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US GOP lawmakers redistributing income from poor to rich: Study

Demonstrators hold signs during a rally against the Republican tax plan on December 13, 2017 in Washington, DC. (Getty Images)

The US tax bill under consideration by Republican lawmakers in Congress is likely to drive income disparities even wider in the US, through generous tax cuts to corporations and the wealthiest Americans, according to a massive new study on global inequality.

The tax overhaul would provide a massive corporate tax cut and further reductions in the estate tax and the income-tax rate for the rich and more modest tax cuts to middle- and low-income families.

Under the tax proposal, the top rate of income tax will drop from 39.6 percent to 37 percent, in a move that will intensify criticism of the deal as overly generous to the wealthy and big business.

The rise of income inequality in the United States is “largely due to massive educational inequalities, combined with a tax system that grew less progressive,” according to the 2018 World Inequality Report, written by a team of leading international economists including Thomas Piketty.

The study shows that the bottom 50 percent of wage-earners in the United States take in only 13 percent of the country’s income, while the top 1 percent grab over 20 percent.

According to the report, the bottom 20 percent of US earners saw their after-tax income rise by just 4 percent from 1980 to 2014. By contrast, the top 10 percent saw their post-tax income more than double over the same period.

Since the 1970s, the US tax code has become more generous to the wealthiest Americans.

The top marginal income-tax rate fell from 70 percent in 1980 to 39.6 percent in 2017, while taxes on capital gains fell by more than half from the mid-1970s to the mid-2000s.

Those changes have made it easier for high-income Americans to grab more and more of the income pie in any given year.

By contrast, Western European countries took a different approach, according to the report. “Continental Europe meanwhile saw a lesser decline in its tax progressivity, while wage inequality was also moderated by educational and wage-setting policies that were relatively more favorable to low and middle-income groups.”

The income situation in Europe underscores that the growing gulf between rich and poor in the United States is largely a result of deliberate policy decisions, and not the consequence of an advanced economy.


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