Transcript Managing the Beast: How Government Can Reduce Wealth Inequality* Jon Forman Alfred P.

Managing the Beast: How Government
Can Reduce Wealth Inequality*
Jon Forman
Alfred P. Murrah Professor of Law
University of Oklahoma
www.law.ou.edu/faculty/forman.shtml
for
WEALTH INEQUALITY AND THE ERODING MIDDLE CLASS
Chapel Hill, NC
November 5, 2007
*Based on Jonathan Barry Forman, Making America Work (Urban Institute Press, 2006).
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Figure 1. The Distribution of Various Economic Resources
100%
Percent of economic resource
80%
Consumer unit consumption, 1999
Household earnings, 1998
Household income, 1998
Household wealth, 1998
60%
40%
20%
0%
Poorest 20%
Middle 20%
Richest 20%
-20%
Quintiles of families
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Figure 2. Ratio of Average Household Income of the Richest 5 and 20 Percent
of Households to the Poorest 20 Percent of Households, 1970-2005
30
26.1
Richest 20%/poorest 20%
Richest 5%/poorest 20%
25
24.6
22.7
19.5
20
18.1
Ratio
16.2
15.7
15.3
14.8
15
12.3
11.7
10.6
10.1
13.2
13.8
10.5
10
5
0
1970
1975
1980
1985
1990
Year
1995
2000
2005
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Figure 3. The Size Distribution of Wealth, 2004: Percentage Share of
Wealth Held by...
90
84.7
80
70
Percent
60
50
40
34.3
30
24.6
20
12.3
13.4
11.3
10
3.8
0.2
0
Top 1%
Next 4%
Next 5%
Next 10%
Top 20%
2nd 20%
3rd 20%
Bottom 40%
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Figure 4. How Taxes and Transfers Reduce Inequality, 2005
100%
Percent of household income
80%
60%
Line of perfect equality
Lorenz curve (income before
taxes and transfers)
Lorenz curve (income after
taxes and transfers)
40%
20%
0%
0%
20%
40%
60%
Percent of households
80%
100%
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Figure 5. Average Cumulative Tax Rates Confronting Low-to-Moderate-Income
Families ($10k - $40k)
100%
Percent
80%
60%
88.6%
40%
58.8%
20%
35.9%
0%
Tax
Plus Food Stamps & Health
Plus TANF, Housing, Child Care
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