American Inequality in Six Charts, an article in The New Yorker, looked at income inequality in the U.S. and did so using a set of charts put together by the Center for American Progress, the center-left think tank founded by Bill Clinton’s former chief of staff John Podesta as well as the author’s on research.
One image that struck me was quite interesting.
According to the author, John Cassidy, this chart “shows a measure of pre-tax inequality and inequality after taxes and transfers for twenty-two advanced countries. The measure used is a Gini coefficient, which captures inequality on a scale of zero to one, where zero is perfect equality (everybody receives the same income) and one is perfect inequality (the richest person gets all the income). The light lines on the bar chart show pre-tax inequality. The dark lines show inequality after taxes and transfers.”
He goes on to say:
“One striking thing about this chart is that the U.S. figure for pre-tax inequality (0.57) doesn’t really stand out. In fact, according to this metric, the United States has pretty much the same level of pre-tax inequality as Sweden and Denmark, two countries that are usually thought of as highly egalitarian. The United Kingdom, Ireland, and several other countries have pre-tax levels of inequality that are considerably higher than the level seen in the United States.”
What can we conclude? Janet Gornick, a political scientist at the CUNY Graduate Center, states that “what this means is that, contrary to popular perception, our system of taxes and transfers does less to ameliorate inequality than the systems other countries have. Take Ireland, for example, where government interventions reduce the level of inequality from 0.63 to 0.35, a reduction of 0.28. In the United States, the comparable figures are 0.57 and 0.42, a reduction of just 0.15.”
So in the United States, income inequality is less than much of the world prior to taxes and transfers, or income redistribution. However the United States leads in global, post-distribution income inequality because it does not transfer as much wealth as other countries.
Q4U: Is it a good thing that the United States does less wealth transfer compared to the rest of the world?
