Unions: Good Intentions Equaling Good Outcomes?

According to economist Charles Baird, legal disputes between unions and businesses have caused human resources to devote their time to resolving problems with unions – taking their time away from their real tasks. Unions also take the focus off of workers’ well-being by not letting the market work. Unions were originally not hurting organizations’ productivity and helping workers, but today that is not the case.

An example of a union dispute that hurts organizations and workers is the question of whether non-union workers already paying representation services have to pay for expenses involved in recruiting non-union workers. In a 1984 Supreme Court ruling, workers under the Railway Labor Act only have to pay grievance adjustment, contract administration, and collective bargaining. A 1988 decision by the Supreme Court ruled that the same securities were stretched to include workers under the NLRA (National Labor Relations Act). In the 1984 ruling, it seemed the ruling made it clear that workers were not required to pay anything other than what was stipulated and it was stated clearly that non-unionized workers should not have to pay for expenses of unions incurred when trying to recruit non-union workers, and the same was said to be valid in the 1988 ruling.

However the NLRB (National Labor Relations Board) challenged that in 1995 – a case that was specifically about parent unions’ litigation costs. They said that the expenses of unions incurred when trying to recruit non-union workers applied to non-union workers if the recruiting was necessary to contract administration, grievance adjustment, or collective bargaining and also if adhering to a 1991 ruling, expenses must be paid by non-union workers if they “’may ultimately inure to the benefit of the members of the local union by virtue of their membership in the parent organization.’”

Flickr photo by Washington Area Spark.

In 1999, once again the NLRB made the case that the ruling in 1984 did stipulate other expenses to non-union workers. The ruling decided that expenses must be paid if they are for “’organizing within the same competitive market as the bargaining unit employer’” according to the 1995 ruling. The NLRB’s reasoning is that non-union workers benefit from paying the extra expenses because the union has more ability with more members to win higher nominal wages. They also said that the 1984 ruling did not matter to their argument because it did not say anything about organizing, and Congress’ motive is to encourage organizing. However, in 1951, Section 2, Eleventh was added, which says that the airline and railroad were already unionized – and so Congress did not encourage further organizing. So the NLRB’s argument is redundant because apart from Section 1 of the NLRA, Section 8(a)3’s motive of Congress, in addition to Section 2, Eleventh, was to recruit all other non-union workers. Therefore, organizing has never been essential to union security, according to Congress.

The NLRB’s argument in the 1999 decision is founded from an economists’ empirical evidence of the result of fewer non-union firms being present in a certain competitive market when non-union workers are increasingly being organized. This helps further the cause of unions for higher wages – making firms less resistant to their demands. So unions increase wages of already unionized workers.
Research published in the 1970s and 1980s shows that a 2 percent increase in nominal wages is the effect of a 10 percent increase in number of unionized workers. The grocery store industry in Michigan saw similar results in a 1992 study brought about by the United Food and Commercial Workers Union.

However, DiNardo and Lee published a study in 2004 that used data from 1984-1999 and found that the effects of new unionization was around zero. They followed employers over time and adjusted for the selection bias problem that unions organize the more profitable organizations that could pay higher wages by using regression discontinuity. The researchers also found other problems with the argument presented by the NLRB: “Increased organizing leads to increased density (the percent of workers who are organized), and this leads to higher wages through increased bargaining power (decreased price elasticity of the demand for labor).”

Charles Baird says that the increased wages due to union pleas has left few choices to owners of capital and consumers, however they do manage to find other non-restricting options other than unionized firms. United Auto Workers, he says, is a prime example of avoidance of the restrictions of unions. American car companies set up plants in other countries that had fewer unions or discouraged unions. Due to the huge loss of jobs by the moves to other countries, the UAW has had to endure wage cuts.

I think that unions create a lot of problems for many people. Union legal issues impact organization productivity and overall livelihood by having long legal disputes which come at a huge cost of time, resources, and lack of knowledge of how the organization and its employees will be affected. Human Resources has a lot of weight on their shoulders due to union issues. They are the ones dealing with workers and their respective payroll and benefits. Unions disrupt their real work. I think it’s interesting to think about that the one argument by the NLRB, as was talked about in the above article summarized: “Organizing the Organized”, lingered on after 10 years, and may still be going on. There are many other arguments like this one that have perhaps gone on for much longer. The long-term effects on companies can’t be positive.

Union workers may get paid more, but are their wage increases real? According to research in the article, they are not. Real wages are lower due to unions. A similar example is the minimum wage. The minimum wage forces firms to pay their workers a minimum, which may or may not be ideal for the company. If the company can’t really afford to pay their workers that wage, then the company, workers, and economy suffer. The company suffers because they will be subject to more financial stress and could possibly have to cut back on workers and production, the workers suffer because their jobs could be in danger – with the low-skilled workers being hurt the most due to employers being unwilling to pay them higher wages (the employers would be unable to offer them a lower wage due to their lower skill set and the higher -skilled workers would win the jobs vs. the lower-skilled workers), and the economy suffers due too much regulation of the market – more unemployment, lower real wages, less productivity and well-being of businesses.

Companies having to accept union demands for higher wages is damaging, and has the same effects as does a minimum wage. An artificial price for employees is created, which leads to artificial wealth, stunted business environments, and people taking for granted unions’ “good intentions.”

