Should income inequality be reduced?

Question

I realize that it seems unfair that some Americans are outrageously wealthy while some struggle to get by.
However, income inequality is one by-product of capitalism. When compared to the polar alternative(Socialism), history shows that capitalism is in all realistic ways superior.
I would rather have an elite wealthy class coupled with poor that can afford to eat than a class of "equals" where many people starve.

Could Warren Buffet and Bill Gates have donated 10's of billions of dollars to charity if their earnings had been severely taxed along the way.
Adam Smith said: more has been done by free enterprise to benefit the poor than any government agency ever could.

If you believe in a balance between the two systems(ie more taxation and more government programs) what programs could you implement that do not encourage laziness and erode self-reliance?

Marty K, did you even read the details?
I am obviously in favor of capitalism, and economically about as far right as you can go.

meloufus-
1) Oil compaines profits are very susceptible to the price of oil. Look at their profits when oil prices are down. Should we make them absorb all of the risks while we collect all of their rewards?
2) Do you realize how many jobs would be eliminated if we attempted to force corporations to foot the tax bill. All capital inflows into the US would stop, as investors would realize that there are no attractive investments here. At least the jobless Americans wouldn't have to pay taxes though.

Answer 1

Everyone is taxed - some just start out & emd up with more.
Income can be equalized - it is called education & hard work.
No one gets their money easy, if you inherit you had to put up with family. I worked hard & do not want to give my portion to a slackard.
They have tried every program since the 1960s when the I want something for nothing started. It does not work.
Bring on the Capitalism!

Answer 2

The most effective tool for reducing income inequality is the graduated income tax. Unfortunately, the basic concept of graduated income tax is too complicated for most of our citizens to grasp. Hence, it has been possible for Republican presidents to incrementally reduce the highest income tax rate with almost no complaint from those at the lower end of the income scale. The steep level of graduation seen in the years right after the Second World War will not return. At that time, Communism was seen as a real thread to Western Democratic Capitalism. Our implementation of social programs such as Social Security, graduated income tax, labor union recognition, and so on were a direct response to this perceived threat. Without the threat of Communism, by whatever name, wealth distribution will continue to favor a super rich elite. Actually this has been true throughout history. The thirty years following WWII, was an exception to the much more common pattern of a super wealthy elite and the bottom 50% or so not doing very well. Don't look for any change to this pattern any time soon.

Answer 3

But it doesn't have to be one or the other.

It doesn't have to be unabaited capitalism with no limits, no goverment control, no accountabiltiy,
or the alternative extreme of communist Russia, where the corrupt government goes raving loony and controls everything and pockets everything.

You have to find a happy medium.
There is nothing wrong with a national health for people who can't afford insurance and outrageous living costs,
there is nothing wrong with fairer distribution.
IT is not communist to want these things.

IN the 50's in the midst of communist paranoia,
CEO's made only 30% more than their lowest paid worker, now they make about 300%-500% more!

I think one program can be implemented that do not encourage laziness and erode self -reliance--HAVING A JOB THAT PAYS ENOUGH TO LIVE DECENTLY~ A, that's 1 job, THAT'S WORTH IT!(Pays a living wage).... And one that you don't have to go to school for 6 years and be in debt up to your eyeballs before you even get a start in life to obtain. Higher learning institutions should be kept from acting like businesses and making tuition too expensive for your average person to afford. You should be able to put yourself through school, have 1 job and afford to live on your own-- just like it was in the communist paranoid 50's.

All you would have to do is keep the corporations here to give people jobs. No more exporting wealth.
Capitalism can run our country into the ground too you know.--outsourcing, each individual's credit card debt defaults, health care defaults, defaults on all loans, our stock market going into the $hitter.
We might all eventually be flipping burgers to one another, and what good are those home appliances made in China when your average American worker can't afford it anymore?

This could eventually happen to us.
Just because we are doing well now doesn't mean it will always be this way. It can all go down in an instant. This is a young country and we feel high and mighty & high on the hog now, but if we don't take care of the people-- The CUSTOMERS I should say,
this country could get into a load of trouble very fast. We are not immune from any economic failure, so I wouldn't be so proud to tout this system as that which works like a charm.
Only time will tell.

