I was reading an article this morning about one thing we were discussing in class: does altering the tax system reduce inequality?
Instead of simply refuting the tax policy that we discussed in class to boost government revenue, the author also mentions ways to do this without taxing the rich more:
"The better response to income disparity, then, is not to tax the rich more, but to boost revenue over all so that government can invest more, and offer higher quality social insurance programs. We have our work cut out for us: Our net investment in public infrastructure is only around 0.5 percent of ourgross domestic product, and our social insurance programs are much smaller than those of most other developed economies."
The author also gives an example of how Germany uses regressive tax systems opposed to America's progressive system and both countries had virtually equivalent levels of income inequality.
Do you agree with this argument that taxing the rich more would not generate the desired result of equality? Is there a way for more government intervention without higher marginal income taxes?
http://www.nytimes.com/2014/10/10/opinion/dont-soak-the-rich.html
His argument appeals to my sense that the key problem with growing inequality is not that the rich are getting richer, but that the median income is not rising as well. On the other hand, the fact that the rich have so much money now means that they could be a very appealing source of income.
ReplyDeleteI think it is interesting how most articles treat raising the income tax on the highest earners as silly and unfair. It seems that when anyone even mentions a tax increase and we all freak out, even if it will not affect us. As Reich's film showed, higher tax rates on the wealthiest people is important to the health of the overall economy (therefore also benefiting the highest earners).
ReplyDeleteAt this point, where income inequality is so high, no solution proposed to fix it is going to seem fair. People with very high incomes see higher taxes, or even not taking a yearly bonus, as a sign that their hard earned dollars are being taken away from them. However, are CEOs actually working 380 times harder than their median employee? Similarly in this article Kleinbard criticizes raising taxes because richer people are not getting a proportionate amount of benefit back from the taxes they pay. He gives the example that "A chief executive who earns 200 times as much as her typical employee does not get 200 times the benefit from our investments in highways." However my criticism would be that that executive did not do 200 times the work to earn 200 times the money of that employee.
I dislike the comparison the author presents between the U.S. and Germany. To me it seems like he mentions that they have the same level of inequality and then states that our tax system is progressive and theirs regressive, therefore concluding that the form of tax system makes no difference. I think this is ignoring many important data points that should be analyzed. He later argues that the key to reducing income inequality may be in where the government is spending income from tax. For example our defense budget is much larger than Germany's and our social service much smaller. In order to compare the effect that the tax systems have on income inequality I think he needs to support his claim with evidence that the makeup of our budgets are the same. As stated the defense budget does not reduce inequality, so a progressive tax system really could lead toward reduced inequality and there may not be evidence in his comparison to support it.
ReplyDeleteI think the evidence is there: they've already tried taxing the rich more, yet inequality still persists. Is his argument at all getting at raising minimum wage?
ReplyDeleteLike Beth said, at this point nothing seems fair, almost no one is happy and the argument in it's entirety has been inconclusive in reaching a realistic solution. No, CEOs are definitely not working "380x harder than their median employee." With the article posing increases in government intervention without higher marginal income taxes, I just don't understand how.
To reduce income inequality effectively you must reduce the income of the wealthy or increase the income of the less fortunate (less fortunate ≠ poor). Again, "fairness" seems to be the issue here, as taking earned income from people who have more to give to those with less isn't necessarily fair. Conversely, the CEO making 380x more than their median employee, while not working nearly 380x more than them also doesn't seem fair. Unfortunately, the only tried and true method to reduce income inequality, as history shows us, is to cap economic growth and marginally tax (50-70%) the affluence out of incomes above a certain level.
ReplyDeleteI think this article makes sense. Why try to change the way we slice the pie when we could be making the overall pie larger for everyone? I think that is the fairest way to deal with income inequality.
ReplyDeleteI think that the best option to reduce income inequality is to bring the lower level incomes up towards the upper level incomes. I think that the best way to do this, like Clay said, is to increase the size of the pie instead of rearranging it. No one wants to decrease their income to increase someone else's, so getting a bigger pie would allow everyone to be happy with the outcome.
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