Baird, Charles W, "Organizing the Organized," 24 April 2009, accessed 7 October 2015.

Rising Income Inequality: An Excuse for Bigger Government: Part III

Flickr image by mSeattle.

Link to Part I of Rising Income Inequality: An Excuse for Bigger Government

Link to Part II of Rising Income Inequality: An Excuse for Bigger Government

Although much public opinion claims that the rich aren’t taxed enough, empirical data shows otherwise. According to Steven Horwitz, an economist at St. Lawrence University, Warren Buffett, one of America’s richest, contributes more than his fair share. Calculating Buffet’s total tax receipts corresponding to his income’s percentage of total taxes paid (in the US), Horwitz found that “[the millionaire’s] income was about 0.00065 percent of total income. Total income taxes paid by Americans in 2010 was about $900 billion. Nine-hundred billion multiplied by 0.00065 percent is $5.85 million, hence, Buffett’s ‘fair share.’ Except Buffet paid $6.9 million” (Horwitz).

There is no sound economic reasoning or data proving that taxing the rich more will help people’s standard of living. Art Laffer, a famous economist, made the argument that because people don’t work to pay taxes, but work to earn money for themselves, they will change where they earn their income, how they earn it, how much and when they earn it just to escape paying more taxes. Statistics show that federal revenues have rarely fallen to 17% or increased to over 20% ever since the 1960s, suggesting that the rich are adjusting to their tax burden. Increasing their taxes actually may not help others (Stossel).

The real causes of the income gap is people’s ability to choose according to the conditions around them. As previously mentioned, more people going to college, early retirements, and having more income mobility are causes of income inequality rising; but they are effects of people making decisions by way of free market capitalism. If taking into account these real causes, income inequality may be rising, but in reality is just offset by the gains society is overall making by these increases in educated people, people able to retire early due to innovations in healthcare, and overall living standards due to income mobility (Smith & Freeman).

The correctly presented data also proves that income inequality is not increasing if looking at the big picture of after-tax income, average market income, the adjusted cost of living index, and the Gini coefficient. In addition, the fallacy of taxing the rich in attempt to improve living conditions for the poor and overall decrease income inequality is proven by the destruction of increasing taxes on the rich using as an example famous economist Thomas Piketty’s tax plan. 

Redistribution programs to the poor do not help either. Social Security and Medicare, the two largest transfer programs, send most of the funds to the elderly – who are mostly not poor. These two government bureaucracies make up 1/3 of federal spending – mostly going to the well-off, contrary to what is normally believed. And ironically, the programs that do send most of the funds to the poor just stagnate the poverty. “When the poor make an effort to improve their skills and work hard to increase their incomes, the government money and benefits they receive are reduced by a large percentage of their additional earnings. Sometimes it’s more than 100 percent, leaving them with less take-home income than before” (Lee). Government trying to redistribute the wealth is going about incentives all wrong (Lee).

And really, is government capable of deciding what is best for the poor? After all, we can’t group every poor person into one group and determine what they all need – it becomes mostly wasteful and likely can’t solve all the problems that contributed to the person’s poverty. The best solution to help the poor is the freedom to help themselves and/or get help from private charities, organizations, churches, and communities. Private funds means that the people who are in charge of and/or gave those funds want to see that the money gets used correctly and not wastefully. A private charity is able to give much more than money as well. They can give opportunities for the future in addition to human care and compassion. A church is able to give spiritual help. Private help to the poor aligns incentives to make sure the people are actually helped, while government misuses money because it was not “the government’s” money in the first place (Hebert).

Reducing poverty should be the focus rather than on income inequality between the rich and poor. The best solution to reduce poverty is to allow more economic freedom. Nathan J. Ashby and Russell S. Sobel of West Virginia University “found that increasing the economic freedom of a state by one unit (equivalent to moving from 40th-freest state to 7th-freest-state) increased the incomes of its poorest residents by 11 percent. By contrast, the same change increased the incomes of the richest quintile by just over a third of that (4.3 percent). The middle class also saw increases, greater than the rich but less than the poor. Increasing a state's economic freedom by reducing taxation and regulation creates broadly shared prosperity across all quintiles” (Adorney). By enabling more people more economic opportunity, more people, especially the poor, are able to move up into higher incomes (Adorney).

Economic research clearly proves over and over again that income inequality is not rising; even accounting for rising numbers of college students, more people retiring early, and rising income mobility show that income inequality is not a problem, but rather a feature of a free market economy. If all people were equal, their incomes and their standard of living would be low. People living in countries like China and Germany in the past under Mao Zedong and Adolf Hitler respectively, had low standards of living under their rulers because taxes were high on the rich and income inequality was attacked (Robinson). 

Free market capitalism is the solution to allow the opportunity for people to flourish, and make their own decisions according to opportunities that arise from their own work and of the interactions of people and businesses in the market. America was founded upon being a land of opportunity, not on being a nation of people that are given equal results by way of redistribution programs or taxes (Reed). Thomas Sowell says it best: “Life in general has never been even close to fair, so the pretense that the government can make it fair is a valuable and inexhaustible asset to politicians who want to expand government” (Sowell).

