Income Inequality in Maryland

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LinesEssay-0215.mp3

February 15, 2013

Lawrence Lanahan

If you’re following “The Lines Between Us,” you may have noticed a particular arc to the issues we’re exploring.

First we looked into equality of opportunity. Where is the opportunity in our region—and where is it not? Why can you cross a street in Baltimore—say, York Road—and just know that things are going to turn out differently for most of the children who live there?

Turns out decades of housing policy and private lending practices helped segregate our region by race and class. In our third episode, UMBC American Studies professor Ed Orser discussed a real estate practice from the 1960s that pressured white families to sell cheap when a black family moved onto the block, then sold the house to a black family at a high markup.

“Black purchasers very often could not get loans through mainstream banks, so only could get the loan to buy the house through the blockbuster or agent," said Orser. "Nobody called themselves a blockbuster by the way. Their defense was they were making housing available where they had been totally excluded.”

We looked back on the whole century, from redlining to predatory lending. We talked to the people whose lives these practices affected, including an African-American World War II veteran who bought a house in Baltimore 63 years ago. Now his great niece, Dominique Moore, wants to help him sell it to help pay for his assisted living costs, but the neighborhoods available to black homebuyers back then haven’t appreciated like those in the suburbs.

“We just received a short sale offer for $11,000," said Moore. "That offer was rejected by the bank. I literally received an e-mail yesterday for $20,000...It’s the ghetto, short and simple.”

Then we spent several weeks asking what’s helping people get good jobs, and what obstacles Baltimore jobseekers are facing. We talked to West Baltimore resident Amber Jones. She was a student at Towson University, but she took some time off in part because of a frustrating bus commute, hoping to save up and buy a car.

“I remember that I had an advisor who was trying to get me to take a 9am class," said Jones, "and I was insisting that it was too early, and she didn’t really seem to understand until I explained to her that it can take two hours to get to campus from my house which by car would only be about 20 minutes away.”

So far we’ve been telling stories from our region, how inequality plays out here. But there’s an aspect on inequality that reaches far beyond Maryland’s borders. It may have come across your radar in the fall of 2011, when the term "99 percent" gained currency, as it were.

Income inequality: the rich getting richer, the poor getting poorer. Activists pitched tents in the downtowns of major cities, and suddenly it seemed everyone in America was talking about inequality.

Now that we’ve laid out the regional dynamics of the disparities we see every day, we’re going to step back and look at their national and global roots.

First, I want to give you a picture of what income inequality looks like here in Maryland.

Maryland’s income inequality numbers are just below the national average, but…it’s growing, according to U.S. Census figures. The official measure of income inequality in Maryland has gone up 34 percent since 1968. Income inequality is highest in Wicomico County and Baltimore City. It’s lowest in Calvert and Charles counties.

What drives income inequality? Some say tax policy—inequality goes up if taxes hit the poor harder. And it goes down if the rich bear a greater tax burden. You may remember income tax rates being raised on high earners here last spring. “We will be moving forward with a revenue package that will call upon about 16 percent of us who are in the top earning brackets of our state to pay a little more, and that’s the primary revenue measure that will be adopted here,” said Governor Martin O’Malley at a press conference last May.

Another driver of income inequality is “capital income”—how much money people make from their investments – interest, dividends, or sales of investments like stocks and houses. In Maryland, the percentage of income coming from investments is way up compared to other sources of income. And that can bump up income inequality because it’s mostly rich people who make their money that way. The “fiscal cliff” deal Congress passed in January raised capital gains taxes, which are levied on this kind of income. That could potentially decrease income inequality.

The other kind of income that can affect inequality is regular old wages. President Obama wants Congress to raise the minimum wage to $9 per hour, and in Maryland there’s a push in the General Assembly to bump the minimum wage from $7.25 to $10. (There’s also push back from legislators who say that would kill jobs.)

Add it all up, and the proportion of all the income in Maryland that’s in the wallets of the richest 20 percent has grown since 1980. It shrunk for everyone else. In 2000, the poorest 20 percent of Marylanders had 4 percent of the income, and the richest 20 percent had 47 percent.

Advocates on the left say there are steps states can take to reduce income inequality, for instance raising the minimum wage, or extending unemployment insurance, or making state income tax systems more progressive.

Some on the right say there are better ways to measure who’s doing well and who’s not. Will Wilkerson is a research fellow at the libertarian Cato Institute. He says if you look at consumption—what we buy—there’s less difference between how well the rich and poor are doing. His argument says what we buy means more for our well-being than how many dollars are in our wallets. Food, for instance, has become cheaper, which helps the poor. And there’s even less difference between the rich and the poor when you ask how happy they are. You still can’t buy happiness—but you can measure it.

At a November symposium on inequality held in Massachusetts, Wilkinson said income inequality itself is irrelevant. “It’s a mathematical abstraction, it’s a measure of the dispersion of incomes," said Wilkinson. "What I think we need to do is look at America’s institutions very closely and try to find the injustice and wrongdoing in those institutions, whether or not that has an effect on the dispersion of incomes.”

For the last four months, we’ve been doing just that: looking at institutions. Now we are going to look at income inequality for a few weeks. We’ll start with the middle class—or rather, what’s left of it.