Book Review: Income and Wealth

Alan Reynold’s Income and Wealth offers a primer on data on income, taxes, and the economy, and counters some of the most popular myths, usually circulated by left-wing groups advocating for redistributing wealth.

For instance, Reynolds points out the importance of work when comparing “the rich” to “the poor”. Those in the top fifth of household income commonly feature two income-earners; those in the bottom fifth mostly have no wage-earners (including senior citizens).

Another myth Reynolds dispels is “the vanishing middle class.” Reynolds notes that reports claiming a decline the percentage of households earning $30,000 to $50,000 is because more households are earning above $50,000. That Americans are getting richer is hardly a problem.

Reynolds takes on the myth of wage stagnation, which we have touched on here.

And among my favorite myths Reynolds dispels—the myth of growing income inequality. Since most income inequality are based on tax return data, tax policy plays a huge role. Reynolds points out that almost all of the “rich getting richer” occurred in the two years following the 1986 tax reform. That is, because of lower income tax rates, the rich began reporting more of their income, avoiding tax shelters, and switching for corporate income to individual income.

Income and Wealth is not leisure reading for the lay person, though number-crunching policy wonks will love it. Yet everyone—students, media, and voters—should understand the facts behind the myths of class warfare.

Alan Reynolds will be a guest on The BOX Program this Saturday.