Wednesday, November 6, 2019
Wall Street Journal op-ed: Tax Cuts for the Wealthy Make Inequality Worse, by Alan S. Binder (Princeton):
Here’s a short test of your value judgments. (There’s no right answer.) If free markets start dishing out increasingly unequal pretax incomes, should the government ignore it, mitigate it by making the tax system more progressive, or exacerbate it by making the tax system less progressive?
The question isn’t hypothetical. And you may be surprised to learn that the U.S. political system has given a clear answer: Exacerbate it. ...
[I]ncome inequality in America now stands at, or just a tad below, its all-time high. The essential fact is that inequality has been rising for almost 40 years.
What about tax progressivity? Two economists at the University of California, Berkeley, Emmanuel Saez and Gabriel Zucman, just published an important new book, The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay. Perhaps the most stunning finding: “For the first time in the past hundred years, the working class today pays higher tax rates than billionaires.”
Chew on that for a moment. You may remember Warren Buffett bemoaning that he paid a lower average tax rate than his secretary. Apparently, he wasn’t alone. ...
When we juxtapose the data on inequality with the data on taxes, a sad story emerges. Since about 1980, the market has been handing out increasingly unequal rewards in the form of pretax incomes. This trend toward greater inequality isn’t uniquely American—within-country inequality has risen in most advanced market economies. But instead of mitigating that trend by making the tax system more progressive, America’s political system did precisely the opposite. The present Age of Inequality is also an Age of Regressivity.