Monday, October 5, 2015

John Quiggin — Would a significant increase in the top (US) marginal income tax rate substantially alter income inequality?


Yes. At the tails.
It’s obvious, as the authors note, that the 90-50 measure won’t change, since neither group is affected (there’s no simulation of behavioral responses which might have indirect effects). But, since the 99-th percentile income is very close to $400k, there’s very little impact on this group either. But the tax, as modelled, raises a lot of money from the ultra-rich incomes. As a result, distributing the proceeds at the bottom of the distribution raises incomes substantially, which explains the big changes in the 90-10 and 99-10 ratios.
The real lesson to be learned here, one I came to pretty slowly myself is that old-style measures looking at quintiles or even percentiles of the income distribution are no longer very relevant. The real question, in the economy of Capital in the 21st Century is how much should go to the ultra-rich.
John Quiggin
Would a significant increase in the top (US) marginal income tax rate substantially alter income inequality?

2 comments:

Ryan Harris said...

The extreme rich, the billionaires, there are only a few hundred in the US, how much opposition can there be to taxing them? People imagine there are legions of them, there aren't.

Tom Hickey said...

The fact this hasn't happened shows their political clout. It's just one instance of political influence and wealth shaping social outcomes politically, and not fro public public purpose.

Nothing much will change without ending first Chief Justice John Jay's, Those who own the country should govern it, with President Lincoln's government of the people, by the people and for the people, which is the essence of capitalism versus socialism.