Debunking Myths About Inequality

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from NCPA,

Much of today’s debate over inequality is filled with inaccuracies, writes Michael Tanner, senior fellow at the Cato Institute.

A common political narrative today is that America’s rich continue to get richer while the poor become poorer, leading lawmakers to call for higher taxes and increases in the minimum wage. But there are a number of fictions surrounding the inequality debate. Tanner debunks some of those myths.

Myth 1: Inequality has never been worse. The distribution of wealth in the U.S. has been relatively stable over the last several decades.

Myth 2: The rich inherit their money. Actually, 80 percent of American millionaires are the first in their families to become millionaires. For the richest one percent of Americans, only 15 percent of their wealth is from an inheritance.

Myth 3: The rich stay rich, while the poor remain poor. While some families are wealthy for generations, research indicates that up to 70 percent of a successful entrepreneur’s wealth is lost by the end of the second generation in the family.

Myth 4: An increase in inequality means an increase in poverty. There is very little correlation between poverty rates and inequality. The economy is not a fixed pie, and a gain by one individual does not mean that another incurs losses.

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