I don't know if the data in this commentary is still true as entitlements and taxes are changing. Perhaps the inequality gap is bigger or smaller than this article suggests, but the premise remains - it is not the amount of "income" that defines one's wealth but how much remains after taxes are paid and benefits are received - what do people have left to spend?
Wall Street Journal, Opinion
Its rise is an illusion created by the Census Bureau’s failure to account for taxes and welfare.
"While the disparity in earned income has become more pronounced in the past 50 years, the actual inflation-adjusted income received by the bottom quintile, counting the value of all transfer payments received net of taxes paid, has risen by 300%. The top quintile has seen its after-tax income rise by only 213%. As government transfer payments to low-income households exploded, their labor-force participation collapsed and the percentage of income in the bottom quintile coming from government payments rose above 90%.
In 2017, federal, state and local governments redistributed $2.8 trillion, or 22% of the nation’s earned household income. More than two-thirds of those transfer payments went to households in the bottom two income quintiles. Remarkably the Census Bureau chooses to count only $900 billion of that $2.8 trillion as income for the recipients. Excluded from the measurement of household income is some $1.9 trillion of government transfers. These include the earned-income tax credit, whose beneficiaries get a check from the Treasury; food stamps, which let beneficiaries buy food with government issued debit cards; and numerous other programs in which government pays for the benefits directly.
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