Answer 4

I believe people should make however much they can get someone to pay them. That being said, we must understand as a society, that not everyone ever can or will be able to earn enough to get by, and that we will always have a need for people to perform the most menial (and lowest paying) jobs. These people will always need a hand.

Not everyone can be a CEO, and how much are we to pay the person who cleans the hotel rooms or sweeps the streets, or changes the light bulbs in public buildings? These are necessary jobs, though low paying ones. We must make accomodation for these people who work just as hard, if not harder than many in much higher paying jobs. If that means government paid health care, or housing subsidies, that's fine with me. After all, the oil companies (who last year posted bigger profits than any corporation in the histiry of the world) are recieveing huge governmental subsidies. Couldn't that money be better used to prop up those members of our society who help things move along, but who don't have enough to get by?

Do you know that 30 years ago, the tax burden in this country was carried by 70% corporate taxation, 30% private citizens, and now it is the exact opposite? We can alter that to a degree where the average person is not buried by taxes while companies carry more of the burden--even a 5% shift would help.

Answer 5

1. I agree with the view of 'Arewether' in as much that a rich man son can become a pauper and poor man's son can become rich.
2. It can be not only in USA but in many other countries.
3. different measures can be taken to bridge the gap or reduce the differences, but cannot make a straight line for man's mind does not think alike.
4. Satisfaction comes to different people in different ways, some totally involving in their work and for some entertaining others and for some getting entertained but without any work also.
Hence when people are not ready to put in their best, they cannot get paid also accordingly. These are general views and there can be exceptions.
VR

Answer 6

thats why people should study harder in school, to get an education, and use it to succeed. believe it or not, we were all born equal. Some had wealthier parents than others, but we all have freedom and the ability to succeed. in this country a rich man can die a pauper, and a poor man can die wealthy. in other countries, the castes are more pernament, and there is no vertical mobility. if youre born poor, you die poor, unless you immigrate to America to have an oppurtunity to succeed.

the only thing socialism solved is the problem of over-population, it killed 60 million people in china, and over 35 million people in russia. because the insecure governments couldnt trust the people to live their own lives, and threw them into work camps, for the good of the proletariat or some crap like that. capitalism gives people the chance to succeed, socialism gives them a chance to meet their makers.

Answer 7

Your just proof some got it easy, but lack true knowledge of what life is like for most Americans caught up in a struggle they can not win! P.S. I hope you get the lessons you need!

Answer 8

Whoops - I'm sorry for my misunderstanding.

Answer 9

Income inequality metrics or income distribution metrics are techniques used by economists to measure the distribution of income among members of a society. In particular these techniques are used to measure the inequality, or equality of income within an economy. These techniques are typically categorized as either absolute measures or relative measures.

Absolute income criteria
Absolute measures define a minimum standard, then calculate the number (or percent) of individuals below this threshold. These methods are most useful when determining the amount of poverty in a society. Examples include:

Poverty line - This is a measure of the level of income necessary to subsist in a society. It varies from place to place and from time to time, depending on the cost of living and people's expectations. It is usually defined by governments and calculated as that level of income at which a household will devote two thirds (to three quarters) of its income to basic necessities such as food, water, shelter, and clothing.
Poverty index - This index was developed by Amartya Sen. It takes into account both the number of poor and the extent of their poverty. Sen defined the index as:
I = (P/N)(B − A)/A
where:

P = number of people below the poverty line
N = total number of people in society
B = poverty line income
A = average income of those people below the poverty line

Relative income criteria
Relative income measures compare the income of one individual (or group) with the income of another individual (or group). These measures are most useful when analyzing the scope and distribution of income inequality. Examples include:

Percentile distributions - One percentile is compared to another. For example, it might be determined that the income of the top ten-percentile is only slightly more than the bottom forty-percentile. Or it might be determined that the top quartile earns 45% of the society's income while the bottom quartile has 10% of society's income. The interquartile range is a standard percentile range from 25% to 75%.
Lorenz curve - This is a graphic device used to display the relative inequality in a distribution of income values. A society's total income is ordered according to income level and the cumulative total graphed.
Gini coefficient - This is a summary statistic used to quantify the extent of income inequality depicted in a particular Lorenz curve.
Robin Hood index - Mathematically related to the Gini coefficient, it measures the portion of the total income that would have to be redistributed in order for there to be perfect equality.
Theil index - This is also a summary statistic used to measure income inequality, based on information entropy. It is similar to, but less commonly used than the Gini coefficient.
Standard deviation of income - This measures income dispersion by assessing the squared variance from the mean. This metric is seldom seen, its use limited to occasional reference in academic journals.
Relative poverty line - This is a measure of the number or proportion of people or households whose level of income is less than some given fraction of typical incomes. This form of poverty measurement tends to concentrate concern on the bottom half of the income distribution and pay less attention to ineqalities in the top half. See poverty line for details.

