The 11-to-1 Gap That Isn't

Most discussions of inequality start with income. That's also where the trouble starts.

Income measures what comes in. It doesn't measure what government takes out through taxes, what it returns through tax credits and benefits, or what households receive through major health coverage.

If the question is how unequal households' broader economic resources are, those things matter too.

Using 2024 Census data for Kansas households headed by someone between the ages of 25 and 64, together with published tax and benefit data, the calculation can be worked through in stages. Retirees are excluded because Social Security and Medicare dominate their finances and raise a different set of questions.

That's a very different picture.

The first surprise is how much the tax code alone narrows the gap — before a single benefit check goes out.

Taxes do much of the initial work. The modeled combined direct-tax burden — federal and state income tax, payroll tax, and property tax — averages about $3,900 for the bottom fifth and roughly $87,000 for the top fifth. That's not an accident: America's federal income tax is steeply progressive. In 2022, the top 10 percent of filers paid 72 percent of federal individual income taxes while earning about 49 percent of income.

Tax credits and SNAP narrow the gap further. Consumption taxes push slightly the other way, since lower-income households spend more of what they receive.

Then comes healthcare. Medicaid is the single largest equalizing item in the calculation — bigger than any tax credit or SNAP. Higher up the distribution, coverage usually arrives through an employer instead, and neither shows up in headline household income.

The original 11-to-1 gap has been cut by more than half.

Related Reading Medicaid does more equalizing work in this calculation than any other program. It's also the fastest-growing line in the Kansas budget — and the reason has nothing to do with waste. Read: Medicaid Is the Symptom. Demographics Is the Problem. →

Now, a fair-minded skeptic — the kind who doesn't take a chart on faith, and good for him — might ask: if government already does this much work, isn't that an argument for doing even more of it? Maybe. But this table only shows where households land today, not what more redistribution would cost or do to the incentive to work.

It tells us the gap is smaller than advertised. It doesn't tell us the bill is paid, or that the incentives are sound. Keep both thoughts in your pocket.

To answer that, we need a comparison. And the obvious one is Europe — Britain especially, which is usually presented as having made a fundamentally different choice: Americans tolerate inequality; Britons tax and redistribute much more of it away.

I am an American living in Britain, and that contrast is part of the political background here too. Twain said travel is fatal to prejudice. Turns out it isn't bad for statistics either.

Britain's Office for National Statistics tracks household resources through the same kind of stages — income, direct taxes, cash benefits, indirect taxes and, in its broadest measures, benefits in kind like healthcare.

Before government intervention, Britain also starts with a large gap — roughly 12-to-1, close to Kansas's 11-to-1. Britain doesn't begin more equal than Kansas. It gets there through what government does next.

ONS's official measure puts non-retired British households at about 5.6-to-1 after direct taxes and cash benefits, before the value of the NHS is added.

Adding indirect taxes and assigning healthcare benefits to both sides produces this broader comparison:

The 5.6 figure is official. The 5.3 and 4.9 figures are scenario estimates, because putting a dollar value on noncash healthcare necessarily involves assumptions.

Britain plainly redistributes more aggressively. But after all that intervention, it doesn't end up nearly as far from Kansas as most people would expect.

And the way the two systems get there is almost as interesting as where they end up.

America's federal individual income tax is actually more concentrated at the top than Britain's:

Britain taxes more broadly — through VAT and National Insurance — and returns more through cash benefits and public services. America concentrates far more of its individual income-tax collections at the top. Britain spreads the tax burden more broadly and gives more back.

Different machinery. Different political traditions. Yet the resulting distributions are much closer than the political debate would lead us to expect.

That challenges a basic assumption behind the American inequality debate. A familiar argument begins with the 11-to-1 number, looks toward Europe, and concludes that America needs substantially more redistribution.

But the American system already compresses that gap enormously. Progressive taxes do much of the initial work. Tax credits, SNAP and Medicaid narrow it further. Once taxes, transfers and an estimated value for healthcare are counted, the distance between Kansas and Britain looks surprisingly modest in this scenario: roughly 5.3-to-1 versus 4.9-to-1.

A Kansas family doesn't live inside an inequality ratio. It lives on what its resources can buy.

A household in the bottom fifth doesn't become more prosperous merely because a household in the top fifth pays more tax. What matters is whether its income pays the mortgage, buys groceries, covers childcare, keeps the car running and leaves something at the end of the month.

So perhaps we have been asking the wrong comparison.

Not simply: How much does one household have relative to another?

But: How much can a household actually buy with what it has?

Housing. Energy. Food. Transportation. Childcare.

Britain redistributes more. Kansas taxes less. Which system actually makes ordinary life more affordable?

We shouldn't assume the answer. We should measure it.

Continue the Series Kansas taxes less than Britain. But taxing less isn't the same as costing less to live. The next question is whether Kansas's own housing math still adds up for the families trying to buy in. Read: Property Tax Relief Needs More Homes →

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Josh Dambacher is a Kansas attorney and spokesman for Republicans Overseas. He is a regular commentator on American politics for the BBC, CNN International, GB News, and TalkTV. He writes The Plains Ledger.

— J.D.