Saez-Piketty lies of omission
What did Saez/Piketty and their followers leave out?
- People adapt to tax policies, so many chose benefits that get taken out before income, instead of raises which get reported as income: so bigger pensions, 401K’s, Student Savings, Healthcare benefits, vacation/flex time, and so on — those have value (income), but aren’t accounted for in IRS data
- Piketty and Saez never touched on purchase power (they only looked at income inequality differences, not actual increases in lifestyle)
- There are the hand-outs to the lower (and middle) classes that were never factored in (like Social Security/Medicare). While other countries count welfare and food and rent subsidies, discounts for the poor on utilities, tax credits and so on, as income, the U.S. does not. This averages to about $35K/poor person (and less for middle earners) -- but that income doesn't show up in IRS data, even-though the benefits have value and have increased
- the final scam is these tables look at family income (not individual income). Why does that matter? Because family sizes have gotten smaller, more divorces, later marriages, and so on. This means even if you divide more income, over more households, it can look like your incomes went down, when the only thing that changed is family makeup.
So not only were they massively wrong in how much incomes had grown, and completely missed how much class mobility there is (go through various groups, from rich to poor, during their lives), but they either were completely incompetent as an economist or intentionally didn’t account for all the hidden income gains (or changes) that would eliminate their income inequality delusion. The left loves them for their agenda, the informed resent their political propaganda (disinformation) that is used to mislead the gullible.
Tax Policy Scam
There’s another scam on a scam.
If you see any table that starts measuring relative income in 1970’s or 1980’s, it’s a big red flag.
Reagan changed the tax code in 1981. Why does that matter?
- Before this personal income tax was 70%, and corporate income tax was 35%. Does that mean all rich people were stupid and paid 70%? No. Virtually none did. They all had offshore accounts and/or shell corporations (trusts, etc), to hide that income and avoid those taxes. Most of their income went into the Corporations/trusts so they paid the corporate tax rates on that money, and saved 35%.
- Once we flattened/simplified the tax code (made corporate and personal income about the same, at 35%), there was no need for the shell corps. So people started reporting ALL their incomes as personal income taxes. It looked like the personal incomes of the rich (and upper middle class) shot upwards, but the only thing that changed was tax compliance.
- You can see this in the two charts to the right. Tax revenues doubled (because employment shot up, as well as incomes and tax compliance). And the amount of taxes paid by either the top 1% or top 10% increased.
Did the rich suddenly get any richer? Very little (because a rising tide raises all boats). But what really happened is the accounting changed. Thus anyone that uses personal income taxes as the basis for their “income inequality” numbers (without adjusting for these changes), is either a complete fool (and knows nothing about tax policy), or is a fraud (they know they’re cooking the numbers by not correcting for these changes, but they’re intentionally deceiving people). Saez and Piketty don’t correct for the tax change. Nor do most of the Newspaper articles that regurgitate the crisis in the middle class. I'll leave it to the reader to decide if the sources are ignorant or deceptive.