Tag: Redistribution

Must-Read: Marshall Steinbaum: How Much Would Increasing Top Income Tax Rates Reduce Inequality?

Posted on by Brad DeLong

Must-Read: Marshall Steinbaum: How Much Would Increasing Top Income Tax Rates Reduce Inequality?: “William Gale, Melissa Kearney, and Peter Orszag… increasing top-bracket ordinary income tax rates…

would have little impact on inequality…. There are two key reasons why [their] tax scenarios do not affect [their measure of] inequality very much. First of all, the rich earn a great deal of their income in categories other than “ordinary income,” to which these tax rates apply…. The other reason… is that GKO measure inequality by the Gini Coefficient. But the scenarios only affect individuals comfortably within the top 1% of the income distribution…. The Gini Coefficient is insensitive to measuring inequality in that group….. [But] the reduction in the top 1% income share as a result of the GKO scenario is just under 20% of the total increase in inequality over the whole period the CBO analyzes…

Evening Must-Read: Martin Wolf: A more equal society will not hinder growth – FT.com

Posted on by Brad DeLong

Martin Wolf: A more equal society will not hinder growth: “Over the past half century, notes the IMF…

inequality has been rising in high-income countries and falling in developing countries… the difference between market and post-intervention inequality in high-income economies is smaller than elsewhere…. Inequality reduces growth. The direct impact of redistribution is negligibly negative. But the indirect effect, via reduced inequality, is beneficial to growth…. Increasing already very high levels of redistribution will harm growth. Yet, below the policy extreme, further redistribution does not harm growth…. Not only does inequality damage growth, but efforts to remedy it are, on the whole, not harmful. These are just statistical relationships derived from data that cover a large number of heterogeneous countries. Nonetheless, the findings suggest that trade-offs between redistribution and growth need not be a big worry…”