Tim Smeeding on how to reduce income inequality

Tim Smeeding knows more than virtually anyone about inequality and poverty in the United States and other rich nations. I asked him what he recommends to reduce income inequality. His response:

  1. Tax appreciated assets when inherited or transferred inter-vivos.
  2. Raise income tax rates on capital income — capital gains and dividends — to levels just below labor, e.g. maximum rate at true current marginal tax rate or 30%. And curtail practices of defining earnings as capital income, e.g. “carried interest” provisions.
  3. Reduce political rents: close tax loopholes that benefit mainly the wealthy (e.g. cap on deductions for employer-provided health insurance); turn deductions that benefit the richest into credits, many refundable, to benefit lower- and middle-income families; allow drug purchases at “best price” rates, not market rates, for Medicare; get rid of oil and gas exploration tax subsidies; limit and phase out agricultural subsidies.
  4. Use tax revenue to improve public infrastructure (including internet).
  5. Improve college prep classes and college counseling for students.
  6. More and better apprenticeships (get employers involved).
  7. Raise the minimum wage to $10 per hour, index it, and enforce labor laws (e.g. on scheduling).
  8. Universal child allowance at $2,500 per child, refundable if this is more than income taxes owed, and separate from the EITC.
  9. Profit sharing among all long-term (full year or more) employees.