Income Inequality vs. Wealth Inequality
Photo by Katrina Charmatz via Getty Images
Paul Solman answers questions from the NewsHour audience on business and economic news here on his Making Sen$e page. Here is Friday’s query:
David G: I keep seeing an argument that says that income inequality is not as bad as statistics make it appear because poor people receive government benefits (or can — perhaps they don’t). Your friend Bob Lerman seems to feel this way.
It is my position that the financial securities owned by a wealthy person are much closer to being actual income than any benefit a poor person may receive. Those financial securities are like money in the bank to them. The wealthiest in our society live off of their financial securities and they pay lower tax rates than most. They can adjust their income as they need/want to.
Shouldn’t we pay more attention to the wealth that the wealthy have access to and less attention to their incomes? If not, why?
Paul Solman: I agree, David, but that’s what we did do in our original economic inequality story: focus on the unequal distribution of wealth, not of income. It’s a story I’ll never forget for two fairly lame reasons: 1) we had to call the New York police to restrain a bouncer on the David Letterman ticket line who was literally blocking and jostling our cameraman (and me too) and 2) of the hundreds of stories we’ve done, this seems to have been the audience’s all-time favorite, drawing 10,000 “likes” on Facebook. (You can watch the story but not the bounced bouncer, who failed to make the cut.)
It was to Dan Ariely’s inequality-of-wealth pie charts that economist Robert Lerman objected.
So yes, liquid wealth generates actual income more surely than Medicare, say. But Lerman’s point still seems valid, don’t you think?
As to lower (capital gains) taxes on many forms of investment income, I count myself a skeptic. Those with wealth have to put their wealth to work somehow. I’m not convinced we have to give them a tax break to invest.
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This entry is cross-posted on the Making Sen$e page, where correspondent Paul Solman answers your economic and business questions