Where We Live: Taxing Inequality

Income inequality stands to be the biggest issue - not just of the next election

Where We Live: Taxing Inequality
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Where We Live: Taxing Inequality


Income inequality stands to be the biggest issue - not just of the next election cycle - but of the next decade. Why? Well, the rich just keep getting richer - a new study released by Connecticut Voices for Children shows that over a four year period, the highest wage earners in the state have seen their income sharply increase - even through a recession - while middle-class workers struggle by, making about the same.

Nationally - the debate has played out in the halls of congress where many  Republican lawmakers have taken pledges to oppose raising any taxes on the rich - calling the top 1% the “job creators” that America needs.

The debate has also played out on the streets since September - as the Occupy movement looks to represent the 99% that hasn’t had a chance to take part in this economic boom.

But from a standpoint of both politics and fairness, any call to simply “tax the rich” faces a big uphill battle.

Here’s a thought, though - what if there was a plan to tax the inequality that’s gotten much worse in the country since 1980, instead of just focusing on taxing the wealth. What if tax policy was seen as an incentive for the “job creators” to make sure all boats lift with their rising tide?

Our guest is Ian Ayres - a Yale law professor and economist - who along with Berkeley’s Aaron Edlin - has a new plan that he outlined in the New York Times.  



Listener Email

If the current tax plan were implemented equally, without loopholes, wouldn't this problem be moot? For instance, all income should be taxed at the same rate so there is no difference between bonuses and ordinary income.

CEO bonuses are not taxed as regular income, however, my husband got a bonus and it was added to his income, at the same tax rate. This is wrong.

Also, if the median income doubles, there is a high likelihood that cost of living will have risen equally - therefore the relative inequality would stay the same.

Listener Email

1. How many Yale faculty are in the 1% taking into consideration the large physician practice at Yale, the consulting work the faculty does outside of Yale, etc.
2. Does your guests' proposal take into account the total tax burden or just look at Federal taxes. Does the proposal consider real estate taxes, sales taxes, State income taxes, gas tax, luxury taxes, etc. I suspect that many of the people at the low end of the 1% are paying in excess of a 45% effective tax rate. That seems like enough to me. Obviously as you move into the super-rich the nature of their income changes and so their effective tax rate will decline.
3. This seems like a classically American solution, treat the symptoms not the disease. I strongly believe that if you poll Americans, they don't have an issue with income inequality. What they have issues with is income inequality that was gained unfairly (like hedge fund guys who use inside information) and income inequality that was gained through unfair influence (e.g. political influence). It is very convenient to try and say that by reducing income inequality you will reduce the influence of the rich. But that is a real cop out and leaves a broken political system and campaign finance system in place. Rich people are a problem that isn't in need of a solution.

Being rich is part of the American dream. Cheating and stealing your way to the top is not, unless your a Kennedy.