The gaps between the incomes of the richest households and low- and middle-income households are wide and growing in most states, according to a major new report from the Center on Budget and Policy Priorities and the Economic Policy Institute that examines inequality at the state level.

“Prolonged growth in income inequality undermines the basic American belief that hard work should pay off,” said Elizabeth McNichol, co-author of the report and senior fellow at the Center. “Anyone who contributes to the nation’s economic growth should reap the benefits of that growth. But for decades now, those benefits have been skewed in favor of the wealthiest members of society.”

Income inequality was a key factor in the rise of the occupy movement and gave birth to the “We are the 99%” mantra.  The issue was also central to the 2012 presidential election as GOP candidate Mitt Romney was caught on tape telling campaign donors that he didn’t really care about 47% of the electorate – ostensibly because they were part of America who don’t pay income tax.  In other words, those who are hurting most from income inequality.  The irony, of course, is that the video was most likely shot by a bartender hired to work the fundraising event.  The 99% low wage David using asymmetric PR warfare against the rich $50,000 a plate 1% Goliath.  The right would without a hint of self awareness dub this “class warfare” when the exact opposite is true.  The real warfare relative to class in this country is the upper waging warfare on the lower.  It’s been this way for decades now.

Mitt Romney was clearly hurt by the 47% video and it became a rallying cry for Obama supporters to hammer away politically at the Republican.  The Romney camp followed up in October with campaign advisor Kevin Hassett claiming income inequality didn’t even really exist, despite overwhelming evidence that it not only exists but hurts the overall health of an economy.

Not only is the issue not new, but not isolated to the U.S. economy.  A 2011 OECD report noted the continuing widening of the gap between rich and poor among member countries.

This new report, released today in Ohio by Policy Matters Ohio, shows a troubling level of income inequality in our state:

  • The average income of the most-affluent 5 percent of households was 10.8 times greater than the average income of the bottom fifth of households in Ohio;
  • Households in the top 5 percent had incomes exceeding $220,000 annually in Ohio, while households in the bottom fifth subsisted on roughly $20,500 a year;
  • The average income of the top fifth was nearly seven times greater than the average income of the bottom fifth of households in Ohio.

Full report: Pulling Apart: A State-by-State Analysis of Income Trends (1.3MB PDF)

Ohio Infographic (PDF)

According to the report, rising income inequality not only raises basic issues of fairness (there’s that word inequality in it afterall), but adversely affects our economy and political systems.  Those at the top continue to have more and more influence while those at the bottom are less represented.  You need only look to Romney’s dismissive comments about the 47% and his post-election claim that Obama won because of “giveaways” to the young, women, and minority voters to see this worldview in stark contrast to that of the sitting President.

The reason for the continuing gap is two fold, the report says.  Wages and salaries continue to skew to the top.  The second is that investment income has grown faster than wage income.  Economic trends as well as government policies at the state and national level have contributed to both of these developments.

The report offers several solutions that states can implement to reverse these trends.  Increasing the minimum wage, strengthen unemployment insurance, making taxes more equal across income groups, and strengthening the safety net are among them.

With our current Governor and Republican controlled state legislators apparently more interested in taking up defunding Planned Parenthood, heartbeat bills, and human/animal hybrid cloning, we’re not very confident that this issue will be addressed in Ohio any time soon.

  • I dont really understand the report. They say that one of the things that states can do to fix the gap is adopt progressive income tax systems. But of the top 10 states in their report where inequality increased over the last decade, it includes California at #3, New York at #5, Massuchusets at #8, and Illinois at #9. These 4 states have some of the highest state income taxes in the country. Only one of the top 10 had no income tax (Texas) and the gap there can be attributed to high levels of immigration.

  • Amy Hanauer

    Great story, thanks for posting. It’s true, as Andy says, that higher state income taxes on top earners won’t really put much of a dent in the growing levels of inequality. But with so many of the gains going to such a small portion of our population, it makes sense to restore the top bracket – at the state and federal level – to pay for the schools, infrastructure, university funding and other public goods that make the economy work for everyone. Clearly when incomes have doubled for the top 5% and grown even more for the top 1%, those households can afford to pay what they used to. What’s interesting is that we actually had higher levels of economic growth when taxes on the wealthiest were higher. But if we really want to increase equity, we need to raise the minimum wage, lower unemployment, and make it easier to form unions.

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