Stop blaming the rich for income inequality
The worlds third-richest man weighed in on the national debate over rising levels of income disparity in the United States yesterday, saying that while the gaps between the countrys haves and have nots are definitely increasing, it is not the fault of those at the top. Nor will it be solved by traditional methods, like improving education or hiking the minimum wage. His solution: a pragmatic, direct way of helping incomes rise for the working poor across America by increasing access to the Earned Income Tax Credit. No conspiracy lies behind this depressing fact: The poor are most definitely not poor because the rich are rich, Buffett, whos net worth we clock in at $71.3 billion, wrote in a Wall Street Journal opinion piece published late yesterday . Nor are the rich undeserving. Most of them have contributed brilliant innovations or managerial expertise to Americas well-being. We all live far better because of Henry Ford, Steve Jobs , Sam Walton and the like. Instead, this widening gap is an inevitable consequence of an advanced market-based economy.
Thats not to say the gap isnt growing. Citing data from The Forbes 400 list of the richest Americans, he said that the total net worth of those on the list in 1982, the first year the list was compiled, was $93 billion. In 2014, that number was $2.3 trillion, up 2,400%. At the same time, median household income in the United States rose only about 180%, he said.
Improving education, wont work fast enough, or go far enough, he said. And fighting to raise the minimum wagecurrently in vogue among many on the leftwont bridge the gap either, he says, and may actually backfire by hurting employment. The better answer, he said, is an expansion of the earned income tax credit, a federal tax credit targeted at working class Americans which gives them a credit starting with the first dollar they earn and rises until it hits a ceiling, then phases out from there.
According to the Center on Budget and Policy Priorities, more than 27 million taxpayers got the ETIC in 2013 and in the 2012 tax year, the average EITC was $2,982 for a family with children.
There is no disincentive effect: A gain in wages always produces a gain in overall income, writes Buffett. The process is simple: You file a tax return, and the government sends you a check. In essence, the EITC rewards work and provides an incentive for workers to improve their skills. Equally important, it does not distort market forces, thereby maximizing employment. I may wish to have all jobs pay at least $15 an hour, writes Buffett. But that minimum would almost certainly reduce employment in a major way, crushing many workers possessing only basic skills. Smaller increases, though obviously welcome, will still leave many hardworking Americans mired in poverty.
Its an argument that probably wont sit well with many on the left accustomed to blaming employers and the rich for the pain of the poor, but, like most things Buffett says and does, it isnt aimed at being popular. Its aimed at actually getting something done. http://www.msn.com/en-us/money/markets/buffett-stop-blaming-the-rich-for-income-inequality/ar-BBk7Alo
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If the rich were not rich, they would be blameless. Pass the beer nuts.