Thursday, April 24, 2014

If your family makes less than $50k per year, you'd be financially better off in Canada or Northern Europe

Yesterday we made the case that the US is a low tax, relatively high inequality country. This isn't hard to do, as it's widely accepted. In fact, one of the tenets of US economic policy since Reagan (who won his first term in 1980) has been that the economic growth brought by low taxes will lift all boats faster than if we had a more distributive economic system. But is this the case? An exciting new data set compiled by the LIS group at CUNY looks at income comparisons across countries for those all across the economic spectrum, and allows us to answer that exact question (via this article).

Here's a figure showing income growth, by income decile, from 1980-2010 across a handful of rich countries:


This comes from here (where it has an awesome interactive feature). The takeaway? For those making less than the median salary in the US, pay has risen much faster in almost every other developed country. And, across much of the income spectrum, several of these countries have now caught up with us in terms of pay. The authors of this article explain:
A Gallup survey conducted between 2006 and 2012 showed the United States and Canada with nearly identical per capita median income (and Scandinavia with higher income). And tax records collected by Thomas Piketty and other economists suggest that the United States no longer has the highest average income among the bottom 90 percent of earners.
And this:
More broadly, the poor in the United States have trailed their counterparts in at least a few other countries since the early 1980s. With slow income growth since then, the American poor now clearly trail the poor in several other rich countries. At the 20th percentile — where someone is making less than four-fifths of the population — income in both the Netherlands and Canada was 15 percent higher than income in the United States in 2010.
Consider this in the context of the tax and inequality charts we showed yesterday. Basically, if you're at or below the median income in the US, you'd be better off financially by moving to Canada, Sweden, Finland, the Netherlands, or Norway (or by voting for higher taxes here at home). Maybe I'm missing something, but considering this data, could someone explain to me why we'd want to continue the tax cut mania that Reagan started?

Note: this data comes via the Upshot, which is a very exciting new news/analysis venture at the NYTimes.

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