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Why Oh Why Can't We Have Better Thinktanks? Cato Institute Edition

Tim Noah:

Alan Reynolds Vs. Inequality: When you're a conservative and you find yourself stumbling over the inequality issue, who you gonna call? Alan Reynolds, senior fellow with the Cato Institute! And so Reynolds is once again on the Wall Street Journal editorial page declaring that income inequality is a statistical illusion brought about by technical changes in the tax law that alter what income gets reported to the Internal Revenue Service and what income does not. "[W]hat the Congressional Budget Office presents as increased inequality from 2003 to 2007 was actually evidence that the top 1 percent of earners report more taxable income when tax rates are reduced on dividends, capital gains and businesses filing under the individual tax code." Um, Alan? The CBO report documented increased inequality from 1979 to 2007. As the foregoing demonstrates, Reynolds's technique is to bury you under a mountain of hard-to-follow, often irrelevant, and sometimes entirely erroneous statistical quibbles to the point where you cry "Uncle!" and agree to believe that the existence or nonexistence of inequality is a matter of personal taste, like preferring Cherry Garcia to Chunky Monkey….

A central problem with Reynolds' argument that a lay person may grasp without much difficulty is that even though the technical changes he describes have, during the past 32 years, gone in different directions at different times--for instance, the capital gains tax went up in 1986 and down in 1997--income share for the top 1 percent has pretty relentlessly gone up, falling only during economic downturns, and even then not very far. That's true if you include taxes or not, if you include capital gains or not, etc., etc. (You can slice and dice the data ad infinitum at my favorite Web page, the World Top Incomes Database.)…