Democrat presidential nominee Hillary Clinton has proposed several tax increases on the wealthiest households and businesses, strongly contrasting Republican nominee Donald Trump’s tax plan. This plan includes a cap on itemized deductions, and individuals who make more than five million dollars, having their income taxed again at a rate of four percent. She also propose a minimum tax of 30 percent on millionaires or 28 percent with deductions. She has also proposed tax adjustments to increase taxes on hedge fund managers. It is projected that these rules will raise $498 billion in revenue over the next 10 years, but supply-side economists believe this will shrink the economy and only generate $119 billion . She has proposed increasing the minimum wage to $12 per hour. The current minimum wage is the lowest it’s been since 1952, when adjusting for inflation. Many economists believe such large wage hikes will create wage push inflation in the near term. As firms seek to reduce costs of production and increase efficiency, this will result in layoffs. Many demand-side economists believe the increase in money held by low earners will grow the economy due to low income person’s marginal propensity to consume, which could help grow the economy.
An IMF study of the correlation between income inequality and GDP growth found that a growth in income of the top 20 percent by 1 percent correlated to a .08 contraction of GDP (a loss of $13 billion). In contrast, each increase in income for the bottom 20 percent correlated with a growth of .38 percent growth of GDP (growth of $63 billion). Much of the money spent by higher earners is concentrated in financial markets. This would likely cause a contraction in the financial markets, but that’s not necessarily a bad thing, given their strong involvement in the housing crisis in 2008, the dotcom crisis 2001 and the savings and loan crisis in 1987. Income inequality isn’t inherently evil. Often times it can be good by incentivizing people to compete, save and invest, but it can have unintended consequences.
One of the biggest effects of decreasing real wages is its effects on health. Due to the increasing cost of health care on average many individuals must make tough health decisions. Over 25 million Americans delay or skip refilling prescriptions to save money each year. On average, the lowest-earning men live 14.6 years shorter and women live 10.1 years less. It also has strong negative effects on mental health. This could possibly be an explanation for the 27 percent increase in suicide. This means it now kills more people annually than car accidents. We are losing individuals in there peak earning years and resulting a negative feedback of decreased growth. So how do we measure inequality? In economics we measure this with something called a Gini coefficient. A score of 100 represents where one person has 100 percent of the money, and a score of zero means everyone has the same amount of money. The US has a Gini Coefficient of 37.1. That is higher than any other country. These types of issues would be address through Clinton's proposed policies. It would seem that supporters of neither side are mentally deficient of as some would want you to believe. It’s just whether or not you believe you should focus on supply-side solutions or demand-side solutions.
Regardless of your stance, I hope this has informed you for the upcoming election, and come November I hope you vote for whoever you believe to be the best candidate.
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