Misleading Liberal Studies Find Rich-Poor Income Gap Growing

By MARK JOHNSON, Associated Press Writer
Fri Jan 27, 2:29 AM ET

ALBANY, N.Y. - The disparity between rich and poor is growing in America as the federal minimum wage has remained flat for years, union membership has declined and industries have faced global competition, according to a study released Thursday.

The report by the Center on Budget and Policy Priorities and the Economic Policy Institute, both liberal-leaning think tanks, found the incomes of the poorest 20 percent of families nationally grew by an average of $2,660, or 19 percent, over the past 20 years. Meanwhile, the incomes of the richest fifth of families grew by $45,100, or nearly 59 percent, the study by the Washington-based groups said.

Families in the middle fifth saw their incomes rise 28 percent, or $10,218.

The figures, based on U.S. Census data, compare the average growth from 1980-82 to 2001-03, after adjusting for inflation.

The poorest one-fifth of families, the report said, had an average income of $16,780 from 2000-03, while the top fifth of families had an average income of $122,150 — more than seven times as much. Middle-income families' average income was $46,875.

So, this Associated Press Writer calls on two liberal think tanks and pro-union activist Trudi Renwick. Isn't he clever? I'm not sure what is sloppier/dishonest work, the liberal studies or Mark's reporting. Let's just call it a tie and get on with the important work of telling the truth. It took me less than ten minutes to find this alternate view from Robert Rector and Rea Hederman, Jr. over at The Heritage Foundation. I'm posting the conclusion only so click here for the entire article.

Conclusion
The Census income distribution figures are the foundation of most class-warfare rhetoric. On the surface, these figures show a high level of inequality: The top fifth of households have $14.30 of income for every $1.00 at the bottom.

However, these figures are flawed by the exclusion of taxes and social safety net spending and by the fact that the "fifths" do not contain equal numbers of people. Adjustment for these factors radically alters the picture of income distribution: The top fifth of the population has $4.21 of income for every $1.00 at the bottom.

The remaining inequality in society is heavily influenced by the lack of work at the bottom. If working-age adults in the lower quintiles worked as much as their higher-income counterparts, the income disparity of the top to the bottom quintiles would fall to $2.91 to $1.00.

Still, the top fifth of U.S. households (with incomes above $84,000) remain perennial targets of class-warfare enmity. These families, however, perform a third of all labor in the economy. They contain the best educated and most productive workers, and they provide a disproportionate share of the investment needed to create jobs and spur economic growth. Nearly all are married-couple families, many with two or more earners. Far from shirking the tax burden, these families pay 82.5 percent of total federal income taxes and two-thirds of federal taxes overall. By contrast, the bottom quintile pays 1.1 percent of total federal taxes.12

In one sense, John Edwards is correct: There is one America that works a lot and pays a lot in taxes, and there is another America that works less and pays little. However, the reality is the opposite of what Edwards suggests. It is the higher-income families who work a lot and pay nearly all the taxes. Raising taxes even higher on hard-working families would be unfair and, by reducing future investments, would reduce economic growth, harming all Americans in the long run.