Why yes, income inequality is a problem

One of the hot terms occupying the center ring of the political circus these days is “income inequality.” (See what I did there?) It’s become so popular, in fact, that the Congressional Budget Office has jumped on the bandwagon and produced a study on it.

As the Occupy Wall Street movement persists in cities across America and gains supporters across the globe, a new report by the nonpartisan Congressional Budget Office (CBO) echoes the concerns raised by the movement’s growing legions.

The CBO report details trends in the distribution of household income between 1979 and 2007, and reveals that after-tax income for the highest income households grew more than it did for any other group during that period. After-tax income is income after federal taxes have been deducted and government transfer payments, such as Social Security and unemployment insurance, has been taken into account.

Right off the bat, I would note that there is something inherently stirring for Americans about the term inequality. We don’t like it and we never have. The long term trend of our nation’s admittedly flawed past has been to eliminate, not reinforce, instances of inequality. When I think of that term, I think of a government which allows one group of people – such as men – to vote and participate in the democratic process while another group – let’s say… women – are not allowed to do so. And we had that in our country. The government was treating different groups of people in an unequal fashion, and we eliminated it.

Going further back, we had the institution of slavery. Yet again the government was treating two groups of people – based on the color of their skin – in different, unequal fashions. And, again, we got rid of it.

So when I hear the term “income inequality” – and call me crazy if you like – here’s what comes to my mind: a government which treats two groups of people differently by way of how heavily they will tax the income and wealth they manage to accumulate. In this case the two groups are those who succeed in accumulating more, and those who fail to do so. And given our system of reporting income for tax purposes, it’s not much harder to determine who falls into each group than it is to identify the skin color or gender of any given American.

So yes, Virginia, we do have income inequality in America. The government is treating two subsets of the population with a different level of harshness. I wonder if we shouldn’t get rid of this inequality as well?