The distribution of income and poverty

Poverty Line

Income Distribution and the Poverty Line

Few if any topics are more sensitive political issues than taxation, which is directly related to income distribution and thus poverty. The latter two concepts, actually, could exist without any form of taxation, but any system of taxation that is meant to approach fairness in a society full of individuals that are not financially equal will necessarily be based upon certain income distributions and an understanding of poverty issues in the population to be taxed. In the United States, as with moth governments, this is accomplished in part by a calculation of the "poverty line," which is essentially an income threshold below which it is exceedingly difficult or impossible to sustain a given number of people with the basic necessities of life (food, clothing, and shelter) (CBPP 2010; Wolf 2009). This line is not fixed, however, and its calculation can be both complex and misleading.

The poverty line established by the federal government for 2008 was $21,200 for a family of four, but many groups and academics claim that the poverty threshold is as much as fifty percent too low -- that approximately $40,000 would be needed to sustain a family of four (CBPP 2010; Zfacts 2005). Part of the calculation for the poverty line that the government uses is an examination of income distribution, specifically looking at different fifths of the population (as divided by income) and noting their disparity and spread (McEachern 2008). As income distributions change for a variety of reasons, the poverty line calculated by the government also changes, and this can distort reality to the point that federal income standards for poverty might indeed be far lower than is really the case in day-to-day life.

The income gap in this country has been steadily rising for three decades, and in fact the ration of the top one percent's household income to the income of the bottom and the middle fifths of the country's population more than tripled over this thirty year period (CBPP 2010). In other words, the number by which the bottom and middle thirds' incomes would need to be multiplied to reach those of the top one percent of earners in the country tripled, from ten to thirty in the case of the middle third (meaning the top one percent makes thirty times more, on average, than do the middle third of earners in the country) (CBPP 2010). As income gaps like this widen, more people are pushed towards the bottom fractions of the income distribution charts, and this can lead to a lowering of the poverty line in keeping with the proportions of the graph rather than with a true acknowledgement of the real cost of basic goods like food, utilities, clothing, and rent (Wolf 2009).