Misleading Statistics on Income Inequality

The American Spectator ^ | September 6, 2016, 12:01 am | Thomas Sowell

[expat_panama]

...When we hear about how much more income the top 20 percent of households make, compared to the bottom 20 percent of households, one key fact is usually left out. There are millions more people in the top 20 percent of households than in the bottom 20 percent of households.

The number of households is the same but the number of people in those households is very different...

...A little over half of the households in the bottom 20 percent have nobody working...

...Household income statistics can be very misleading in other ways...

...income statistics can show an economic decline, even when per capita income has risen...

...the number of people per household can vary so much, while individual income statistics always mean the average income of one person?

...not everyone makes truth their highest priority...

...Even individual income statistics have pitfalls when they lump together very different kinds of income, as is usually the case. Incomes from salaries are very different from incomes from capital gains.

A salary is usually earned and paid in the same year. Capital gains received in a given year can be paid for value accrued over a number of years...

In the income statistics, your income will be recorded the same as that of someone on a salary of $200,000 a year.

What difference does that make? It makes a big difference when most low and moderate incomes are from salaries, while incomes in the highest brackets are more likely to be primarily capital gains...

...statistics on income inequalities are often comparing high multi-year earnings with lower single-year earnings — that is, comparing apples and oranges.

Such statistical distortions are discussed more fully in my book Wealth, Poverty and Politics. In an election year, it might be worth taking a look.

[Gay State Conservative]

A little over half of the households in the bottom 20 percent have nobody working...

Which,BTW,is a central goal of the Rat Party's grand plan...

[expat_panama]

Welcome back to the market place everyone!   Back to our sideways trading (last Fri. up 4/10ths in lower trade) and now looking at upbeat futures +0.69%.  Precious metals look good too w/ gold and silver moving up to $1,332.38 and $19.60.  Futures see them topping that +1.47%.   Our only report today comes out after opening: ISM Services.

FR Econ threads:

• Robert Samuelson: A New Era Of Labor Scarcity?
• Slower August Job Growth Will Keep The Fed On Hold In September
• Report: Up To 80% Of Current Jobs Threatened By Technology
• Obama Kept His Promise, 83,000 Coal Jobs Lost And 400 Mines Shuttered
• The Fed may be preparing for the unthinkable — negative interest rates in America
• State’s largest private ambulance service closing (North Carolina, 400 laid off)
• Obama economy gives us more horrible news: Only 151,000 new jobs in August

--and lots to read

Rich Will Forego Carried Interest for a Bigger Loophole - Michael Hiltzik
Market Booms Can Persist Much Longer Than Expected - Tom Stevenson
JFK & Reagan: When Econ. Policy Wasn't Partisan - John Tamny, Forbes
Yes, the News Can Survive the Newspaper - Jim Rutenberg,New York Times
Saudi/Russia Just Threw Oil Big Fat Head Fake - Geoffrey Smith, Fortune
Why U.S. Job Creation Machine Is Broken - Howard Gold, MarketWatch
August Jobs Report Doesn't Change Much for the Fed - John Crudele,NYP

[wastedyears]

A central tenet of feminism.

[expat_panama]

Huh. Just realized that most folks I argue this topic w/ are chicks.

[Lurkina.n.Learnin]

My folks sold the house I grew up in which provided a large chunk of their retirement. Statistically they had a hell of a year but that was the culmination of a lot of years and sweat. It was basically a once in a lifetime thing. These politicians that want to take a large part of that to “equalize” income with someone who never worked a day in their life make me want to scream.

[citizen]

Cap gains realized from selling your primary residence are tax exempt up to $250K, $500K married filing jointly - Taxpayer Relief Act of 1997

[Lurkina.n.Learnin]

It was 1991 when they sold that. As I recall there were exemptions back then also and they didn’t get hurt too bad tax wise. It isn’t right that government taxes at exorbitant rates and then offers exemptions and deductions to keep your money. Jump through these here hoops just right and we won’t confiscate your money.

[citizen]

Oh, that’s good there were exemptions in 1991 for your parents’ sale. I agree with your points for sure.