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Nov 17

Income inequality decreases in free markets, increases under government regulations

Income inequality is proclaimed to be a major issue for government trusters everywhere. In the U.S., presidential candidates like Elizabeth Warren and Bernie Sanders argue for even greater government regulations and taxes to fight income inequality.

But the data show that U.S. income taxation already places burdens on the highest income earners which are greater than in most countries. In California, the most socialistic state, the highest 150,000 earners among California’s 40 million residents pay half of all income taxes.

A new study by Cato Institute collects research showing that earned wealth is outpacing inherited wealth in most countries, and the richest people in the world tend to experience wealth growth rates that are lower than average stock market growth rates.

43 percent of billionaires on the 2018 Forbes richest 400 list were new in the prior 10 years.

Other studies have shown that the poor spend a higher proportion of their income on highly-regulated goods such as energy than do the rich.

The Cato study concludes that increasing regulations helps the rich and harms the poor.