Adorney, Julian. "Free the Poor." The Freeman 7 March 2014: 1. Web. 15 April 2015.

Freeman, Daniel J. Smith and Rachel H. "Income inequality may actually be good news." AL.com 6 February 2015: 1. Web. 6 February 2015.

Hebert, David J. "The Paradox of Public Assistance." The Freeman 24 January 2014: 1. Web. 15 April 2015.

Horwitz, Steven. "The Tax-the-Rich Truth Squad." The Freeman 22 September 2011: 1. web. 7 February 2015.

Lee, Dwight R. "Reducing Income Inequality at the Expense of the Poor." The Freeman 5 February 2013: 1. Web. 15 April 2015.

Robinson, Ron. "#43 – Income Inequality Is the Great Economic and Moral Crisis of Our Time." The Freeman 6 February 2015: 1. web. 7 February 2015.

Sowell, Thomas. n.d. Web. 20 April 2015.

Stossel, John. "Taxing the Rich." Townhall 29 September 2010: 1. web. 7 February 2015.

Rising Income Inequality: An Excuse for Bigger Government: Part II

Flickr image by mSeattle.

Link to Part I of Rising Income Inequality: An Excuse for Bigger Government

The argument that rich people need to be taxed further to prevent income inequality from rising further doesn’t make sense economically. According to the Michael Schuyler of the Tax Foundation, if esteemed economist Thomas Piketty’s tax plan to change the face of equality in America were put into place, it would be ineffective at preventing income inequality from increasing and would not help the poor at all. “The basic version of Piketty’s wealth tax would impose a tax rate of 1 percent on net worth of $1.3 million and $6.5 million and 2 percent on net worth above $6.5 million. Piketty contemplates additional tax brackets, including a bracket of 0.5 percent starting at about $260,000” (Schuyler).

Schuyler completed two case studies about Piketty’s wealth tax. Both find that it does nothing to help the poor. The first: the basic plan of “1 percent on net worth between 1 and 5 million euros, and 2 percent on net worth above that.” Using purchasing power parity and rounding up a little, in US dollars $1.3 million is the starting point for the 1% tax and $6.5 million is the starting point for the 2% tax. The second: “Piketty’s recommendation for a more comprehensive wealth tax, adds a starting bracket of 0.5 percent on net worth between 200,000 and 1 million euros. Converted into dollars and slightly rounded up, the bracket runs from $260,000 to $1.3 million” (Schuyler).

Those seem like small tax percentages, but in reality will augment the possibility of injury to the economy. A wealth tax is equal to a much higher income tax – an example being “if the pre-tax return on an asset is 8 percent, a 1 percent wealth tax on the asset would take away one-eighth of the income. That is the same tax bite as a 12.5 percent income tax rate” (Schuyler). Also, a majority of some people’s wealth is capital; its accumulation is delicate to expected after-tax returns. This wealth tax would hit capital hard, and in turn, job formation, productivity, and innovation (Schuyler).

The first case “estimates that after the economy has adjusted to the wealth tax, the stock of private business capital will be down 13.3 percent, the wage rate will drop 4.2 percent, there will be 886,000 fewer jobs, and the economy’s total output of goods and services (GDP) will be 4.9 percent lower than otherwise” (Schuyler). The poor will obviously not been helped, but hurt by the supposed wealth tax that was meant to decrease the income gap. The standard of living overall will decrease, not just for the poor. (Schuyler).

The second case increases the number of people having to pay the wealth tax dramatically. It estimates, after adjustments, that “the capital stock will be 16.5 percent smaller than otherwise, wages will be 5.2 percent lower, 1.1 million jobs will be lost, and the overall economy will produce 6.1 percent less output than otherwise” (Schuyler). The severity of the effects of the tax has just increased, not the overall effects. Piketty is but an example of someone coming up with a plan that is believed to decrease inequality if implemented, but in reality, would lead to big problems and big losses if put into action. “The Tax Foundation model estimates that the GDP loss, expressed in terms of the 2013 economy, would be about $800 billion annually under a two-tier wealth tax of 1 and 2 percent. The estimated loss would rise to about $1 trillion annually if a half-percent bracket on smaller wealth holders were also imposed” (Schuyler). The attempted fix to income inequality is estimated to decrease the supply of services and goods, decrease the number of jobs, and lower wages. Everyone would be affected and hurt (Schuyler).

Real factors of income inequality are good news of increasing standards of living. For example, more people going to college causes inequality. The Tax Foundation’s Alan Cole found that in 1968, there were 7 million college students in the US and now there are over 200 million (Cole). Because many college students either delay working or earn very little money at low-skilled jobs, this shift in the number of students increases income inequality. However, a more educated American population is great news for everyone (Smith & Freeman).

In addition, healthcare innovation enabling elderly to have longer retirements is a factor of “rising” income inequality. Mark Perry of the Tax Foundation found that the number of active workers per retired worker has decreased almost 32% since the 1970's (Aging Population). Most retirees using their savings instead of income after retirement results in less wealth for the elderly. The Economist says that since the 1960s, the average number of years people spend in retirement has doubled (The Economist). However, retirees not living from direct incomes primarily doesn’t make them poor nor do retirements hurt productivity (Smith & Freeman).

