How Not to Reduce Inequality

Double the taxes! Triple the taxes!

AEI’s James Pethokoukis has a blog post covering a recent Brookings study on the effects of “taxing the rich” on inequality. The study found that large increases to the top individual tax rate did little to reduce inequality, even when assuming explicit redistribution to the bottom 20 percent. Pethokoukis then draws attention to suggestions that have been made to reduce inequality:

Inequality researcher and best-selling author Thomas Piketty says “the main policy to reduce inequality is not progressive taxation, is not the minimum wage. It’s really education. It’s really investing in skills, investing in schools.” That would seem to reflect the idea, put forward by Steven Kaplan and Joshua Rauh, that technology and globalization have enabled the highly talented and educated individuals to manage or perform on a larger scale, “thus becoming more productive and higher paid.”

He continues to offer various, evidence-based reasons for rising inequality, including real-estate prices and better-paying firms.

Worth the read.

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