New York Times: Rising-Tide Tax System, The

In the last 20-plus years, overall economic growth in the United States has come at a cost: rising income inequality, which in the past few years has hit levels not seen since the late 1920s. A more progressive income tax, introduced during the New Deal, helped mitigate the problem, and it remains a likely prescription today. Ye a team of economists that includes Robert Shiller of Yale University and Leonard Burman of Tax Policy Center recently released a paper in which they propose another way of “spreading the wealth” –one that, while prevent income inequality from worsening in the coming years.
Under that proposal, the tax would automatically be rewritten at the end of each year to reflect any changes in the relative share of national income earned by each income bracket. For example, if one year the nation`s top earners saw their share of national income rise while people at the bottom saw their share grow at a slower rate (or decline), the following year`s tax rates would be automatically to compensate for the new inequality. This would keep everyone`s share of after-tax income at the earlier level.
The proposal is progressive in intent but conservative in effect. The only “redistribution” ti promises would be an automatic response to growing inequality. Indeed, the proposal would work both ways: if the rich saw their share of nation`s income grow more slowly relative to people lower down the economic ladder, the tax system would become less progressive, and the tax burden would increase on the middle –and lower- income tax brackets.
The name of the proposal –the rising-tide tax System- is an allusion to John F. Kennedy`s claim in 1962 that “rising tide lifts all boats,” a promise that a general economic growth would benefit all members of society. Shiller argues that it`s still possible to turn Kennedy`s vision into a reality. “It`s something we can engineer,” he says.
Years in ideas 2008, New York Times, The Times Magazine.By Stephen Mihm.


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