Righteous inequality: Who earns, who pays a fair share?

April 7, 2020. In my management and leadership classes, when we discussed income equality, I used a simple demonstration of the misunderstanding most students have as to how much of the national income the top quintile of earners actually earn, as well as how much of the national income students felt that this top income bracket SHOULD earn.

One problem is in the language the students often heard about this top income group. Rather than use words like "earn" or "make," the words the students most often heard from critics of "inequality" was how much this group "took" or "received." Worse, even bright college students operated under the assumption that there was a fixed amount of national income, so that any more going to the top quintile meant less available for the four lower quintiles. My guess is that, if pressed, some students would argue irrationally that there should simply not be a bottom quintile, and that its absence would solve the problem of inequality. It is sort of the Lake Wobegon effect, where everybody's income should be "above average."

As to what the students believed and wanted to be the case, the range of team estimates in one typical class ranged from 45% to 80% (average 60%) earned by the top twenty percent, and 45% to 70% (average 55%) of federal income taxes paid by the top quintile. Basically, the students believed that this top group's share of taxes was about the same (three percentage points lower, 59.2% earned and 55.8% shared) as their share of income. The actual IRS numbers (circa 2014) were quite different: the top quintile earned 51% of income and paid 84% of federal income taxes.

Asked their preferences, the team average for the preferred share of income earned by the top quintile was 38%, and the share of taxes 44%. Again, the preferred tax share was generally comparable to the preferred income share, although students believed that the top quintile was earned a larger share of income (59.2% than the share too federal income taxes they paid, 55.8%). But the startling comparison is the gap between the share earned and the share paid. Students thought that the gap was six percentage points (44% of taxes on 38% of income), when the actual gap was thirty-three percentage points (84% paid on 51% earned).

Put to the task of determining a 'fair share' of taxes, students would prefer that the top earners pay much LESS than they do in federal income taxes, even though they also though that this group earned less than they actually do. Basically, students think that the top quintile easy less than a fair share of federal income taxes, only to learn that this group pays well more than their 'fair share.'

Another interesting finding was what the students though the three bottom quintiles paid in federal income taxes. Students believed these bottom 60% of taxpayers paid 21.4% of federal income taxes, when the actual figure was 3%.

In my fifty years of university life, I concluded that college students too often offer their opinions as a substitute for critical thinking. Worse, they don't understand statistics -- either descriptive or inferential -- nor can they separate correlation from causality. They lack knowledge, facts and evidence, substituting feelings and rhetoric for a thoughtful analysis. And if the facts run counter to their beliefs, they can take offense at having this discrepancy identified. Feelings trump facts. Further, they lack a grasp of economic, historical and global perspectives. Economics to many of them is simply greedy capitalism. History os what they know from television shows they've seen since they were ten years old, and their world expands little beyond local, parochial boundaries and thinking. Even geography is a problem for them.

The problem is the K-12 educational system, abetted by higher education, where they have abandoned the teaching and learning of facts in favor of the development of self-esteem. Aspirational thinking has been replaced by social promotion. An appreciation of the rights government must protect -- speech, assembly, religion, bearing arms -- has been replaced by an unexamined, strong belief in the rights government supposedly owes them: education (kindergarten through college), jobs, healthcare and more. Personal responsibility and deferred gratification have been replaced by personal liberty (often expressed in licentiousness) and instant gratification.

What joy in retirement I have found is in reexamining and reaffirming my basic beliefs in family and faith. And while I treasure the time I spent in higher education, I fear greatly for its future, both in terms of the sustainability of a $300,000 Jesuit college education and the societal impact of these new models of learning. While I look fondly on my own years as a student, I fear for those in the midst of their 'formal,' public or private education.

I remind myself most days: "It's great to be gone (from higher education)!"