And most importantly, another reason for income inequality “increasing” is increasing income mobility (Smith & Freeman). Almost 60% of taxpayers who began in the lowest income group in 1999 moved up to a higher income group by 2007. The myth of the population decline of the middle class is busted. Because of increasing income mobility, everyone will have a better standard of living (Hodge & Lundeen).

Interestingly, 40% of people in the highest income group dropped down to lower income groups within eight years of the time that they moved to the highest income group. This is a direct denunciation of the misconception that rich people stay rich and take up a large share of the nation’s wealth for long periods of time (Hodge & Lundeen).

Cole, Alan. "Income Data is a Poor Measure of Inequality." 2014. Web. 1 April 2015.

Freeman, Daniel J. Smith and Rachel H. "Income inequality may actually be good news." AL.com 6 February 2015: 1. Web. 6 February 2015.

Hodge, Scott A. and Andrew Lundeen. "Americans Are Economically Mobile." 2013. Web. February 6 2015.

Perry, Mark J. "Can Aging Population Explain Income Stagnation?" Carpe Diem 23 October 2011: 1. Web. 6 February 2015.

Schuyler, Michael. "The Impact of Piketty’s Wealth Tax on the Poor, the Rich, and the Middle Class." 2014. Web. 8 April 2015.

Rising Income Inequality: An Excuse for Bigger Government: Part I

Flickr image by mSeattle.

Concerns for the low-income portion of America is not unjustified – but rather it would be callous to pretend that everyone in America is well-off and is “dealt a fair hand.” However, the cause of fighting rising income inequality leads to an increased desire and need for more government intervention resulting in erosion of freedoms (McCloskey). Misinformed Americans thinking that income inequality can be solved by government is a larger problem than it seems at first glance. “Free people are not equal, and equal people are not free” (Reed).

According to a 2014 poll by Pew Research Center, 78% of people in the US saw the income gap in our country as a big problem (Weldon). Wherever the opinion of income inequality being a major problem came from cannot be narrowed down easily. Where the problem really lies is how the public can be so misinformed as to believe in a false opinion – really just propaganda. 57% of people in the US think that the distribution of wealth is unfair, according to a 2011 Gallup poll, and a CBS news poll found that 69% think that the income gap is increasing (Weldon). A majority of people who are misinformed about such an important issue as equality is not to be taken lightly at all.

Though even capitalists such as famous economist Ludwig von Mises admit that income inequality is an effect of capitalism, he makes the great point that inequality is everywhere in a free market and is the price to pay for such immense overall wealth that makes even the poorest in a capitalist society richer than the poorest in a statist society. Overall, free-market capitalism is a blessing, as the American people can see if they just look around their home at the goods that would not have been possible without innovation and free trade. A free market enables people to quench the desire to make something of themselves using their unique abilities. This has made possible the wealthy society that we know today as the United States of America, the land of opportunity where people are unequal, but have equal opportunity (Boudreaux).

Contrary to popular belief, income inequality is only increasing if you look at before-tax income, which is how highly-esteemed economist Thomas Piketty showed that income inequality is increasing. Measuring before-tax income and using that data to prove that there is a rising income gap doesn’t make sense because people do not consume their tax deductions. Their real income is after taxes and so if you’re going to study income inequality you have to use realistic data – and the fact is that “if one looks at after-tax income, the increase in income inequality over time is greatly reduced. If one goes further and factors in the government’s attempts to redistribute income, income inequality is not increasing in the U.S. at all” (Dorfman).

According to Mark J. Perry, a scholar at the American Enterprise Institute and a professor of Economics and Finance at the University of Michigan’s Flint campus, “After adjusting for both government transfers and federal taxes paid, the average household in the top quintile received less than 8 times more after-tax income ($188,200) than the average household in the bottom 20% ($24,100)” (“Adjusting for transfers and taxes”). When accounting for federal taxes and government transfer payments, income inequality almost halfway disappears (“Adjusting for transfers and taxes”).

Also, by using a single price index for cost of living, income inequality is exaggerated. Between 1994 and 2005, prices of low-end products that low-income households consume were falling. “This implies that non-durable inflation for the 10th percentile of the income distribution has only been 4.3 percent between 1994 and 2005 (0.4 percent per annum), while the non-durable inflation for the 90th percentile has been 11.9 percent (1.0 percent annually), and 13.4 percent (1.2 percent annually) for the richest 5 percent of households in the sample” (“Rising Income Inequality"). According to Perry, this adjusted cost of living index says that real incomes are gradually rising, instead of the income gap between the rich and the poor becoming larger (“Rising Income Inequality").

A method of measuring inequality, the Gini coefficient (ranges from 0% complete equality-100% complete inequality), also proves that income inequality is not rising. Throughout the 1960s-1980s, the Gini coefficient was rising, but leveled out starting in the mid-1990s through 2010, the most recent Gini coefficient data; again, clear-cut evidence that we should not be worried about the income gap rising (“The ‘Imaginary Hobgoblin’ of Income Inequality”).

