Thus, given the connection between investment, productivity and wages, there is little conflict between people who invest in equipment and those who use it. Saving done outside of IRA, Keogh and 401K plans faces a marginal tax rate of up to 39.6 percent. American saving incentive is weakened because it's taxed so heavily. Lower savings means fewer resources to fuel investment. As a result growth in both worker productivity and earning are lower than they would be otherwise.
Politicians demagogue about wage stagnation.
Instead, we find that the share of personal income going to both workers and savers has declined since 1990, because the share going to government transfer payments has increased. In other words, Congress is reaching into worker paychecks to finance programs like Social Security, Medicare and Medicaid. Dr. Reynolds shows it's the handout explosion, and resulting slower economic growth, explains wage growth stagnation. Instead, Congress should get out of the way of more rapid economic growth. They should eliminate the corporate profit tax charade.