Economic Inequality

  • February 28, 2017
    Guest Post

    by Jennifer Bird-Pollan, James and Mary Lassiter Associate Professor of Law, University of Kentucky College of Law

    Economic inequality can mean a variety of different things, and can be measured in a variety of ways. One might be concerned about absolute inequalities of income or wealth, where, for instance, some members of a society have high incomes, and others have low incomes, or no income at all.  One might also be concerned about inequality of opportunity, where, a society does not provide equal chances for all to achieve success, often because of factors outside of an individual’s control, such as that person’s race, gender, or geographic location. However you define or measure it, there is general consensus that economic inequality in the United States is at historically high levels. A variety of factors have contributed to the rise in inequality. Despite the all-American belief in the story of the self-made man and the value of pulling yourself up by your own boot straps, it has become clear over the past few decades that the American tax and transfer system does very little to facilitate upward economic ability in the United States.

    Using the federal government to address economic inequality requires two components: the government must raise tax revenue from those with wealth and/or income, and then use it to fund programs that support the lowest income members of society. Unfortunately, our government has been resistant to both of those steps in the past few decades. The highest marginal individual income tax rate was as high as 94 percent in the middle of the 20th Century, while in 2017 the highest marginal tax rate is 39.6 percent.  These numbers don’t tell the whole story, since when the highest rate was over 90 percent, it only applied on amounts earned over very high income thresholds (approximately $2.5 million in today’s dollars). By contrast, today’s top marginal rate applies to income over about $400,000. Nonetheless, there has been an overall reduction in the effects of the individual income tax on high-income earners. While the individual income tax is the largest source of revenue in our current tax system, other taxes administered by the federal government have been cut in recent years as well. The federal wealth transfer taxes, including the gift tax and the estate tax, applied to all transfers over $675,000 as recently as 2001. Under current law, individuals can transfer $5,450,000 ($11,900,000 for a married couple) to their heirs without paying a penny of wealth transfer tax. And while our corporate tax rate remains at least nominally relatively high (35 percent) when compared internationally, changes to the tax code that allow for nearly indefinite deferral of corporate tax obligations, as well as an evolution of the kinds of entities taxpayers use to do business significantly reduce the amount of revenue raised through the corporate tax system. In other words, nearly every means the government has to raise tax revenue from the high income and high wealth members of society has been scaled back, reducing the ability of the government to fund the kinds of programs that might fight economic inequality from the bottom up, by funding programs in education, childhood poverty fighting measures, or health programs, just to name a few.

  • February 22, 2017
    Guest Post

    by Maura Healey, Attorney General of Massachusetts*

    To pay for the hallmarks of a decent middle-class life, American families have found it increasingly necessary to borrow money. We tell our children that a college degree is essential for their success in the modern economy, but few students can afford the ever-increasing costs of higher education without incurring student loans. (1) We extoll the virtues and benefits of homeownership, but the high cost of housing requires most homeowners to have a mortgage loan. (2) As middle-class wages have remained stagnant, consumers have looked to credit to pay for essential expenses like transportation, medical bills, and childcare. As a result, many American households find themselves deeply in debt.

    Too often, these debts have proven to be disastrous. Countless students sought to learn essential job skills and borrowed heavily to do so, but instead became the victims of high-cost, fraudulent, for-profit schools that offered no meaningful vocational training. (3) Homeowners across the country are still grappling with the consequences of the predatory subprime mortgage loans that caused the financial crisis of 2008. (4) While debt may allow some families to succeed, debt cripples the aspirations and ambitions of many others— approximately seventy-seven million Americans have at least one delinquent debt on their credit report. (5) 

    Given the challenges that consumer debt poses to the economic security of so many people, I applaud the Harvard Law & Policy Review for devoting this issue to discussing the rights and obligations of creditors and debtors and to the appropriate policy responses to America’s ongoing struggles with debt.

  • January 18, 2017
    Guest Post

    *In October, ACS released "What's The Big Idea? Recommendations for Improving Law and Policy in the Next Administration." With that next administration on the horizon, authors of the report are reviewing their recommendations in the ACSblog symposium: Updating The Big Idea.

    by K. Sabeel Rahman, Assistant Professor of Law, Brooklyn Law School

    As the incoming Trump administration prepares to take office, many Obama era policy initiatives find themselves in the crosshairs of the new administration and the Republican Congress. On the table are a variety of proposals including not only the headline proposed dismantling of the Affordable Care Act, but also measures that could undo the FCC’s net neutrality rules, further privatize the public school system and even voucher-ize parts of Medicare. These proposals represent more than just a pendulum swing away from government regulation to conservative free market principles. Rather, at stake in this debate is a much deeper issue about the nature of public goods and the determinants of economic opportunity and freedom.

