1. 1 Law and Economic Justice Jon Forman Alfred P. Murrah Professor of Law University of Oklahoma Central Oklahoma Association of Legal Assistants Oklahoma City, Oklahoma April 29, 2011

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3. U.S.: Share of Household Income & Gini Index, 2005 Market incomeDisposable income Quintiles Lowest 1.50 4.42 Second 7.26 9.86 Middle14.0015.33 Fourth23.4123.11 Highest53.8347.28 Gini Index0.4930.418 3

4. 4 Education Wage Premium 20 Facts About U.S. Inequality that Everyone Should Know, http://stanford.edu/group/scspi/cgi-bin/facts.php. http://stanford.edu/group/scspi/cgi-bin/facts.php

5. 5 Job Losses 20 Facts About U.S. Inequality that Everyone Should Know, http://stanford.edu/group/scspi/cgi-bin/facts.php. http://stanford.edu/group/scspi/cgi-bin/facts.php

6. 6 20 Facts About U.S. Inequality that Everyone Should Know, http://stanford.edu/group/scspi/cgi-bin/facts.php. http://stanford.edu/group/scspi/cgi-bin/facts.php Productivity and Real Income

7. 7 CEO Pay 20 Facts About U.S. Inequality that Everyone Should Know, http://stanford.edu/group/scspi/cgi-bin/facts.php. http://stanford.edu/group/scspi/cgi-bin/facts.php

8. 8 Office of Management and the Budget, A New Era of Responsibility: Renewing America’s Promise (2009).

9. 9 20 Facts About U.S. Inequality that Everyone Should Know, http://stanford.edu/group/scspi/cgi-bin/facts.php. http://stanford.edu/group/scspi/cgi-bin/facts.php Deregulation of the Labor Market

10. 10 20 Facts About U.S. Inequality that Everyone Should Know, http://stanford.edu/group/scspi/cgi-bin/facts.php. http://stanford.edu/group/scspi/cgi-bin/facts.php Intergenerational Income Mobility

11. Rising Poverty 11 U.S. Census Bureau, Income, Poverty, and Health Insurance Coverage in the United States: 2009, (Current Population Report No. P60-238, September 2010), http://www.census.gov.http://www.census.gov

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13. 13 Congressional Budget Office, Trends in Federal Tax Revenues and Rates (December 2, 2010), at 24, http://finance.senate.gov/imo/media/doc/120210DEtest.pdf.http://finance.senate.gov/imo/media/doc/120210DEtest.pdf

14. Rising Inequality 14

15. 15 Average Annual Earnings of Full-time Workers, 2008 Doctors (Family & GP)$161,490 Lawyers 124,750 Economists 90,830 Nurses (RN) 65,130 Police 52,810 Auto mechanics 38,967 Secretaries 29,990 Garbage collectors 37,540 Orderlies 24,620 Waiters and waitresses 19,580

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21. Income Inequality Gini coefficient Interdecile ratio P90/P10 Interdecile ratio P50/P10 LevelRankLevelRankLevelRank Australia0.30163.95152.0918 Canada0.32184.12172.1420 Mexico0.47308.53302.8630 Sweden0.2322.7921.721 United Kingdom0.34234.21181.9915 United States0.38275.91272.6929 OECD-300.31..4.162.09.. 21 http://dx.doi.org/10.1787/420888675468

22. Inequality and Redistribution Country Gini Before Gini After Poverty Before (50% of median income) Poverty After (50% of median income) Tax % GDP Social Spending %GDP Australia0.460.328.612.430.617.1 Canada0.440.3223.112.033.316.5 Mexico n/a0.4721.018.420.67.0 Sweden0.430.2326.75.349.129.4 United Kingdom0.460.3426.38.337.121.3 United States0.460.3826.317.128.015.9 OECD0.450.3126.410.635.920.5 22

23. 23 Social Spending & Child Poverty in Selected Countries

24. 24 Joint Committee on Taxation, Present Law and Historical Overview of the Federal Tax System (JCX-1-11), January 18, 2011, www.jct.gov.www.jct.gov Joint Committee on Taxation, Present Law and Historical Overview of the Federal Tax System (JCX-1-11), January 18, 2011, at 70, www.jct.gov.www.jct.gov

25. 25 U.S. Payroll Tax Rates: Selected Years 0 2 4 6 8 10 12 14 16 18 20 1940196019802010 Year Percent paid jointly by employee and employer Medicare Social Security

26. 26 OECD Tax Database, http://www.oecd.org.http://www.oecd.org Tax-to-GDP ratio, 2008

