Yar.

It would be cool to use IRD time series data to track income changes through time.

Add to this a variety of CPI’s for different income deciles, and we can compare inequality over lifetimes in real resources.  Awesome.

Agreed – the tax change is a step change, the trend is genuine changes in inequality.

However, people were taking a point from pre-1986 and a point post Bush cuts and comparing them – which exaggerates the size of the change.

And size is important in this context, as there is a range of potential explanations that need to be taken into account (I mention 8 above) – as after all, there is no reason to expect that the distribution of income should be some magical constant throughout time. 

We cannot say whether it is bad or good unless we can decompose the changes – and by exaggerating the size, we make the idea that some of it is due to “bad bargaining positions” seem a little more convincing than it is.

When I have time (uh, March-ish) I’m going to have a look at the MSD’s Household Income Report, which I think uses microdata from the Household Income Survey, and is pretty longitudinal. Will be interesting to see how the survey data varies from the tax data.

Fair enough. But that significant upward trend would still be missing the direct impact of the Reagan/Bush tax cuts, which is fundamentally material to the question we’re asking.

None of us are disagreeing with Krugman – we are just trying to tease some of the intricacies out of the data.

Also, I was trying to point out that the NZ context doesn’t seem as extreme – it seems mostly explainable by changes in population demographics (older populations have a greater dispersal of human capital, and thereby wages).  The only person that mentioned NZ was Mankiw – when he was saying that all us anglo-saxon countries had an upward trend in inequality.  However, I’d say that the degree of change is pretty different …

Wait, am I disagreeing with Krugman here? Uh oh.

Not that, in the case of the US I’m just saying that comparing points pre-86 and post-86 is a bit dodgy given tax changes – there was undeniably a step-change due to that.

However, even if we corrected for the step change there would be a significant upward trend which we would have to explain.

I agree with you that the spike in this dataset is probably due to tax reporting issues, but that doesn’t mean there is no spike. The Reagan cuts was a massive flattening of the tax system and had equally massive distributional consequences – this is, in fact, the core of the OWS case – but its direct impact was not captured by this dataset because this is pre-tax data.

All we can draw from this is OWS shouldn’t be using reported pre-tax income as a measure of distributional equity – and I don’t even know if they are doing that.

And I wonder if you’re overstating the case of its impact on tax avoidance. The Reagan cuts lowered individual rates and raised corporate rates. This would have reduced the incentives to shelter income in companies. For the purpose of this dataset, this may have caused the spike because this is personal income data, but for revenue purposes, it’s just reported corporate income being changed to reported personal income.

I told you that coupon had expired.

“The rich get richer, and the poor get poorer, and the average person has no choice about it. No matter how much study they do, they’re still going to stay on the bottom rung.”

The poor arent getting poorer. And there is still a large amount of social mobility. Maybe this guy is demanding that there be no diminishing returns to education?

“The goals are to eventually eliminate the use of money and bring in a resource based economy.”

Yay for barter!

“The main reason for this is there is a lot of technological unemployment these days. We’re still within a system which is monetary and market driven but those jobs are never coming back.”

Down with technology!

“The collapse of the financial system and the millions of people starving all over the world while there’s still so much waste.”

Yep, those things are totally related.

“We need to look at the resources we have and how we can distribute them more evenly. In the future, we need to start growing more of our own food, getting into things like permaculture and living more sustainably.”

Brilliant. The people doing the distributing should be doing a better job. More inefficient use of resources. Yay for waste!

“The politicians could make things more equal for everybody. The rich are getting richer, and the poor are getting poorer, and I think that’s unfair.”

Again false. But I love the faith in big brother. The government can make everything better. We just need the right people in charge? Maybe we just need the right rules? Scarcity can be solved with rules.

“Everyone is becoming so individualistic and are keeping to themselves more and more. It’s just becoming this consumer driven, individualistic world.”

Yeah, nobody cares about the collective any more. And that’s sad.

“There is a huge disparity in New Zealand. There are big businesses growing and a lot of them are offshore, they don’t care about the people here.”

Surely if rich businesses go overseas it will reduce inequality?

“You get lots of people who are just interested in that individualist drive to get to the top. They want to make more and more profit and that can only happen by exploiting the workers and people at the bottom of the chain.”

How many more centuries will people keep believing this lie?

“Corporations are getting to a point where they’re bigger than some governments and to some degree they have too much control over governments. …”

OK, so this guy can at least see…

“People don’t really have a chance to have their say every time we sign up to a new free trade deal.”

… there we go.

 “The way globalisation works is governments dictate how countries interact with each other.”

Yep, because governments never dictated how countries interacted with each other before globalisation came along.

Oh, except for for ever. 

See Jenny, I actually listen to what these guys are saying, and have from the beginning. And thats why I hold the opinions I do.