LEFT-of-center policy groups often lament income inequality, using the gap as a way to push “progressive” solutions such as higher taxes on top earners (including some in the middle class), a higher minimum wage and perpetual unemployment benefits. The Oklahoma Policy Institute joins this parade with a drumbeat of statistics showing that income inequality is exceptionally high in this state.
Frankly, we've never understood how punishing the most successful will help anyone else, but that's a topic for another day. Among OK Policy's prescriptions for what it sees as the disease of income inequality is a less regressive tax system, which would include exempting groceries from the sales tax.
Most Oklahomans would like to avoid paying state and local sales taxes on groceries. The problem, as OK Policy surely knows, is that municipal governments depend heavily on sales taxes; exempting groceries would be devastating for them. Recommending a grocery exemption is thus a hollow policy pronouncement.
OK Policy cites statistics showing that the income gap between top earners and the middle class between the late 1970s and the middle of the first decade of the 2000s was greater in Oklahoma than in all but two states. Interesting, though, is the fact that Oklahoma is on a top 10 list populated by Connecticut, New York, California and a slew of blue states (Texas is the exception) that basically embrace the concepts OK Policy is pushing.
Why is income inequality so great in those states? Perhaps the income gap is widening because some people are working harder and succeeding out of proportion to other people.
We used to celebrate hard work and financial success in this country. Now we lament the income gap. We seek government solutions to narrow it. For the rich to have less and the government to have more might change the gap statistics, but does it change human dynamics?
A New York Times story this year noted that income distinctions are heavily linked to family structure, perhaps more so than to the tax code. As we noted in a July editorial, two-parent households have “a profound advantage in income and nurturing time” that “makes their children statistically more likely to finish college, find good jobs and form stable marriages.”
Yet we don't see in the progressive agenda any recommendations for specific ways to encourage two-parent households. Instead we see appeals for a higher minimum wage indexed to inflation. We see calls for higher, longer unemployment benefits. We see pleas to make the wealthy pay more income taxes.
At the state level, higher taxes for the rich may have the effect of driving people to other states. That should narrow the income inequality gap in the states being abandoned, but it hasn't done so in California and other high-tax states in the top-10 gap list.
Hollow demands for exempting groceries from the sales tax make for good policy platform planks, but they don't translate into policy changes. That would require a restructuring of the tax system. A reduction in the state's personal income tax, fought vigorously this year by OK Policy, went nowhere partly because analysis revealed that it would result in many middle-class taxpayers getting a tax increase while those in higher and lower incomes improved their positions.
The income gap is a peculiar obsession. We should focus instead on the gap between what all taxpayers make and what they get to keep and the gap between the cost of government programs and the ability of citizens to pay for them.