Another flaw that rising income inequality data is founded upon is that increased capital is a cause of the increasing gap. According to classical philosopher Aristotle and modern-day French economist Piketty, capitals gains that usually exceed the economy’s growth will cause the share of returns in national income to increase because the wealthy people who have the capital will continue reinvesting in interest income, therefore causing rich people to have a larger share of overall national income. However, if capital gains are an unfair advantage to the wealthy as assumed by the above way of thinking, then other assumptions may also be made, such as “the rich always reinvest their returns”, “only rich people have capital”, “there is no such thing as human capital”, “most rich people inherit their wealth”, “the rich never lose money – no creative destruction”, and that “people care most about income inequality and don’t care about the working class”. Those assumptions about the rich don’t make economic sense, or common sense, for that matter (McCloskey 12-13).

A nation having a large amount of capital is not a problem, anyway. Capital is key to innovation, and innovation in a free-market economy means an overall better standard of living for us all, because not just the rich use capital. For example, small business owners in the middle class must have capital to begin their business. They must always have some capital to remain successful as well. Bad investments are also made, signaled by the “invisible hand” of market forces of supply and demand to weed out what is not profitable or necessary. Yes, most people who have capital are rich, however, but the fact that they are “rich” is beside the point because most rich people in a capitalist society accumulate their wealth not by cronyism but by their own work, which is beneficial to others in society (Borders).




Borders, Max. "#1 -- Income Inequality Arises From Market Forces and Requires Government Intervention." The Freeman 15 April 2014: 1. Web. 1 April 2015.
Boudreaux, Donald. "Equality and Capitalism." The Freeman 1 September 2002: 1. Web. 1 April 2015.
Dorfman, Jeffrey. "Dispelling Myths About Income Inequality." Forbes 8 May 2014: 1. Web. 1 April 2015.
McCloskey, Deirdre Nansen. "Measured, Unmeasured, Mismeasured, and Unjustified Pessimism: A Review Essay of Thomas Piketty's 'Capital in the Twenty-First Century'." Erasmus Journal for Philosophy and Economics 2014, Autumn ed.: 56. Document. 1 April 2015.
Perry, Mark J. "Adjusting for transfers and taxes reduces income inequality between highest and lowest quintiles by 50%." American Enterprise Institute 17 November 2014: 1. Web. 5 April 2015.
—. "Rising Income Inequality Has Been Exaggerated: 2X." Carpe Diem 20 September 2010: 1. Web. 1 April 2015.
—. "The 'Imaginary Hobgoblin' of Income Inequality." Carpe Diem 31 October 2011: 1. Web. 1 April 2015.
Reed, Lawrence W. "The Quackery of Equality." The Freeman 30 May 2012: 1. Web. 1 April 2015.
Weldon, Kathleen. "If I Were a Rich Man: Public Attitudes About Wealth and Taxes." Huffington Post 4 February 2015: 1. web. 7 February 2015.

The Effect of the Tax Code on Marriage

Flickr image by Orin Blomberg.

Marriage and family stability should be encouraged so that children may have the opportunity for a better future. However, the effects of the tax code penalizes marriage. Low-income workers, being more likely to be subject to the marriage tax penalty than middle or high income workers, could be driven to not get married at all or divorce due to more unwanted financial stress (Fichtner and Feldman).

Why would a household with two people each earning the same amount of income (ex. $50,000 annual income per individual) be taxed more than a household with two people each earning different incomes (but still earning a total of $100,000 annually)? Government, it seems, threw being “fair” and promoting “equality” out the window when instituting the tax code. Jason Fichtner, a senior research fellow and Jason Feldman, a research analyst, both under the Mercatus Center, calculated that “For many middle-class families, the tax brackets for married couples filing jointly for any given tax rate is roughly twice the amount as a non-married worker, thereby subjecting more income to a lower tax rate.” While a single-earner household earning $60,000 a year could take home a $3,465 “marriage bonus”, a two-earner household, each person earning $30,000 a year, could be subject to a penalty of $1,083 (Fichtner and Feldman).

To encourage women to stay in the labor force after having children, Obama has two proposals: adding a new tax credit for second earners and tripling the existing tax credit for child care expenses. There are two reasons that the proposal of adjustments to the tax code is “justified” by lawmakers. The first is that because two-earner households would naturally incur higher living costs vs. single-earner households with the same income, two-earner households should be taxed more. But since single-earner households earn less, and because the labor would be divided inefficiently, the first justification doesn’t make sense. The second reason is to keep the tax code progressive, and when applied to families, penalizes marriage which also doesn’t make sense (Ponnuru).

So the tax code, adjusted or left alone, is discouraging marriage. Politicians, wanting to keep women in the labor force and coming up with policies for that purpose, would still and are at present discouraging them from working, and marrying for that matter (Ponnuru).

As with other government policies, the tax code, by penalizing marriage, hits low-income people hard in addition to penalizing high-income people (Fichtner and Feldman). Households with two adults and no dependents are very likely to incur the marriage penalty if annual income is fairly equal or very equal and between $10,000 and $20,000 or between $350,000 and $1,000,000 – obviously burdening the poor as well as well as taxing the rich more while the middle class will likely receive a marriage bonus (Kasprak).


If households are made up of two adults and one dependent and incomes are relatively equal or close to equal, households with an annual income between $30,000 and $60,000 are fined heavily for being married, especially at around $40,000 a year, in addition to households with an annual income between $500,000 and $1,000,000. Once again, hitting the low-income people hard and subjecting the high-income people to more taxes (Kasprak).


