January 3, 2012

THANKS, W:

Look Past Taxes to Fix Global Puzzle of Inequality (Clive Crook Dec 27, 2011, Bloomberg)

Democrats in the U.S. have decided to make inequality a central issue in next year's elections. I'd question whether that's good politics. Even in hard times, American voters aren't easily persuaded by appeals to class interests.

Yet even setting electoral tactics aside, a focus on inequality seems unlikely to lead to better policy, especially if you look at how current U.S. policy choices stack up against those of other advanced industrialized economies.

If anything, rich Americans contribute a greater share of taxes than do their peers in other industrialized nations. The top 1 percent of U.S. taxpayers paid 40 percent of federal income taxes in 2007. The top 1 percent of British taxpayers paid 24 percent of the corresponding total.

A new report by the Organization for Economic Cooperation and Development shows that in the middle of the last decade -- i.e., after the Bush tax cuts were introduced -- the U.S. income tax was about as strongly redistributive as income taxes in Canada, Denmark, Finland, the Netherlands and Sweden. You might have noticed that the CBO report on top incomes was widely quoted, but one finding got less attention: Between 1979 and 2007, "the federal individual income tax became slightly more progressive."

The awkward truth is that the U.S. income tax system is anomalous not because it taxes the rich lightly but because it taxes everybody else lightly.

Posted by at January 3, 2012 3:47 PM
  

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