Saturday, February 25, 2006

Why Is The Income Gap Widening?

Income distribution has been on a downward spiral in the US for quite sometime. The gap between the rich and the poor has progressively widened, the gully has become an abyss!!! Up until the 1960's the top 20% of US households earned ten times as much as the bottom 20% of households. This relatively high ratio has become larger still. The increasingly inequitable distribution of income has produced the current gulf where the top quintile (20%) of US households earn 14 times more than their counterparts at the bottom.

And yet the present administration in the White House is committed to making the tax cuts permanent or at least extending them until 2015. So what is wrong with a tax cut you ask? It is estimated that if the law is extended until 2015 then the average tax payer in the bottom 20% can expect an annual benefit of $23.00, yes that is not a misprint the benefit will amount to 6.3 cents a day for those that belong to the bottom 20% of the income earners. On the otherhand the top one tenth of one percent will each save $196,000.00 each year. A quick back-of -the-envelope calculation shows that the 20 million tax payers will share $460 million while the richest 100,000 tax payers will get a downpour of $19.6 billions. Now that is a trickle down effect in action!

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