Inequality Is Bad, but Poverty Is Worse

You might be interested in this column I wrote for Bloomberg View about inequality. I argue that the US preoccupation with this subject misses two main things. First, by international standards, the US tax system is not unusually gentle on the rich, it is unusually gentle on the non-rich. Second, the US is indeed an outlier when it comes to policies affecting inequality--not because of the way its tax system works, but because it spends so little on support for the poor.

If anything, rich Americans contribute a greater share of taxes than do their peers in other industrialized nations. The top 1 percent of U.S. taxpayers paid 40 percent of federal income taxes in 2007. The top 1 percent of British taxpayers paid 24 percent of the corresponding total.

A new report by the Organization for Economic Cooperation and Development shows that in the middle of the last decade -- i.e., after the Bush tax cuts were introduced -- the U.S. income tax was about as strongly redistributive as income taxes in Canada, Denmark, Finland, the Netherlands and Sweden...

The awkward truth is that the U.S. income tax system is anomalous not because it taxes the rich lightly but because it taxes everybody else lightly...

The OECD's international comparisons tell you some other interesting things. For instance, at the bottom of the income distribution, unlike at the top, U.S. policy is an outlier. In most industrial countries, social benefits such as unemployment insurance and other cash supports are easier to get and more generous than in the U.S. -- and typically two or three times more powerful in reducing inequality...

Why does [this] command so much less attention? One reason is that American liberals find high incomes more upsetting than poverty.

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