Wealthy Americans Don't Actually Earn Their Money, Merely 'Receive' or 'Claim' It?

A Wednesday post by economics reporter Catherine Rampell on the paper's Economix blog hits hard at the common liberal target of "extreme" and "stark" income inequality in America: "Inequality Is Most Extreme in Wealth, Not Income."

Rampell's word choice sent the message (perhaps unconsciously) that income isn't earned through hard work or talent but is instead passively and undeservedly "received," distributed by some nameless but powerful entity.

Typically, comments about rising inequality refer to the stark disparities in incomes of the very highest-paid Americans and everyone. We have observed in several posts, for example, that most of the income gains over the last few decades have gone to the very richest Americans. That means the highest-paid Americans have been claiming a larger and larger share of earnings.

Rampell even composed a chart "showing what percentage of all of America's income (including capital gains) is going to each of several income classes, today versus previous years."

Pretty striking, right? As of 2008, about 21 percent of income was received by just 1 percent of earners.

Rampell showed an income inequality chart from the liberal Economic Policy Institute as well.

The top 1 percent of earners receive about a fifth of all American income; on the other hand, the top 1 percent of Americans by net worth hold about a third of American wealth. (Note that the top income earners are not necessarily the same people as the top net-worth Americans - after all, lots of high-net-worth people don't work or have much else in the way of sources of new income.) Wealth-related inequality has also been relatively stable over the last few decades, whereas income-related inequality has been growing since the '70s.

Rampell concluded by looking for a way to justify a wealth tax:

Proposals for a wealth tax resurface periodically. The idea is always contentious since it basically requires double-taxation of earnings. There are lots of existing examples of double-taxation on the books, though.

(Hat tip Karol)

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