Entitlements, Not Tax Cuts, Widen the Wealth Gap

What should be done about income inequality? That basic question underlies the arguments hashed out in the supercommittee and promises to be a central issue in the presidential campaign.

Supercommittee Democrats argue that income inequality has been increasing and can be at least partially reversed by higher tax rates on high earners. They refused to agree on any deal that didn’t include such tax increases.

Supercommittee Republicans offered a plan to eliminate tax preferences and reduce tax rates, as in the 1986 bipartisan tax reform. They argued that high tax rates would squelch economic growth.

They didn’t make the case that their proposals would also address income inequality. But House Budget Committee Chairman Paul Ryan, in a 17-page paper based largely on a Congressional Budget Office analysis of income trends between 1979 and 2007, has done so.

Ryan, a Republican from Wisconsin, makes the point that the government redistributes income not only through taxes but also through transfer payments, including Social Security, Medicare, food stamps and unemployment benefits. The CBO study helpfully measures income, adjusted for inflation, after taxes and after such transfer payments.

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 Read More at Human Events By Michael Barone, Human Events