TaxProf Blog

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Pepperdine University School of Law

Tuesday, March 24, 2015

Michael: Taxing Labor Like Capital Would Reduce Income Inequality and Promote Economic Growth

Michael PhotoTaxProf Blog op-ed:  Taxing People Like Shares: How Pro-Labour Tax Simplification Can Help Reduce Income Inequality and Promote Long-Term Economic Growth, by Bryane Michael (Oxford University):

Stagnant wages in the US have contributed largely to income inequality. No wonder given friendlier capital tax rates, compared with labour. Could the much-debated change to the US tax code hold the key to a fairer society? In this brief, I will discuss the economics and ethics of changes to worker taxes. Specifically, I will look at equal taxation of income taxes and capital taxes. I will discuss how other such taxes in places like South Korea have helped achieve social (read macro-ethical) goals. I will also provide estimates of how such taxes would reduce income equality in the US, and their effect on the budget deficit. Its an article about ethics because of the balancing of "good" across political-economic groups.

Figure 2

We used to tax people just like capital in the late 1980s, when both income and income equality shot up. In that time, you paid more tax when you got richer – whether you got rich from digging ditches or speculating in stocks. Let’s return to the ethics of that time.

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Sure, we can make everyone equal -- equally unemployed and equally miserable using this guy's formula.

Cutting capital gains taxes resulted in more investment, more jobs, and economic growth. Raising capital gains taxes, the writer's real point, would not result in more jobs with people better off.

What do you want, people equal according to one set of standards or everyone better off?

Posted by: Woody | Mar 24, 2015 11:14:11 AM