Potomac Fever: The real causes of income inequality

Friday, April 6, 2012

A complex story.

John Smith said...: Interesting article--the authors highlight an overlooked issue in my opinion--that perhaps the rising incomes of the 1% are not due to paying "unfairly" low marginal taxes, but due their responses to lower taxes on dividends and capital gains, which have spurred economic growth and are still higher than in most successful economies.

Digging through the comments in your WSJ article, I found this: http://www.treasury.gov/resource-center/tax-policy/Documents/incomemobilitystudy03-08revise.pdf

The article suggests that, according to the Treasury Department, the American Dream is still alive and well, i.e. we still have economic dynamism and income mobility. The commenter who provided that link also made some valuable, and in my opinion quite true, points about what should be the goals of taxation, which should not aim to achieve "fairness":

"The real question should be is our tax code efficiently financing the legitimate task of the government, and is it efficient in supporting economic growth or at least minimally disruptive to the economy. The answer to both of these questions is no, it is not; therefore the tax code should be changed".

He goes on to argue that progressive marginal tax rates like we have now are alright, but everyone should pay in--which is far from what we have now.

Interesting stuff--all should take a look.; April 8, 2012 at 6:30 PM

Potomac Fever