27. Earned Income Tax Credit (EITC) Increase  New credit percentage for 3 or more qualifying children I.R.C. § 32 (ARRA § 2002) Temporary increase 2009 & 2010 Computed as 45% of earnings (up from 40%)  Maximum credit increased to $5,666 in 2010  Maximum AGI increased to $48,362 in 2010 27

28. Child Tax Credit  $1,000 per qualifying child I.R.C. § 24 (ARRA § 1003)  Temporary expansion of eligibility for refundable credit  More lower income families qualify: 2008 – threshold amount was = $8,500 2009 and 2010 – threshold amount = $3,000 28

29. Poverty Levels & Net Federal Tax Thresholds, 2010 Unmarried individual Single parent w/ 1 child Married couple w/ 2 children Married couple w/ 3 children 1. Poverty levels$10,830$14,570$22,050$25,790 2. Simple income tax threshold (before credits) $9,350$15,700$26,000$29,650 3. Income tax threshold after credits $13,395$32,380$50,250$60,567 4. Employee payroll tax threshold $0 5. Combined income & payroll tax threshold $9,348$25,717$38,635$43,788 29

30. Taxes at Poverty Level, 2010 30 Unmarried individual Single parent w/ 1 child Married couple w/ 2 children Married couple w/ 3 children 1. Poverty levels$10,830$14,570$22,050$25,790 2. Income tax at poverty level (after credits) -$453-$4,450-$7,712-$8,554 3. Employee Social Security & Medicare tax at poverty level $829$1,115$1,687$1,973 4. Combined income & payroll tax at poverty level $376-$3,335-$6,025-$6,581 5. Combined tax as a % of income at poverty level 3.5%-22.9%-27.3%-25.5%

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32. Outlays for the Principal Federal Benefit Programs in the United States (billions of dollars) 32 2009 actual2015 estimate Social Security$678$893 Medicare 425 651 Medicaid 251 336 Unemployment compensation 119 65 Supplemental Security Income 41 52 Earned income tax credit 42 45 Child tax credit 24 26 Making work pay tax credit <1 n/a Food assistance 72 89 Family support 26 25 Housing assistance 10 5 General retirement and disability 8 10 Federal employee retirement and disability 118 141 Veterans benefits and services 49 84

33. 33 Some Specific Recommendations  Making Taxes Work  Making Welfare Work  Modestly Raising the Minimum Wage and indexing it for Inflation  A Two-Tiered Social Security System  A Restructured Pension System  Universal Health Care  Move Toward Full Employment

34. 34 Percentage Composition of Federal Receipts by Source: 1940-2005 0 10 20 30 40 50 60 1940195019601970198019902000 Year Percent Individual Income Tax Corporation Tax Social Insurance Excise Taxes Other

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38. 38 Average Cumulative Tax Rates Confronting Low-to-Moderate-Income Families ($10k - $40k)

39. 39 $2,000 per Worker Earned Income Credit, with or without a Phase-out

40. 40 Pre-transfer Earnings plus Universal Grants plus Worker Credit less Tax Imposed Equals After- tax Income 0$6,000 0 0 $5,000$6,000$1,000 $11,000 $10,000$6,000$2,000 $16,000 $20,000$6,000$2,000 $4,000 $24,000 $30,000$6,000$2,000 $6,000 $32,000 $40,000$6,000$2,000 $8,000 $40,000 $50,000$6,000$2,000 $10,000 $48,000 $100,000$6,000$2,000 $27,500 $80,500 $150,000$6,000$2,000 $45,000$113,000 $200,000$6,000$2,000 $62,500$145,500 How a Comprehensive Tax and Transfer System Would Affect a Single Parent with Two Children

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42. 42 Health Coverage 2009 Source of Coveragemillionspercentage Total population304.3100.0 Employment-based coverage169.7 55.8 Individually Purchased 27.2 8.9 Public 93.2 30.6 Medicare 43.4 14.3 Medicaid 47.8 15.7 Military health care 12.4 4.1 No health insurance 50.7 16.7

43. 43 Summary  Government should intervene To encourage work Promote economic justice  Tax, spending, and regulatory proposals Increase the size of the economic pie Allow us to divide it more equally

44. About the Author  Jonathan Barry Forman (“Jon”) is the Alfred P. Murrah Professor of Law at the University of Oklahoma College of Law;  Jon is the author of Making America Work (Washington, DC: Urban Institute Press, 2006); and  Jon was the Professor in Residence at the Internal Revenue Service Office of Chief Counsel, Washington, DC, for the 2009-2010 academic year.  Jon can be reached at jforman@ou.edu, 405-325-4779, www.law.ou.edu/faculty/forman.shtml.jforman@ou.edu www.law.ou.edu/faculty/forman.shtml 44