Research used to target “the 1 percent” excluded important data to produce growing rich/poor gap
AUSTIN – Claims that the gap is growing between America’s richest and poorest are built on a foundation of flawed research, according to a report published today by the Laffer Center for Supply-Side Economics.
“The principal research supporting claims of dramatic income inequality in America is unsound and misguided,” said Laffer Center Senior Fellow Brian Domitrovic, Ph.D. “This focus on ‘the 1 percent’ takes no account of any absolute increase or decrease in living standards on the part of the lower classes. Studies have shown that in every recent interval of American history, and certainly from 1980 to the present, living standards and real income have risen for virtually everyone.”
The Laffer Center report, “The Left’s Dubious History of Income Inequality,” challenges the income inequality research by French economists Thomas Piketty and Emmanuel Saez that was cited by President Barack Obama in the narrative supporting his first budget proposal. The concepts developed by Piketty and Saez later provided the Occupy Wall Street slogan, “We are the 99 percent.”
Domitrovic criticized the Piketty-Saez research for relying solely on income reported on federal tax returns, which overlooked the true income of the wealthiest Americans.
“Because Piketty and Saez did not include untaxed benefits in their calculation of income in the post-World War II period, they did a poor job of accounting for the true income of the wealthy during these years,” Dr. Domitrovic said.
“Piketty and Saez had some of the tools necessary to show that they were understating the rich’s income between the 1940s and 1970s,” Domitrovic elaborated. “But they declined to use them because doing so would debunk their U-shaped pattern of income inequality over the past 100 years – the basis for their current celebrity.”
The report provides a brief review of the history of taxation in America, establishing that higher tax rates on the wealthy result, seemingly counter-intuitively, in the burden of taxation falling on the middle class.
Brian Domitrovic, Ph.D., is a senior fellow of the Laffer Center for Supply-Side Economics and an associate professor and chairman of the history department at Sam Houston State University.
Laffer Center website: http://www.laffercenter.com/
Facebook page: www.Facebook.com/TheLafferCenter
Twitter feed: www.Twitter.com/LafferCenter
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