Defining income
Both of the above measures use income as the basis for evaluating poverty. However, 'income' is here understood different to a common understanding: It means the total amount of goods and services that a person receives, and thus there is not necessarily money or cash involved. If a poor subsistence farmer in Uganda grows her own grain it will count as income. Services like public health and education are also counted in. Often expenditure or consumption (which is the same in an economic sense) is used to measure income. The World Bank uses the so-called living standard measurement surveys (LSMS) to measure income. These consist of questionnaires with 200+ questions. Surveys have been completed in most developing countries.


Criticisms of income inequality metrics
It is not clear how income should be defined. Should it include capital gains, imputed house rents from home ownership, and gifts? If these income sources are ignored (as they often are), how might this bias the analysis? How should non-paid work (such as parental childcare) be handled? Wealth or consumption may be more appropriate measures in some situations. Broader metrics of human well-being might be useful.
Should the basic unit of measurement be households or individuals? The Gini value for households is always lower than for individuals because of income pooling and intra-family transfers. The metrics will be biased either upward or downward depending on which unit of measurement is used.
These income inequality metrics ignore life cycle effects. In most Western societies, an individual tends to start life with little or no income, gradually increase income till about age 50, after which incomes will decline, eventually becoming negative. This will have the effect of significantly overstating inequality. It has been estimated (by A.S. Blinder in The Decomposition of Inequality, MIT press) that 30% of measured income inequality is due to the inequality an individual experiences as they go through the various stages of life.
Should real or nominal income distributions be used? What effect will inflation have on absolute measures? Do some groups (eg., pensioners) feel the effect of inflation more than others?
How do we allocate the benefits of government spending? How does the existence of a social security safety net influence the definition of absolute measures of poverty. Do government programs support some income groups more than others?
Income inequality metrics are seldom used to quantify and examine the causes of income inequality. Some alleged causes include: life cycle effects (age), inherited characteristics (IQ, talent), willingness to take chances (risk aversion), the leisure/industriousness choice, inherited wealth, economic circumstances, education and training, discrimination, and market imperfections.
These criticisms help to understand the problems caused by the improper use of inequality measures. However, they do not render inequality coefficients invalid. If inequality measures are computed in a well explained and consistent way, they can provide a good tool for quantitative comparisons of inequalities at least within a research project.


Benefits and costs associated with Income inequality
In many capitalist countries there undeniably is a marked level of inequality in income distribution. This could be defined as having a gini coefficient of over .25 - but even that is a generous allowance of inequity. Whilst if all resources were put toward creating a more equitable distribution of income, relative equality, or a least a 'fairer' distribution could be achieved. However, this is very rarely done, and there are economic reasons for this.

Optimal Level of Inequality
In their study for the World Institute for Development Economics Research, Giovanni Andrea Cornia and Julius Court (2001) reach policy conclusions as to the optimal distribution of wealth. The authors recommend to pursue moderation also as to the distribution of wealth and particularly to avoid the extremes. Both very high egalitarianism and very high inequality cause slow growth. Extreme egalitarianism leads to incentive-traps, free-riding, high operation costs and corruption in the redistribution system, all reducing a country's growth potential. [see Gini-Growth curve here]

However also extreme inequality diminishes growth potential through the erosion of social cohesion, increasing social unrest and social conflict causing uncertainty of property rights. Therefore public policy should target an 'efficient inequality range'. The authors claim that such efficiency range roughly lies between the values of the Gini coefficients of 25 (the inequality value of a typical Northern European country) and 40 (that of countries such as China and the USA). The precise shape of the inequality-growth relationship depicted in the Chart obviously varies across countries depending upon their resource endowment, history, remaining levels of absolute poverty and available stock of social programs, as well as on the distribution of physical and human capital.