And oddly enough, if households with two earners with fairly the same incomes or close to the same incomes have two dependents and earn between $15,000 and $70,000 a year, are penalized heaviest among people having no dependents, one dependent, and two dependents. People earning between $500,000 and $1,000,000 are likely to incur a marriage penalty as well if the earners have fairly the same incomes or close to the same incomes (Kasprak).


To summarize, Richard Morrison of the Tax Foundation explains what is going on: “Marriage penalties tend to affect low income and high income couples, but not middle income ones—low income couples because of the marriage penalty inherent in the structure of the Earned Income Tax Credit (EITC) and high income couples because the 28 percent rate bracket and above for joint filers begins at less than twice the amount for single filers. Middle income couples are much more likely to receive a marriage bonus simply because there is no penalty inherent in the bracket structure for the 25 percent rate levels and below—for joint filers, each bracket begins at exactly twice that for single filers” (Morrison).

Staying true to its design, the marriage tax discourages work. A stay-at-home member of a family receiving a bonus is discouraged from returning to work because joint-filing says that for the stay-at-home family member to return to work, he or she must be subject to the tax rate of the other head earner’s next marginal dollar of income – for example, if the other head earner’s income was $60,000 – the rate would be 25%, instead of the single filing rate of 10%. “Although married individuals have the option of filing separate tax returns, filing under the tax status ‘married filing separately’ imposes limits on tax deductions, narrower tax brackets, and higher marginal tax rates” (Fichtner and Feldman).

Two-worker families with relatively the same incomes have the choice of earning less income and being married, or being married and earning less income, but probably providing a more stable home for children (Fichtner and Feldman).


Mainly, the low-income people are ironically, hit the hardest by the marriage penalty, even though the rich people are subject to the marriage penalty as well (Morrison). Importantly, if people are concerned about reducing poverty and helping low-income people and encouraging family stability, they should be concerned about the tax code. Discouraging work by taxing income and stability by a gap between who is taxed depending on if you’re married and have fairly similar or very similar annual incomes and how many dependents you have is a burden that will not help low-income families out of poverty. The solution, not to poverty, but to alleviate the tax burden, is to allow families the choice of filing taxes as single or married – without penalties – tax status should remain neutral regarding marital status. This allows the opportunity for more people to flourish and from there, allow their children to flourish (Fichtner and Feldman).




Fichtner, Jason and Jacob Feldman. "Eliminate the Marriage Tax Penalty." US News 18 September 2012: 1. web. 4 March 2015.
Kasprak, Nick. "Marriage Penalties and Bonuses (Families with Children Edition)." Tax Foundation 29 August 2013: 1. web. 4 March 2015.
Morrison, Richard. "Tax Code's Marriage Penalty Varies Greatly with Income." Tax Foundation 10 January 2013: 1. web. 4 March 2015.
Ponnuru, Ramesh. "Obama's War on Homemakers." American Enterprise Institute 22 January 2015: 1. web. 3 March 2015.

Technology Creates Opportunity for Better Employment – Not Mass Unemployment

Many people are worried today that technology is taking away jobs. Concerns over robots replacing cashiers, pharmacists, automobile drivers, telemarketers, sewers, data entry keyers, document-reviewing software replacing lawyers, and more are not unfounded. Either computers/computer software is already replacing humans in these occupations, or they will be extremely likely to do so (Aquino; Thompson). People who look at the long-run effects, however, instead of short-run, will see that technology does not negatively affect employment in the long-term and improves our lives (McElroy; Bessen).

The type of unemployment that may be or will be experienced by workers due to technology advancements is structural – meaning that unemployment will likely be temporary as other job opportunities in other fields arise, sometimes from the technology advancements themselves. This is further legitimized by the fact that although we are experiencing more technology in fields replacing the role of human labor in bookkeeping, sales, and banking, we have three-quarters of a million more people occupying positions in those areas from 1999 to 2009 regardless of the tough economic times that the recession brought, according to the Occupational Employment Survey conducted by the Bureau of Labor Statistics (Bessen).

Interestingly, some people say that banking has been negatively impacted; but in reality, it has been more positively impacted by technology (Bessen). “Because ATMs perform many teller transactions, fewer tellers are needed to operate a bank branch. But because it costs less to operate a branch office, banks dramatically increased the number of branches in order to reach a bigger market. More bank branches means more tellers, despite fewer tellers per branch” (Bessen). In addition, relationship banking is still alive contrary to what some believe, because though tellers do not complete as many simple transactions as they once did, they are now completing the more complex tasks that can still make the customer’s experience personal (Bessen).

Though new technology in the textile weaving industry is an example of a dramatic decrease in labor – 98 percent – in the long-run people were made better-off. It does seems like mechanization brought hard times for the people working in the industry due to massive unemployment, but the greater demand for cloth due to a dramatic decrease in its cost quadrupled the number of textile industry jobs (Bessen).

