Keep Your Eyes On The Size Of The Pie

We constantly hear from Liberals in the United States that it is not fair that the Top 1% have so much income

We are told they have too great a share of the national income.

The 1% should pay more in taxes.

We would all be much better if we were more like Europe or another country.

Let's take a step back and put the issue in context.

In 2024, it took $650,000 of income to put you in the Top 1% in the United States.

Let's compare that to some European countries.

Would the United States really be a better place to live if it was more like Europe?

Granted, there is more so-called income inequality today in the United States than in Europe.

I pointed that out in an earlier blog post on that subject in February titled "Income and Wealth Inequality"

It is true that the United States has more income and wealth inequality than European countries that have adopted stronger socialist welfare states than the U.S has.

However, the actual gap has not really changed much in the last 45 years between the United States and these other countries.

Source: https://ourworldindata.org/economic-inequality

You also have to take into account the relative differences in the amount of income and wealth there is to divide between various countries.

The size of the pot of income and wealth also matters.

For example, Czechia has a Gini coefficient of .33 which is the top income equality score in the world.

However, Czechia's GDP per capita is almost $30,000 less than the United States.

There is a big difference in being in the bottom half of income earners in 'equitable' Czechia compared to living in the so-called 'inequitable' United States.

The size of the income pot matters a great deal.

The numbers above show that it is clearly better to be in the top 1% in the United States than in other countries.

However, the same can be said for every other group as you go down the income ladder because of the fact that the income pie is so much larger in the United States.

You really see that by comparing the United States 1% to some other countries in the world.

  

The fact is that a high percentage of the United States population would qualify for the top 1% in many countries in the world.

You can be sure that the people from many of these countries who want to immigrate to the United States are not concerned about "income inequality" in the United States.

They want a piece of that larger income pie for themselves and their family.

That includes those who might be 1% earners in countries like Australia and Canada who see the potential difference in their income potential in the United States.

You can put all of this in further context by looking at the 1% income level from a state level perspective.

It took $1.2 million of income to break into the Top 1% of earners in Connecticut.

West Virginia has the lowest threshold---$420,000.

However, that is still almost twice the level of income to qualify to be in the top 1% as you will find in much of Europe, Australia and Canada.

All of this reinforces the conclusion that I made in my earlier post this year on income equality.

The most important thing is to keep your eyes on the size of the pie.

We should not ignore the issue of income inequality in public policy discussions but our time would be much better spent working to make the economic pie bigger rather than worrying about how to slice it.

The bottom line is that we are in this together in this country.  President Kennedy said it best 60 years ago when he said, "A rising tide raises all boats".   

The reality is that when the rich do better it follows that everyone generally does better.  If the rich become poorer, we all most certainly will become poorer.  

We need to start recognizing that if the 1% and 99% work together we will get much more than 100% in the end. 

If we pit the 99% versus the 1%, it is guaranteed that we will get much less than 100%.