    While laissez-faire political thought often portrays the market as a domain of economic freedom and opportunity, unsullied and unskewed by government interference, genuine economic freedom and opportunity require much more than the removal of government interference (even if such a thing were possible). Freedom is not just the absence of restraint; it is the affirmative capacity to pursue life choices and ends that each of us has reason to value. That capacity in turn depends on equal and universal access to foundational goods and services that make such economic opportunity and freedom possible. The underlying infrastructure of economic opportunity thus includes access to things like education, healthcare, labor protections from economic insecurity and the like. In the absence of these goods and services, individuals and communities alike are deeply insecure, vulnerable, unable to enjoy meaningful economic freedom and opportunity

    If the goal is to provide this kind of freedom for each of us to develop the lives and experiences we have reason to value, then the purpose of social policies must be understood in terms of enabling access to those goods, services and opportunities whose presence in turn enables that freedom—and whose absence narrows it. We can think of these as public goods in which our policies must invest. These public goods are not physical infrastructure like roads or bridges; they are a kind of “social infrastructure,” that make possible a wider array of stable, secure life pathways. Since these resources are critical enablers of a wide range of social uses and projects, they must be managed as a commons: open to use by all on principles of equal access and nondiscrimination, simple to identify and access without excessive or confusing barriers, designed to maximize these downstream uses and the spillovers and innovations that might result.

  • January 12, 2017
    Guest Post

    by Phil Telfeyan, Executive Director of Equal Justice Under Law and lead attorney in Buffin v. San Francisco

    No person should have to spend even one day in jail solely because he or she is poor. This fundamental axiom of American law is the cornerstone of the movement to end America’s discriminatory money bail system. In the past two years, Equal Justice Under Law has filed 11 lawsuits seeking to end money bail in cities and states across the country. Seven of these suits have led to the end of money bail in those seven cities; our litigation in San Francisco has the potential to end wealth-based detention across all of California.

    On Oct. 26, 2015, 19-year-old Riana Buffin was arrested for stealing from a department store. Under San Francisco’s bail schedule, she could have been immediately released if she had paid $30,000. But because she is too poor to pay that amount, she sat in jail for two days until the District Attorney decided not to press charges. Because of those two days in jail — two days a rich person would not have endured — Ms. Buffin lost her job at the Oakland airport, cutting off an essential source of income for her mother and two younger brothers (all three of whom have disabilities). Nobody thought Ms. Buffin was a danger to society. She had never been arrested before and the DA did not even file charges against her.

    Ms. Buffin is the lead plaintiff in a class action lawsuit — Buffin v. San Francisco — seeking to end San Francisco’s wealth-based detention scheme. The city currently runs two systems of pretrial justice: one for the rich and another for the rest of society. The poorer you are, the worse San Francisco’s justice system treats you.

    After numerous motions to dismiss, United States District Court Judge Yvonne Gonzalez Rogers declared that our legal challenge could move forward on the merits against Sheriff Vicky Hennessy. On Nov. 1, 2017, the Sheriff’s response came in: she and the City Attorney refused to defend money bail. “This two-tiered system of pretrial justice does not serve the interests of the government or the public, and unfairly discriminates against the poor,” the filing stated. Although the Sherriff will continue to enforce the State’s law, “she is not required to defend it, and she will not.”

  • August 17, 2016

    By Kevin Battersby Witenoff

    In The Hill, Melissa Boteach and Rebecca Vallas advocate to reform TANF and expound upon the necessity to improve other social welfare programs.

    The ACLU has filed a lawsuit against the Florida Department of Corrections on behalf of transgender woman, Reiyn Keohane. The ACLU and Keohane are alleging the DOC has infringed upon her Eighth Amendment rights by disallowing hormone therapy treatment, reports Andrew V. Pestano of UPI.

    The Huffington Post published an op-ed by Jason Steed in which he explains why it may be in Republican Senators' best interest to reconsider a hearing for Supreme Court nominee Merrick Garland.

    Annalyn Kurtz in The New York Times highlights the challenges faced by new mothers in a male-dominated field that are representative of the struggles females encounter in the workplace across the country.