Former President Jimmy Carter said, according to the Associated Press, that “[t]he middle class has become more like poor people than they were 30 years ago.”
While the former president is right that times are tough – unemployment is still high and economic growth is still slow – life is still much better for the middle class and the poor today than it was in 2009.
For one thing, a larger number of people earn higher incomes today. As you can see in the chart below, in the 1970s about 20 percent of U.S. households earned above $75,000. Today over 30 percent of U.S. households earn over $75,000. Equally as important, there are less people who earn under $25,000 today, because they have moved into higher income groups.
Don Boudreaux at Café Hayek has another great way to look at how life has improved since the 1970s. Using his Sears catalog from 1975, Professor Boudreaux illustrates that the things that make up everyday life are a lot cheaper today than they were in the 1970s by comparing how many hours of work it takes to pay for an item like jeans or a television.
From Café Hayek (where there are more examples that illustrate the same thing):
- adult jeans: 1975 price was $6.99 (or 1.4 hours); 2013 price is $19.99 (or 1.0 hour)
- television (19″ color): 1975 price was $294.95 (or 60.6 hours); 2013 price is $129.99 (or 6.6 hours)
- 30″ kitchen all-electric range/oven: 1975 price was $159.95 (or 32.8 hours);2013 price is $369.99 (or 18.6 hours)
In almost every case it costs substantially less work hours to pay for the things that we use, and this is to say nothing of the improvement in quality.
Another example worth noting is that over half the country has high tech smartphones with access to the internet at the fingertips at all times. Something that wasn’t thought of ten years ago, let alone 40 years ago. These all represent quality improvements in quality of life.
Carter says all this isn’t enough, that we should raise taxA tax is a mandatory payment or charge collected by local, state, and national governments from individuals or businesses to cover the costs of general government services, goods, and activities. es to mitigate income inequality. From the Associated Press:
“Equity of taxation and treating the middle class with a great deal of attention, providing funding for people in true need, like for affordable housing, those are the sort of things that would pay rich dividends for Americans no matter what kind of income they have.”
But taxes on the wealthy are already high (and, in fact, is the most progressive tax code in the OECD). According to the chart below, the top ten percent of taxpayers pay for over 70 percent of federal income taxes, and the evidence shows that high levels of progressivity damage economic growth, and growth is the current economy’s greatest need.
Now, this all isn’t to say that things don’t need to get any better, because they do. Wages have stagnated the last couple years, job growth has been minimal, and investment is near record lows.
But these are all issues that tax reform can help address. There are plenty of steps that can be taken to help improve the economy: cut the corporate rate and move to territorial; lower the tax rates on pass-through businessA pass-through business is a sole proprietorship, partnership, or S corporation that is not subject to the corporate income tax; instead, this business reports its income on the individual income tax returns of the owners and is taxed at individual income tax rates. es; move towards full expensingFull expensing allows businesses to immediately deduct the full cost of certain investments in new or improved technology, equipment, or buildings. It alleviates a bias in the tax code and incentivizes companies to invest more, which, in the long run, raises worker productivity, boosts wages, and creates more jobs. ; and lower taxes on savings and investment. These steps would help mitigate the poor growth of the U.S. economy, increase wages, create jobs, and lead to the continued advancements in quality of life that the U.S. needs, and Jimmy Carter would like to see.Share