Your Income: Earned or Distributed?

tumblr_mht7sopr8g1qg4lyzo1_1280

By Mike Cronin

When you received your pay check, was it because you earned it by trading your time and skill for money, or because it was just “distributed” to you?  I suspect you answered that you earned it. Most of us do. That’s why talk about the vast “income inequality” in our country can be very misleading.

When a statistician talks about income distribution, he or she is referring to how income brackets fit in a bell curve, like in the chart above.  When a politician or a pundit talks about income or wealth distribution, we are supposed to just act as if our money has been unfairly distributed and not earned, and  certain adjustments are necessary to make things “fair.”  These adjustments take the form of taxes, if you “received” too much, or hand outs and benefits, if you “received” too little.

The statisticians’ usage of the term distribution is neither bad nor good, it’s just math. The politicians’ and pundits’ usage of the term distribution is insidious, because it sounds so fair, but it drops contexts in at least two ways.  Every dollar that is “given” by the politicians to those who didn’t have “enough” income “distributed” to them, either:

  1. Had to be taken away from those who had produced it, then “redistributed” to the “have nots;”
  2. or, it had to be minted, printed, or digitally conjured up out of thin air and “pumped” or “quantitatively eased” into the economy.

The first is literal and direct theft (though we call it income taxes) and the latter is indirect theft, because it steals value from our existing money. (Full disclosure: I work for the government, so almost my entire income during my working life has come from your taxes – and my own. The part of the government I work for is clearly derived from the enumerated powers in the Constitution, and I favor The Fair Tax vice the confiscatory taxation system we have today. Decide for yourself whether I am a hypocrite. The thought has given me pause from time-to-time.)

So, statistically speaking, we have a vast disparity between the highest income earners and the lowest. That does not mean income distribution is unfair, because it does not mean that the “haves” with huge incomes somehow just got lucky and received an unfairly large distribution of money. Maybe they earned it, maybe they inherited it, maybe they embezzled it. The fact that they have It is not proof that they got it unfairly. Likewise, the fact that “have nots” at the low end of the income bell curve don’t have more doesn’t mean that they have somehow been cheated. Perhaps it means that they can work hard, gain skills, and climb into higher income brackets.

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s