Economist Walter Williams says that the telecommunications industry is a marvel of a seemingly overall massive job loss that turned into advancements in the industry that did not make us worse off, but better off (Williams). “In 1970, the telecommunications industry employed 421,000 workers as switchboard operators, annually handling 9.8 billion long-distance calls. Today the telecommunications industry employs only 78,000 operators. That's a tremendous 80 percent job loss. What happened? The answer: There have been spectacular labor-saving advances in telecommunications. Today more than 100 billion long-distance calls a year require only 78,000 switchboard operators. What's more is the cost of making a long-distance call is a tiny fraction of what it was in 1970” (Williams).

Technology has time and again caused a painful transition for workers having to find jobs in other fields. Yes, we have had and do have an unemployment problem in the US, but that problem does not stem from technology (McElroy; Williams; Bessen). “Forbes pointed out that U.S. unemployment rates have changed little over the past 120 years (1890 to 2014) despite massive advances in workplace technology” (McElroy). Even though unemployment increased dramatically during the economic downturns such as the recent Great Recession and the past Great Depression and Panic of 1893 – those were problems caused not by increases in use of new technologies, but by financiers. It was through innovation by entrepreneurs and business that brought employment back up (McElroy).

Flickr image by Scott McLeod.

Structural unemployment exists because of technology, but this creative destruction allocates human labor to its best uses – those occupations that require the special human skills of creation, caregiving, problem-solving, and communication. The market’s power of “the invisible hand” will weed out the jobs no longer yielding more than the cost of the human labor to produce the goods or provide the services. However, attempts by government to stop creative destruction and prevent competition, such as the presence of monopolies and patents hurt our economy in the long-run, contrary to the positive effects of technology. By trying to stabilize employment by way of cronyism, the government hurts consumers by allowing companies the ability to raise prices artificially, and creates stasis by impoverishing employees (McElroy).

Though it is true that some human labor has been eliminated because of technology, new jobs have been created that are more valuable to our society than some jobs in the past (McElroy; Williams). Would it be economically beneficial today to employ such people as the milkman and the iceman who delivered to homes in the past, over going to the grocery store or using the ice-maker in a refrigerator? Taking into account wages and compensation in today’s prices, it makes economic sense that technology saves consumers money and has made life easier (McElroy; Williams). Creative destruction of technology has caused some structural unemployment, but the transition from the widespread use of ships and trains to cars and airplanes made unemployment shift, but not increase. In the long-run, the number of jobs in more valuable industries than past ones has brought innovation that has enriched everyone’s lives (McElroy; Williams; Bessen).

Without technology, there is a loss of innovation and progress that would decline our nation’s standard of living. People will lose opportunities to gain new skillsets and change their careers to fields that yield a greater amount of success (McElroy; Williams; Bessen). The need for new skills might even be the reason for stagnant wages (Bessen). Hindering technology would be hurting productivity and furthermore employment in new and/or better fields (McElroy; Williams; Bessen).



Aquino, Judith. "Nine Jobs that Humans May Lose to Robots." NBC News 2012. web. 20 February 2015.
Bessen, James. "Don't Blame Technology for Persistent Unemployment." Slate 30 September 2013: 1. web. 20 February 2015.
McElroy, Wendy. "#45 – Robots and Computerization Cause Unemployment." The Freeman 20 February 2015: 1. web. 20 February 2015.
Thompson, Derek. "What Jobs Will the Robots Take?" The Atlantic 23 January 2014: 1. web. 20 February 2015.
Williams, Walter E. "Job Destruction Makes Us Richer." Townhall 27 July 2011: 1. web. 20 February 2015.

The Rich Already Give Back Enough

Successful business people in America are “under the gun” by TV shows, movies, academia, and the media more than business people have ever been in the past, even under such “propaganda machines” as China’s Red Guards under Mao Zedong, Germany’s National Socialists under Hitler, and Cuba’s Committee for Defense of the Revolution under the Castro brothers (Robinson). It’s not surprising then, that the majority of US public opinion is that income inequality is a big problem (Weldon). “In a 2014 Pew poll, a large majority saw the current gap between rich and poor as a moderately or very big problem (78 percent). A smaller majority (57 percent) in a 2011 Gallup poll said that the distribution of wealth in the country is unfair. Furthermore, most think the problem is getting worse. A solid 69 percent majority in a CBS News poll in January thought that the gap between rich and poor is getting larger” (Weldon). 

Flickr image by Chris Potter.

The popular idea to fix the “income gap” between the rich and poor in America, is instituting higher taxes on the wealthy (Weldon). It then seems that President Obama’s policies would please the American public: “The top 1% are now paying an average tax rate that's 6 percentage points higher than when Obama first took office … to an estimated 33.8% today, according to the Tax Policy Center” (Sahadi). The taxes that would hit the rich the hardest is the higher top income tax rate of 20% up from 15% and the higher capital gains and dividends tax rate of 24.2%. In addition, taxpayers subject to the 3.8% Medicare surtax would add that tax to the other above-mentioned taxes for a 28% top rate on some of their investment income (Sahadi). 

