2010-10-26

Why the US economy will be in the toilet for a long time US Gini 0.542

calculated using corrected formula and sanitized Social Security Medicare flat tax data
http://ssa.gov/cgi-bin/netcomp.cgi?year=2009

The blue line represents a perfect flat distribution of income. The bottom 10% according to this ideal gets 10% of the income, and the bottom 30% gets 30% of the income, and the bottom 70% of earners gets 70% of the income. The green line represents how much income those fractions of the population actually get. The more the green line sags, the greater the Gini Coefficient.

0.542 (much better than the old .0608 calculated with a mistake from erroneous data but still) puts the US in league with Africa and Central America. A low Gini coefficient is a mark of civilization. A high one is trouble. Countries with bad income disparity don't have vibrant economies. The same supply-sider arguments against progressive taxation dragging on the economy also apply to an oligarchy distorting markets. Now that the economy is not growing, there's no "increasing the whole pie"  argument to stave off "why is my slice so small?"

6 comments:

  1. I think this makes a very strong case for raising taxes, specifically making them more progressive. I see that there are tax-bogeyman political ads showing up on this blog. Please click on those ads, especially if you agree that the ultra-rich need to stop dodging taxes. The people who pay for these ads can easily afford it!

    ReplyDelete
  2. I cannot find that the top bracket $50 million + averages out at $518 million and there are only 72 "players" in that category. Was there a data error in the original? Not that it matters, they are still earnings obscenely high salaries (in flagrant and absurd violation of the "marginal productivity of labor" non-sense)

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  3. Scary Wage Data II -- Social Security Changes Its Numbers
    http://tax.com/taxcom/taxblog.nsf/Permalink/UBEN-8ATH9M?OpenDocument

    False alarm! The data contained some errors.

    "Mark Lassiter, a Social Security spokesman .. said .. two individuals filed multiple W-2 forms reporting $32.3 billion of pay for work, forms the agency determined after examination were phony."

    If anyone wants the new Gini index based on the revised numbers, post a comment to request it below, or I'll let sleeping dogs lie.

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  4. OK. I recalculated the Lorenz curve chart and Gini index based on the updated SSA 2009 wage data, but I discovered an error in my formula which distorted the upper incomes' percentage more than lower incomes.

    If you must know, I was mis-estimating the area under the Lorenz curve by adding instead of subtracting the triangular areas from the "right Reimann sum" which would have been clipped by the Lorenz curve.

    Always check your work, kids!

    ReplyDelete
  5. Thanks for these data:

    I have estimated some Gini indices for IRS (positive income) AGI.

    http://scholar.library.csi.cuny.edu/~volschot/giniirs.htm

    Since they give the agg for the brackets, it can be estimated pretty straightforwardly in excel

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