“Inequality: What Does the Data Say” – Dr. Phil Magness at University of Georgia

YAL UGA hosted Dr. Phil Magness of Berry College on Monday to discuss statistics concerning wealth inequality in the United States between the early 20th century and today. Dr. Magness began with an overview of the argument of Dr. Thomas Piketty that, during this time, the periods of lowest taxation of the wealthy have corresponded with, and have caused, the periods of greatest inequality. Dr. Piketty posited that prior to WWII and after 1980, taxes on the wealthy were low and inequality was high, and that between WWII and 1980, taxes on the wealthy were high and inequality was low.

Dr. Magness then addressed the statistical issues with Dr. Piketty’s claims. Before WWII, income and tax data are very unreliable, due in part to poor enforcement mechanisms; among others issues, middle-income households often understated their wealth to avoid paying taxes. After WWII and before the Reagan tax cuts, while the top tax rate was in fact very high, no one actually paid that much because of all the loopholes in the tax code. When these loopholes are considered, the effective tax rate during this period is similar to that in other periods. Finally, various statistics disagree on whether wealth inequality has in fact increased since 1980.

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