Comments on: How to pay for inequality reduction: follow-up

By: Richard Smith

Richard Smith — Fri, 09 Oct 2009 23:22:55 +0000

Lane,

I think the most relevant line out of the article was, “Whether desirable or not, increases of this magnitude strike me as unlikely.”

There are so many (possible) solutions out there, but the problem is that they all have their flaws.

By: Lane Kenworthy

Lane Kenworthy — Fri, 24 Apr 2009 20:38:08 +0000

DolB: Just to be clear, the charts here suggest we’d need top-end effective tax rates far higher than we had in the 1960s in order to increase tax revenues by 5% of GDP.

By: Divorced one like Bush

Divorced one like Bush — Wed, 22 Apr 2009 13:27:37 +0000

So the chart shows the increase would approach what we had in the middle class growth years of 50′s and 60′s. Ok, no political will to do it.

But, what seems to be forgotten in this distribution issue is also back then we had more of the income going to more of the people via pay for their labor. That is what made the difference.

You could not raise the rate as high as these charts suggest, if we return to policies that made it more profitable for companies to pay their help. Even unionizing fits with this tax issue. Tax a broader distribution of income means a lower overall rate for everyone AND, more money for the state to invest in all those things that business likes and needs to make money.

Time to broaden the discussion. (as I keep noting at Angry Bear).

Also, I have pointed out, that the amount of money needed to be made up in income to the 99% of the population to equal the share of 1976 is $1.4 trillion dollars. You just can’t do that with taxes. You have to do it by paying the help more for their labor.

By: Lane Kenworthy

Lane Kenworthy — Wed, 22 Apr 2009 03:53:55 +0000

Richard: I agree; I like Robert Frank’s take on this.

Gordon: The rest of GDP — around 2.7 trillion in 2006 — is investment, depreciation, and a few other things.

By: gordon

gordon — Wed, 22 Apr 2009 01:08:53 +0000

Another conclusion from this calculation might be that inequality reduction in the US is impracticable without reducing military expenditures. At least, it is impracticable with the strategy you are recommending.

I notice that the total household income in 2006 calculated by adding up total pre-tax household income from all income quintiles is only some $10.6 trillion. Where is the other $4 trillion, and how (if at all) is this presently taxed?

By: Richard H. Serlin

Richard H. Serlin — Wed, 22 Apr 2009 01:06:14 +0000

A fantastic system is a highly progressive consumption tax, as advocated by Cornell economist and New York Times Economic Scene columnist Robert Frank. For details see a brief Washington Post Column on this by Professor Frank. Such a plan may not be politically feasible now, but it can be in the future if first the academic community becomes educated about it and strongly in favor of it; this can lead to opinion leaders, including pundits, and politicians favoring it, and then the public. This process has happened many times before. Also, the exact plan may not be politically feasible now, but some aspects of it to some extent may, and these may be very valuable. Professor Frank is famous for his tireless advocacy of considering positional/context/prestige externalities, the pink elephant of economics. Smart consideration of these monumental externalities could massively increase total societal utility. You will read more about this in the above linked article, but I strongly believe that every economist and sociologist should read his book, "Luxury Fever" (1999), or at least his very brief book, "Falling Behind" (2007).