Nicholas Kristof cites, apparently with approval, the following strategies to reduce income inequality:
- Government should be more concerned with monopolies and competition policy.
- Trade unions should be bolstered to represent workers’ interests.
- Government should provide public-sector jobs at minimum wage to those who want them, in areas such as meals-on-wheels, elderly care, child care and so on.
- In addition to a minimum wage, there should be a framework to restrain pay at the highest levels. Atkinson cites companies that have voluntarily decreed that executive pay should be capped at 65 or 75 times the average pay in the firm.
- Personal income taxes should be made more progressive, with a maximum rate of 65 percent.
- Every child should get a “child benefit†payment, to help keep kids out of poverty.
Just for the record I support his first proposal, think the second is fighting the last war (which has already been lost), cautiously support the third, agree with the fourth but think it’s beyond the power of the federal government to effect without disastrous consequences, and have grave reservations about the sixth. Have we learned nothing from our experience with AFDC? Watch the movie Precious some time for a primer.
It’s the fifth I’m curious about. I have no objection to it in principle but am skeptical that it will accomplish anything. Consider the history of the effective rate of taxation. I’ll save you the trouble of clicking over. It’s been tremendously stable over a very great period of time, resistant to changes in marginal tax rates. The only exception has been during a period of national emergency (World War II).
What measures does Mr. Kristof think should be implemented to increase the effective rate of taxation of the highest income earners?
#3 could be quite expensive. Unless you think that the federal government can extend credit to itself indefinitely without a collapse in the dollar, that means that additional revenue will be needed. Additional revenue means more than increasing the marginal rate of taxation. It means increasing the effective rate.
What concerns me about the plan is that even if all of the above were implemented it still wouldn’t do much about income inequality. To do that you’ve got to train your guns on the top 3% of income earners rather than just the top .1%, curtail immigration, and stop currency manipulators.
4, 5, and 6 can be accomplished with 3 alone. A full employment policy will alter the capital/labor income ratio, improving household quality of life, reducing poverty significantly and narrowing income inequality. Jobs, not welfare.