The government is the only reason U.S. inequality is so high (it's the tax code) -Dylan Mathews WaPo

[Bill USA]

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/12/05/the-government-is-the-only-reason-u-s-inequality-is-so-high/

While the rhetoric in President Obama's big inequality speech Wednesday was characteristically soaring, the policy proposals were largely rehashes of past administration initiatives. What's more, a surprising number of them had little to do with tax or transfer programs. Things like increasing exports, reducing certain regulations, boosting spending on scientific research and other investments, and raising the minimum wage are intended to reduce inequality before taxes or transfer programs like Social Security and the Earned Income Tax Credit come into the picture.

That's a totally valid way of tackling the problem, and there are plenty of other initiatives, such as patent reform or reducing occupation licensing requirements, that would reduce inequality before taxes and transfers. Dean Baker at the Center for Economic Policy Research has a long list of worthwhile proposals along these lines.

But it's worth noting that you can get U.S. inequality down to the levels seen in extremely egalitarian societies like Sweden by doing nothing but changing tax and transfer policies. Pre-tax/transfer inequality in the U.S., as the above chart by the Luxembourg Income Study’s Janet Gornick shows, is about equal to that of Sweden, Norway, and Denmark. Finland, Germany, and Britain actually have higher pre-tax/transfer inequality than the U.S. does.[font size="3"] The only reason these countries enjoy such low levels of inequality is that their tax and transfer systems reduce inequality much, much more than the U.S. system does.[/font]

And, interestingly, the way they do that is by using relatively regressive but highly efficient consumption taxes to fund very generous welfare states. That's a marked contrast to the U.S. approach of having relatively progressive income taxes but stingier spending programs.

We do our biggest redistribution of wealth by [font size="3"]Privatizing Profits and Socializing Losses[/font].. in other words, everybody picks up at least part of the tab for businesses losses (and those of gamblers like Hedge fund managers) while they keep the largest portion of their profits! WHAT A COUNTRY!!!

[MindMover]

1. Probably will get NSA'd for viewing this and commenting but so what ....

I am an old fart .... and don't have anything to lose, so here goes ... no savings and no stock portfolio ...


This article is so true that it hurts to read it ... I mean really, who holds the purse strings .... the big bad billionaires or the big bad trillionaire makers, IE: taxing, money making, governments ...


"But it's worth noting that you can get U.S. inequality down to the levels seen in extremely egalitarian societies like Sweden by doing nothing but changing tax and transfer policies."

[Ace Acme]

2. SInce it's WaPo at least you'll have a lot of company.

Note the article claims that the way more egalitarian states reduce inequality is through consumption taxes.

That makes a lot of sense to me. Why tax income? We don't want to penalize success. Tax consumption.
Avoid regressive consumption taxes by making it a luxury tax. You want a $20 shirt, no tax. $40, $60, $80
shirts get tax. People buy them for the snob appeal, and making them more expensive will only increase the
snob appeal. Everybody wins.

[reACTIONary]

10. I attended a town hall held by Ben Cardin the other day...

...and he was advocating consumption taxes as a way of increasing exports. He said that corporate income taxes contribute to the cost base of products sold abroad and make American products more expensive compared to products that are manufactured in countries that use VAT.

[airplaneman]

3. I don't believe its just the tax code.

Every law affects the distribution of wealth. There are way too many laws that protect those who have money over those that do not. The examples are endless. Just look at bankruptcy laws. Why can a hospital charge 10X what they settle with the insurance company to an uninsured person? Why does a businessman with 100 houses get a write down in bankruptcy whereas an individual is always denied that benefit? Then there are patent and copyright laws. Did you know a pharmacy company can take 5 generic drugs mix them together and patent them as a new drug combination charging 10 times what the generics used to cost.
Laws should affect society as a whole and not those with money
-Airplane

[Phlem]

7. It's way more than just the F'ing tax code

and this black and white reasoning has got to end. One could add, corruption and probably get way much closer to the real issue. The lying, stealing, black mailing, etc.... that all comes with politics that run our lives.

-p

[cantbeserious]

4. Who Stole the American Dream? - See Here - Much About The Tax System And More

http://www.democraticunderground.com/1017163425

[Laelth]

5. k&r for the truth, however depressing it may be. n/t

-Laelth

[truedelphi]

6. In discussions on the ACA, I pointed out that poorer people over 55 get shuffled onto

MediCaid, and in return, their estates get the bill for their services.

So the poorest of the poor don't get to leave their double wide trailer to their kids, and so many here think that is fine. But meanwhile the Richest and The One Percent have had tax burdens reduced to ridiculous lows - all because so many people are sold the idea that "Big Corporations create the most jobs." Not only do the Biggest Corporations get low tax rates, they get subsidies, again with the idea that they will create jobs. PLEASE Someone point to any Big Corporation that is hiring Americans at decent wages on account of these subsidies.

Actually, when a nation has an even playing field, study after study proves that it is the middle class business person who creates the jobs through their small to mid sized company. But that is no longer possible. Congress and its bought and paid for puppets continually in-equalize the playing field.

As a small publisher, I can't compete with Amazon, and they end up selling our books for us, as they get a discount on the postage and shipping rates, and also ample tax breaks that my small company doesn't.

Both sides of the aisle are guilty guilty guilty. In fact, it was the Democratic majority in Congress that got what I call the Unequal Postage Act passed back in late sopring of 2007!

[freshwest]

8. True. It's been slanted against wage earners by Congress changing the tax code to favor business.

It's gotten completely out of hand in the last few decades.

[indepat]

9. Just arrogant enough to wonder if Dylan has read my posts on this board opining income inequality

in the U.S. is mostly due to governmental policies (including the minimum wage) and the tax code.