that perceptions of the market are so negative on a continent with such a rich tradition of economic freedom?

It can be alleged that the arguments for capitalism have become too utilitarian to appeal to a continent that has been ravaged by the effects of slavery, colonialism, kleptocracy, ethnic genocide, crony capitalism, and extreme poverty. Indeed, in his 1999 book “Development as Freedom,” Harvard Professor Amartya Sen argued,

The discipline of economics has tended to move away from focusing on the value of freedoms to that of utilities, incomes, and wealth. This narrowing of focus leads to an under appreciation of the full role of the market mechanism, even though economics as a profession can hardly be accused of not praising markets enough.”

Read more at FEE Online 

Sorry, Democrats, but the Federal Tax Code Disproportionately Hits the Wealthy

Sen. Jeff Merkley, D-Ore., wrongly asserted Wednesday that the federal tax code is regressive, hurting low-income workers more than the rich. During a Senate Budget Committee Hearing on the benefits of a balanced budget, Merkley sparred with former Gov. John Engler, R-Mich., the president of the Business Roundtable.

Merkley asked Engler, “Why should low-income or middle-income Americans pay a higher tax rate for every $1,000 they earn than the rich?”

“I thought our tax code was progressive,” Engler responded.

Merkley replied, “Well then you’re deeply misinformed and I encourage you to read up a little on it.”

To the contrary, Merkley is the one deeply misinformed about how progressive the federal tax code is.

The wealthy pay far higher tax rates than the poor do. The highest fifth of income earners pay the government 12 times more of their income than the lowest fifth of income earners. The top one percent of income earners are hurt even more by the tax code, paying an average federal tax rate of 29 percent, compared to the two percent paid by the lowest-fifth.

Some tax breaks are claimed more often by high-income earners, such as the home mortgage interest deduction. But the size of these deductions and credits does not offset the higher tax rates the wealthy pay.

The progressiveness of the federal tax code is largely driven by the individual income tax, which provides nearly half of all federal revenue. The top fifth of income earners pay an average individual income tax rate of 14 percent, while the bottom fifth instead face an average rate of negative eight percent.

Read the rest at the Washington Examiner…

Proof That Rich Pay More Than Their Fair Share of Taxes

Just because the rich can afford to pay more in taxes doesn’t mean they aren’t paying their fair share.

While some call for a more progressive tax code in which the rich “pay their fair share” in taxes, it is almost always left unclear exactly what is meant by “fair share.” Is it fair to ask the top one percent of income earners, who earned 15 percent of wealth in 2011, to pay at least 15 percent of the taxes? They actually paid 24 percent of all federal taxes, with an average federal tax rate of 29 percent.

In contrast, the average federal tax rate for the bottom fifth of income earners is only two percent and they paid less than one percent of federal taxes in 2011, the last year for which data is available from the Congressional Budget Office.

Liberals say that rising inequality is reason enough to raise taxes on the rich. They typically neglect to mention that more income for the wealthy means they carry a greater burden of federal taxation.

Read the rest at the Washington Examiner…