The cure for income inequality lies in the voting booth

The cure for income inequality lies in the voting booth
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A recent Deutsche Bank note on inequality confirmed what millions of American already know: Despite a soaring stock market and reassuringly low unemployment, the gap between Americans’ finances continues to widen.

The data tell a stark picture. The top 10 percent used to capture about one-third of all income, now it gets over half. Wage disparities have been equally as bad. And these glaring gaps in income have produced a marked divergence in prosperity — almost all of the gains in wealth over the past 30 years have gone to the top 10 percent.

According to the research, this is not a case of a rising tide lifting all boats. A record 30 percent of households have zero or negative wealth outside of their housing equity, and the average wealth of the bottom 90 percent has not budged since the mid-1980s. That’s 30 years without progress.


The trends may very well worsen under current policies. The most prominent legislative achievement in the past year was a massive tax cut that was probably the most tilted toward the wealthy in the past half-century. Somewhat improbably, the tax cut will even raise taxes on nearly 70 percent of middle-class families after 10 years.

Think about that: Congress was given a $1.5-trillion blank check for tax reform and still managed to raise the taxes on the bulk of the middle class.

Plans to roll-back the Affordable Care Act would exacerbate these trends. Health insurance is not just a quality of life issue, it is a major financial concern. Health care makes up almost one-tenth of middle-class expenditures, so more expensive care can take a bite out of nest eggs and drive up debt.

Fortunately, there is plenty policymakers can do; increasing the return to work is key. This means not only spending more on traditional education, but strengthening training programs for mid-career workers. Expanding the Earned Income Tax Credit is a proven strategy for boosting take-home income.

In addition, workers will forever struggle to get their fair share unless they regain their bargaining power — both by rolling back anti-union laws and scrapping restrictive practices like non-compete agreements that encumber worker mobility.

It wouldn’t hurt to boost the federal minimum wage, either. It’s tough to combat inequality when full-time workers earn $15,000 per year.


We can also make it easier for families to build wealth. The tax code has traditional sources of asset-building incentives, with taxpayers spending nearly $100 billion annually to boost homeownership and roughly twice that on retirement saving.

The problem is that almost none of this goes to middle-class families. More equal incentives for homeowners and retirement savers would be a reasonable place to start.

But to truly combat inequality, we need an even more fundamental change: Americans must vote in their own economic self-interest.

Residents of the poorest states continue to back policies that make them poorer. The poorest state in the union — Mississippi — overwhelmingly voted for a presidential candidate pushing a tax plan that would give the bottom fifth of taxpayers a cut of $128 per year.

Texas has the highest share of residents without health insurance, but both elected senators voted to repeal the Affordable Care Act and the state legislature refuses to expand Medicaid. Arizona, already beset by poor marks for public education, continues to support state and local politicians that have cut per-student K-12 education funding by 37 percent between 2008 and 2015.

Progressive candidates clearly do not appeal to everyone. Voters back politicians for a host of reasons, including social policy and cultural values. But persistent inequality will remain unless the nation’s working class decides to back candidates who care about their paycheck, too.

Benjamin Harris is a visiting associate professor at the Kellogg School of Management at Northwestern University and was formerly the chief economist to Vice President Biden.