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Obama puts spotlight on growing income inequality

Martin Desmarais | 2/5/2014, 10:55 a.m.
President Obama delivers his State of the Union address last week. The president called for policies to narrow the income gap between the wealthy and the poor. courtesy of the White House

President Obama called on the country’s leaders to make 2014 “a year of action” to address the growing wage gap in the United States during his State of the Union address last week.

“Today, after four years of economic growth, corporate profits and stock prices have rarely been higher, and those at the top have never done better,” he said. “But average wages have barely budged. Inequality has deepened. Upward mobility has stalled. The cold, hard fact is that even in the midst of recovery, too many Americans are working more than ever just to get by — let alone get ahead. And too many still aren’t working at all.”

His call to action mirrors moves in Massachusetts and cities and states across the country to apply public policy to the deepening wage divide. Policy makers see local and national initiatives to increase the minimum wage and provide tax credits for low income workers as steps to bridge that divide.

Obama’s remarks on the income gap are the latest of several instances where he has called on policy makers to address the issue.

“Our job is to reverse these trends,” he said. “It won’t happen right away, and we won’t agree on everything. But what I offer tonight is a set of concrete, practical proposals to speed up growth, strengthen the middle class, and build new ladders of opportunity into the middle class.”

Massachusetts state Sen. Sonia Chang-Diaz has been involved with several pieces of state legislation that are addressing issues critical to income inequality, including raising the minimum wage and making Massachusetts taxes more progressive.

Her Act to Invest in Our Communities calls for an increase in the income tax from the current 5.2 percent to 5.95 percent and sets the tax rate on investment income to 8.95 percent; at the same time improving significant tax exemptions to protect low- and middle-income taxpayers and seniors. The point of this legislation, according to Chang-Diaz, is to correct the flat-rate tax and ensure that people at a higher income level pay more taxes proportionately — and use the increased tax revenue to the state to fund the types of infrastructure that can help low- and middle-income workers improve their economic status.

“It would allow us to put more resources behind some of the things all of our communities need, but in particular help those who are faced with income immobility,” Chang-Diaz said.

Prof. Barry Bluestone, director of the Kitty and Michael Dukakis Center for Urban and Regional Policy at Northeastern University, says the concept of income immobility that Chang-Diaz mentions is a compounding factor in income inequality.

Income inequality measures the distribution of wealth across households and is generally referred to as the comparison of the growing financial gap in this country between the highest-income brackets and the middle- and low-income brackets.

As explained by Bluestone, income immobility is what keeps people and families in the income brackets they are in with little or no chance of improving. He emphasized this is the big shadow hanging over the income inequality problem and keeps the income gap so big.