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UW Expert: Income Inequality Probably Will Get Worse

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Monday, February 3, 2014   

MADISON, Wis. - Signs point toward a bigger divide between America's haves and have-nots, according to Tim Smeeding, director of the Institute for Research on Poverty at the University of Wisconsin-Madison.

"The upper end is bouncing back very quickly from the recession," Smeeding said. "That means to me that in the future - the next time we record it, this fall - we will find that income inequality has increased, and the share of the top end may even go beyond its all-time high."

Smeeding and an economist with the Federal Reserve examined trends before, during and after the recession of 2008. They found that the top 1 percent has already rebounded to levels of wealth measured before the recession. Smeeding said the trend of the disappearing middle class is very troubling.

"I think we should raise the tax rate on capital gains and on dividends, and reinstitute the minimum tax at the top. This won't hurt people who are already paying a lot of tax at the top, but it will affect those who find ways to jiggle their income so they pay less. You can call that 'tax the rich' if you want, but I'd call it fair taxation," he said.

Smeeding and researchers at Stanford University found that the taxable income of the top 1 percent grew 31 percent from 2009 to 2012, but for the rest of Americans it grew by only .4 percent.

Smeeding said he advocates maintaining the earned income tax credit for low-wage earners, and he supports the Supplemental Nutrition Assistance Program (SNAP), commonly called food stamps, to protect those at the lowest end of the income spectrum.

"The other thing we need to do is do more to create more jobs in our economy," he added. "We need to stimulate jobs and get the labor market going. We need to train low-skill people, so that when the labor market catches up they are more likely to be ready for it."

He also advocated raising the minimum wage over the next three years to $10 an hour.

The Stanford Center for Poverty and Inequality findings are available at www.stanford.edu.




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