[InformedConsent]

Originally Posted by wanderlust76

Between 1979 and 2011 the average after tax income for the bottom 20 percent rose by only about 48 percent. The top 1 percent saw their after tax incomes rise by 200 percent during that same time frame.

There are 2 reasons for that.

Reason 1: The bottom 20% is over-reproducing, thereby forcing downward pressure on their wages. It's a supply and demand thing:

Originally Posted by InformedConsent

...the no/low-income no/low-skill labor class in the U.S. is over-reproducing, forcing downward pressure on wages.

We know that...

1) Nearly half of all U.S. births are paid for by Medicaid (medical care public assistance program for the poor).
Medicaid Pays For Nearly Half of All Births in the United States | publichealth.gwu.edu

2) Those who receive public assistance have a birth rate 3 times higher than those who don't. Stats and citations, here:
http://www.city-data.com/forum/32045595-post217.html

3) 70% of those who are born into poverty never even make it to the middle class.
Only 30% of those born poor ever make it to the middle class

How is that sustainable going forward? What's the plan for paying to support all those additional people, 70% of which are likely to need some or several forms of public assistance for life?

Let's take a look at the enormity of the problem using a numerical example...

Because we now have nearly 50% Medicaid births, we'll do a 1 to 1 comparison: 1 million receiving public assistance, 1 million not receiving such, the latest published birth rate numbers for each group (halved because the rates were reported for women only), and the formula for predicting future population: future value = present value x (e)^kt, where e equals the constant 2.71828, k equals the rate of increase (expressed as a decimal, rate taken from the U.S. Census data), and t is the number of years.

After 20 years, the population of those not receiving public assistance will have grown from 1 million to 1.75 million.

After 20 years, the population of those very likely needing public assistance will have grown from 1 million to 4.953 million, 3.467 million of which will never rise above poverty.

1.75 million paying taxes to support social programs for 3.467 million after just 20 years. The poverty class is growing at twice the rate of everyone else.

And that's not even counting the millions of poor illegal immigrants to which Obama's EO will give work permits.

All of that keeps wages down for all but the most accomplished, who are therefore relatively rare. Supply and demand. Very basic concept.

Reason 2: The U.S.'s progressive tax system (European countries actually have regressive tax systems) creates a perverse incentive for our government to promote maximum income inequality:

Originally Posted by InformedConsent

There's a reason for that... The problem is the progressive federal tax system in the U.S. Because of our highly progressive tax system, the government is overly dependent on making sure the income gap is as wide as possible, and that they don't discourage the revenue producers too much by taxing them at rates that are too high therefore either driving them and/or their capital available for investment out of the country, or causing them to scale back on their productivity and income because there's a tipping point at which they decide they have enough for now and don't need to earn as much thereby significantly lowering their effective tax rate and dramatically reducing federal tax revenue.

I'll let this economist explain it:

The liberal case for regressive taxation - Salon.com

For example, in the U.S., the top 1% earns 18.7% of the income, but pays 35.1% of the federal income tax revenue, roughly twice their fair share which is 4 times what the middle class pays (the middle class pays only about half of their fair share of the federal income tax compared to their share of the income). The problem with our country's progressive tax system is that it creates a perverse incentive for the federal government to enact policies that promote as wide of an income gap as possible in order to maximize tax revenue.

As long as the U.S. has a progressive tax system, the incentive remains to keep the income gap as wide as possible, and this is why: When the top 1% loses income share, the federal government loses twice that much in tax revenue. But when the top 1% gains income share, the federal government consequently gains twice that much in tax revenue. Another way to look at it is that the federal government receives 4 times more income tax revenue per dollar earned from the top 1% than they do from the middle class, so guess whose income they're going to favor and protect.

Furthermore, the countries with more income equality have regressive tax systems, mostly based on VAT, consumption, etc., instead of one's income. Pay close attention to the charts:

Other countries don’t have a “47%” - The Washington Post

Think very carefully about that... It's counterintuitive, and some people get angry when this is pointed out to them, but it actually turns out to be true.

And true to form, Mr. 'tax the rich's' presidency has resulted in EXACTLY what was predicted by the liberal economist quoted above.

Income Inequality Worse Under Obama Than George W. Bush - Huffington Post

Furthermore, in regards to the 2nd reason, Federal Government politicians seek to maximize tax revenue to spend to buy votes. It's simple math. Which group has more votes?

50 people earning $20,000 each and receiving taxpayer-funded public assistance?

Or

2 people earning $500,000 each?

Extrapolate that onto the U.S. population in which 47% pay no federal income tax whatsoever yet receive the same government services and benefits that everyone else does, with the added benefits of one or more forms of taxpayer-funded public assistance for most of the bottom 25%.

It's all about buying votes. Under our current progressive federal tax system, the only way to maximize tax revenue to do that is to maximize the income of those who are taxed the most: the top 1%.