"Obama and Friends Discover Inequality"--(a different view)

[ProSense]

9. There it is

"Therefore, in Obama’s SOTU speech today we’ll hear some basic facts about the problem, some vague proposals that are never intended get to the earliest legislative stages "

... the "vague proposals," filling in for the cliche "pretty speech." Except the President's speech was laced with a lot of things that he can do via executive action, like raising the minimum wage for about a half a million workers, which is likely to force Congress to act.:

Senators Warren, Markey Praise Presidential Executive Action to Raise Minimum Wage for Federal Contract Workers
http://www.democraticunderground.com/10024405389

Together with Congressional action it will have a significant impact.

The days are long over when minimum wage workers were high school kids from middle-class families picking up spending money working after school. The workers who will benefit from a minimum wage hike are overwhelmingly adults, many of whom are supporting children. The higher minimum wage will also put a substantial dent in the poverty numbers, reducing the share of the population in poverty by 1 to 2 percentage points, close to 5 million people.

http://www.smirkingchimp.com/thread/dean-baker/53892/president-obamas-inequality-story

The Tight Link Between the Minimum Wage and Wage Inequality

by Lawrence Mishel

A higher minimum wage is an important way to address wage inequality, as the erosion of the minimum wage is the main reason for the increase in inequality between low-and middle-wage workers (in particular the 50/10 wage gap, that between the median and the 10th percentile earner). This is particularly true among women, the group for whom the wage gap in the bottom half grew the most. As the figure below shows, two-thirds of the increase in the 50-10 wage gap can be attributed to the erosion of the real value of the minimum wage. [The 50/10 wage gap grew 25.2 (log) percentage points between 1979 and 2009 and that two-thirds of this increase (16.5 percentage points, or 65 percent of the total) can be attributed to the erosion of the minimum wage.] The paper this figure draws on usefully and appropriately captures the spillover impact of the minimum wage—the impact on those earning above the legislated rate. This finding makes sense, since it was in the 1980s that the minimum wage eroded the most, and that was the same time period when the 50/10 wage gap among women expanded greatly. The erosion of the minimum wage explains over a tenth (11.3 percent) of the smaller 5.3 (log) percentage point expansion of the 50/10 wage gap among men. For workers overall more than half (57 percent) of the increase in the 50/10 wage gap was accounted for by the erosion of the minimum wage.



- more -

http://www.epi.org/blog/tight-link-minimum-wage-wage-inequality/

How about the health care law that some people wanted to kill?

Obamacare Will Help Reduce Income Inequality

by TomP

Obamacare is far from perfect. Many of us have long sought a single payer system, but that was not doable in 2010. Perhaps a public option was, and it is unfortunate that we did not achieve that. It is one of the reforms to Obamacare that progressives should fight for.

My post today is about some good news. A study from the Brookings Institution shows that Obamacare will help reduce income inequality. Of course, much more is needed, but it all adds up. This is a step forward. (Raising the minimum wage also is very important because it will cause a bump in wages at minimum wage and wages above it (and it likely will have to be done state-by-state).)

Here's the study on Obamacare and inequality:

THE ARCHITECTS OF THE AFFORDABLE CARE ACT (ACA) sought to expand health insurance coverage, slow the growth of health care spending, and improve the quality of care. Changing the distribution of incomes was not a stated objective. Nonetheless, the ACA may do more to change the income distribution than any other recently enacted law. It does so by requiring employers to offer affordable health insurance to their full-time employees, by providing refundable tax credits to help make private health insurance affordable, and by expanding eligibility for Medicaid. The law penalizes nonpoor adults who are offered affordable coverage and do not buy it. It reduces subsidies for some Medicare plans and imposes new taxes on the labor and investment incomes of high-income families. In each of these ways, the new health law will change the net incomes of Americans at all income levels.

Brookings Institution: POTENTIAL EFFECTS OF THE AFFORDABLE CARE ACT ON INCOME INEQUALITY

You can read the entire study at that link. Here is a synopsis from TPM:

Obamacare is poised to mitigate soaring inequality by raising the incomes of the poorest Americans, according to a new study by the Brookings Institution.

By 2016, when its core provisions will have fully taken effect, the law will lift the average incomes of the bottom one-fifth of earners by nearly 6 percent, and the incomes of the bottom one-tenth by more than 7 percent, the study found.

The "great majority" of beneficiaries of the law's subsidies and Medicaid expansion will be in the bottom half -- and the "overwhelmingly majority" in the bottom third -- of the income distribution.

Obamacare is worth defending.

http://www.dailykos.com/story/2014/01/27/1272820/-Obamacare-Will-Help-Reduce-Income-Inequality

Krugman: Obama and the One Percent
http://www.democraticunderground.com/10024391415

The new heatlh care law raised the payroll tax for high income earners and taxed investment income.

Net Investment Income Tax

A new Net Investment Income Tax goes into effect starting in 2013. The 3.8 percent Net Investment Income Tax applies to individuals, estates and trusts that have certain investment income above certain threshold amounts. The IRS and the Treasury Department have issued proposed regulations on the Net Investment Income Tax. Comments may be submitted electronically, by mail or hand delivered to the IRS. For additional information on the Net Investment Income Tax, see our questions and answers.

Additional Medicare Tax

A new Additional Medicare Tax goes into effect starting in 2013. The 0.9 percent Additional Medicare Tax applies to an individual’s wages, Railroad Retirement Tax Act compensation, and self-employment income that exceeds a threshold amount based on the individual’s filing status. The threshold amounts are $250,000 for married taxpayers who file jointly, $125,000 for married taxpayers who file separately, and $200,000 for all other taxpayers. An employer is responsible for withholding the Additional Medicare Tax from wages or compensation it pays to an employee in excess of $200,000 in a calendar year. The IRS and the Department of the Treasury have issued proposed regulations on the Additional Medicare Tax. Comments may be submitted electronically, by mail or hand delivered to the IRS. For additional information on the Additional Medicare Tax, see our questions and answers.

http://www.irs.gov/uac/Affordable-Care-Act-Tax-Provisions