Study undercuts Obama’s income inequality argument

Study undercuts Obama’s income inequality argument

Washington’s tax hike on wealthier Americans won’t accelerate economic growth, won’t create jobs, and won’t lower the debt by more than a rounding error. So what was the point of all that debate about the fiscal cliff? Why did President Obama insist on those upper-income tax increases, especially when the economy continues to struggle?

Simple: It was a way — even if mostly — of addressing what President Obama views as America’s biggest problem: Rising income inequality. The purest expression of the president’s economic views came during a 2011 speech in Osawatomie, Kansas, where he spoke at length about how rising inequality “hurts us all” and “gives lie to the promise that’s at the very heart of America: That this is a place where you can make it if you try.”

But does the data back up Obama’s rhetoric? Most claims that it does are based on two inequality studies, one by economists Thomas Piketty and Emmanuel Saez, the other by the Congressional Budget Office. Both studies are frequently cited in mainstream media stories about income inequality. But new research by Philip Armour and Richard Burkhauser of Cornell University and Jeff Larrimore of the Joint Committee on Taxation raises questions about those two studies and their conclusions. Here are their two key findings:

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