A new study by the Institute for Fiscal Studies (IFS) has found that there is a huge gap between the pay earned on the one hand and the pay received on the other.
Its authors say the gap is “at the root of a widening income gap” between the rich and the poor, with the richest 10% of households earning nearly half the national income.
Their conclusion: “This inequality must be addressed by cutting taxes and spending to create a fairer society.”
In other words, a faireer society means more taxes for the rich.
Income gap The study looked at the incomes of 1,000 households from April 2018 to May 2020.
It found that the top 10% earned a total of $3.3 trillion, or 34.4% of national income, while the poorest fifth earned $1.9 trillion, less than half of the top earners.
The richest 10%, on the average, earned $5.3 million.
While the incomes in this group are larger, the incomes are smaller than those of the poorest.
This means that those at the top are able to pay higher taxes and to have a greater effect on the economy than the other 99%.
The gap between incomes is widest among the very rich.
The richest 1% of Americans, who account for 60% of the nation’s wealth, earned an average of $14.4 million each in 2018.
As of March 2019, they had an average income of $68.4m, more than double that of the bottom 10%.
According to the IFS, the gap between rich and poor is so wide because it is driven by the incomes earned by those in the middle.
For example, a middle-income household earned about $8,000 more per year than a rich household in 2018, and the middle-class income gap is still large, the IF found.
However, the income gap between these two groups is smaller than that between the top 1% and the rest of the population.
Even though the top one percent of earners earn nearly twice as much as the rest, they make up less than 5% of all people.
So, while a larger income gap would be good news for the poor and middle class, the fact that the gap has widened is evidence that it needs to be addressed.
A fairer world means more tax and spending The IFS researchers argue that a faireter society would allow governments to focus on providing greater fairness and equality.
“There is a need for tax cuts, higher spending and increased investment in schools, health care and public services,” the report states.
That means a fairered society would mean higher tax revenues, the researchers argue.
Taxes should be cut to ensure that the poorest pay the same as the richest, and that those earning above the national average do not end up worse off, the report concludes.
These tax cuts would then encourage more investment and more investment would increase the incomes and wages of the middle class.
Reducing taxes would help to create an economy that works for all.
What do you think?
Are the rich better off?
Have the incomes been skewed too much?
Tell us in the comments section below.
Read more on the IFP: The world is more unequal: How the wealth gap is widening and the super-rich are getting richer