World Politics News   Articles for World Politics Course

I have posted many articles about the growing income inequality in the US which I regard as the most serious problem in the country right now.  It has been getting worse over the last 40 years, and one of the main causes of inequality is the way the tax system favors capital over labor income.  The National Bureau of Economic Research has just published a report on a tax technique of which I was unaware:  the growth of “pass-through” entities which allows corporate profits to be taxed at a much lower rate.  According to the NBER report:

In 1980, pass-through entities accounted for 20.7 percent of U.S. business income; by 2011, they represented 54.2 percent. Over roughly the same period, the income share of the top 1 percent of income earners doubled. Previous research has shown that the two phenomena are linked: The growth of income from pass-through entities accounted for 41 percent of the rise in the income of the top 1 percent. By linking 2011 partnership and S corporation tax returns with federal individual income tax returns, in particular Form 1065 and Form 1120S K-1 returns, the researchers find that over 66 percent of pass-through business income received by individuals goes to the top 1 percent. The concentration of partnership and S corporation income is much greater than the concentration of dividend income (45 percent to the top 1 percent) which proxies for income from C corporations (traditional corporations). While taxpayers in the top 1 percent are eight times as likely to receive dividends as taxpayers in the bottom 50 percent, the ratio for partnerships is more than 50 to 1.

Such is the sleight of hand used to disguise how the rich get richer.

Ian Buruma is a brilliant analyst/historian of world politics.  One of his more recent essays analyzes the rhetoric of the current Republican candidates with respect to US policies toward Daesh (the Islamic State), specifically Senator Cruz’s promise to “carpet bomb” the caliphate and Trump’s promise to “bomb the shit” out of Daesh.  Buruma points out the vulgar silliness of such policy prescriptions, advocated by people who know absolutely nothing about the experience of war.