Inequality in the US

More inequality is not good for the US economy and society. Especially, when the inequality is encouraged directly by government policies.  Rich getting richer will not help return the economy to a better balance nor will it lead miraculously to more growth and more tax revenues–it will do just the opposite.

Tax policy is one of the best tools we have to help offset the troubling trend of growing inequality. Unfortunately, the Bush tax cuts have had the opposite effect, providing much larger benefits — both in dollar terms and as a percentage of income — to people at the very top than to middle- and lower-income people. People making more than $1 million get an average of about $124,000 each year in tax cuts, according to the Urban-Brookings Tax Policy Center. The main reason, of course, is the large tax cuts targeted specifically at high-income households.

So this fall, when policymakers decide whether to extend the high-end tax cuts, they should keep in mind just how unequal incomes in the United States have become. As former Federal Reserve Vice Chairman Alan Blinder wrote recently in the Washington Post, is the rationale for extending these tax cuts “that America needs more income inequality? Seems to me we have enough.” To me, too.

via Economist’s View: “Inequality and the High-End Bush Tax Cuts”.

About Stephen E. McGaughey
International consultant in economic development programs and projects

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