A part of Obama’s justification for more taxes on the rich is that rich people have an unfair advantage over the middle class and poor of America – and therefore, should be taxed more (Miron). Since Warren Buffet was taxed less than his secretary, it seems that he is not paying enough taxes; but in reality, it is hard to define someone’s income like Buffet’s and from there find the taxation rate. Though Buffet pays himself a low salary, he obtains most of his income through his capital gains earned through speculation. Capital gains are taxed at 15%, while his secretary pays a top tax rate of over 30% (“The Tax-the-Rich Truth Squad”). “The reason the capital-gains rate is so low is that those gains are taxed first at the corporate level — at  35 percent — before being taxed again as Buffett’s income at 15 percent.  In addition, it’s not clear what Buffett included in his secretary’s taxes and income” (“The Tax-the-Rich Truth Squad”). 

In reality, rich people like Warren Buffet are being taxed not only more than what politicians claim, but also more than their “fair share” (“The Tax-the-Rich Truth Squad”). A 2008 Tax Foundation report found that “The top 1 percent earned 20 percent of all income but paid 38 percent of all total income tax receipts.  The top 10 percent earned 46 percent of all income and paid 70 percent of total taxes” (“The Tax-the-Rich Truth Squad”). To prove that a millionaire like Buffet is overtaxed, Steven Horwitz, an economist at St. Lawrence University, calculated Buffet’s total tax receipts corresponding to his income’s percentage of total taxes paid (in the US). So, he concluded that “[The millionaire’s] income was about 0.00065 percent of total income. Total income taxes paid by Americans in 2010 was about $900 billion. Nine-hundred billion multiplied by 0.00065 percent is $5.85 million, hence, Buffett’s ‘fair share.’ Except Buffet paid $6.9 million.  So by that standard, Warren Buffett is overtaxed!” (“The Tax-the-Rich Truth Squad”).

Higher taxes are supposed to alleviate the burden of the middle class and poor families of America (Sahadi). The problem is that taxing the rich cannot solve income inequality, nor can it help (“The Tax-the-Rich Truth Squad”). A New Models Poll from 2008 found that 66% of the country believes that increasing taxes on the rich would not hurt the economy, while 32% said they believed it would (Weldon). However, taxing the rich hurts the middle class and poor in addition to not helping the economy (Stossel; “The Tax-the-Rich Truth Squad”). 

Rich people in a free market society usually do not become rich through dishonest tactics, but rather through the use of their human capital – ideas that revolutionize to new technologies that result in better lives for us all. Wealthy entrepreneurs, businessmen, and other such people have provided far more than the lower classes have given them (“Giving Back”).

The perception that rich people should give back just because they have plenty is absurd. Why should someone who worked for his or her wealth be forced to redistribute what is rightfully theirs to people who have no right to the wealth? “The only reason one would ‘give back’ is that one has ‘taken’ something inappropriately from others. The ‘back’ in ‘give back’ assumes that the thing in question rightfully belongs to someone else” (“Giving Back”). 

When taxes are raised on the rich, they will go lengths to minimize the effects of those taxes (Stossel). Art Laffer, a famous economist, explains: “It's just economics. People don't work to pay taxes. People work to get what they can after tax. They'll change where they earn their income. They'll change how they earn their income. They'll change how much they earn, when they receive the income. They'll change all of those things to minimize taxes” (Stossel). Statistics show that federal revenues have rarely fallen to 17% or increased to over 20% ever since the 1960s, suggesting that the rich are adjusting to their tax burden, so increasing their taxes actually may not help others (Stossel). 

So do Americans really want a country that discourages wealth creation? Because, according to John Stossel of the Fox Business Network, taxing the rich does exactly that (Stossel). “Donald Trump, who knows something about making money, says of course the rich will leave when hit with higher taxes. ‘I know these people. They're international people. Whether they live here or live in a place like Switzerland doesn't really matter to them’” (Stossel). Discouragement of wealth creation seems to imply America’s loss of some wealthy entrepreneurs and businessmen due to tax hikes would hurt productivity, technology, and innovation – in addition to the number of job opportunities in “big-money” industries (Stossel; “Giving Back”; “The Tax-the-Rich Truth Squad”).

Prior evidence strongly suggests that our government should not hinder rich people from creating wealth and opportunities for us to flourish. Therefore, the portion of the American public who is jealous of the wealthy, and wants to redistribute their wealth with taxes seem statistically proven to be quite mistaken in their thinking. “Expecting more from the rich is nothing but class envy, a call for punishment of the successful” (“Giving Back”).

Horwitz, Steven. "Giving Back." The Freeman 11 August 2011: 1. web. 7 February 2015.
—. "The Tax-the-Rich Truth Squad." The Freeman 22 September 2011: 1. web. 7 February 2015.
Miron, Jeffrey A. "The Tax Code Should Not Redistribute Wealth." The New York Times 4 February 2015: 1. web. 7 February 2015.
Robinson, Ron. "#43 – Income Inequality Is the Great Economic and Moral Crisis of Our Time." The Freeman 6 February 2015: 1. web. 7 February 2015.
Sahadi, Jeanne. "Taxing the Rich: The Record under Obama." CNN Money 30 January 2015: 1. web. 7 February 2015.
Stossel, John. "Taxing the Rich." Townhall 29 September 2010: 1. web. 7 February 2015.
Weldon, Kathleen. "If I Were a Rich Man: Public Attitudes About Wealth and Taxes." Huffington Post 4 February 2015: 1. web. 7 February 2015.