Wednesday, January 11, 2017

Tax and the rich

To be honest, I'm in no position to judge the modelling work in the paper, and "common sense" is a tricky thing when it comes to economics, but this certainly sounds worth looking at:

We Need To Tax The Rich But Instead We'll Do The Opposite

What’s the scale of the problem? The paper notes that in the U.S., “the share of overall wealth held by the top 1% has increased from around 25% in 1980 to over 40% today; for the top 0.1% it has increased from less than 10% to over 20% over the same time period.” Economic mobility has severely declined during the same time period as well, which means that our country today is far more unequal and offers far less opportunity than it did a generation ago. When the very wealthy double their share of the pie at the same time when it is harder than ever to achieve a better living standard than your own parents, people will naturally get frustrated, even if they can’t put their finger on who or what is thwarting their dreams.

The new study uses an economic model to examine several possible drivers of inequality in the past 35 years, including the decline of progressive taxation (meaning that the rich are being asked to give less of what they earn back to the public), increases in wage inequality (the growing gap between how much high and low earners are paid), and the rise of the capital share of income (how much of our national income comes from capital, rather than from wages for labor). Their findings: It’s the taxes, stupid.

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