Let’s deal with income inequality the easy way
We can address income inequality the easy way or the hard way.
The shrinking middle class and the growing chasm between rich and poor Americans should worry everyone, and politicians from across the spectrum will campaign on the issue this fall. But there are a limited number of ways to solve the problem.
On the left, presidential candidate Bernie Sanders talks about raising taxes, mostly on the rich, by $15.3 trillion and redistributing the income through government programs. That’s how the U.S. created the middle class during the 20th century, and he’s more than happy to use this proven technique.
Lowering taxes, though, is proven to boost economic activity. That’s why Republicans have fought to keep taxes as low as possible for the last 30 years.
The alternative to taking wealth from the top is to boost those at the bottom. And that’s the thinking behind the updated overtime rules announced Wednesday.
For decades, employers could avoid paying overtime to people who made more than $23,660 a year by calling them managers. Even though it’s hard to imagine an employer expecting someone to manage others for only $23,000 a year, a lot of restaurants apparently do it.
The Department of Labor has raised the threshold to $47,476, effective Dec. 1. That’s a real managerial salary. Employers are howling about the new rule, just as they howl when Democrats talk about raising the minimum wage. Higher wages mean lower profits or higher prices for customers, and employers hate both of those options equally.
Raising incomes at the bottom, though, is the easy way to address income inequality. Decreasing poverty reduces reliance on government programs, and higher-paid workers also spend more.
That’s much better than raising taxes on the rich, which hurts economic growth.
Let’s accept the challenge of addressing income inequality, but instead of dragging people down, let’s lift people up.