Textbooks teach us that we can have a more egalitarian society only if we give up growth or efficiency. However, closer analysis shows that we are paying a high price for inequality: it contributes to social, economic and political instability, and to lower growth....
There is good news in this: by reducing rent-seeking – finding ways of getting a larger share of the pie, rather than making the pie larger – and the distortions that give rise to so much of America’s inequality we can achieve a fairer society and a better-performing economy.Read it at The Financial Times | Opinion
America is no longer a land of opportunity
by Joseph Stiglitz
5 comments:
Stiglitz may not be in paradigm, but he gets the equality/inequality part right. I also think the use of taxation as incentives or disincentives for certain economic behaviors is not only appropriate, it's what the tax code has always been used for (at least in part).
John Zelnicker " the use of taxation as incentives or disincentives for certain economic behaviors"
Warren Mosler agrees. It's basic to MMT on tax policy.
That's why I find difficulty in practice to use tax as a monetary policy tool.
There are too many interests at stake when you set up tax structures or change them. Yes, you can run 'temporal' programs and cut taxes here and there, but rising them back ain't that easy (to fight inflation specially, it just does not cut it from a marketing pov).
Take how indirect taxes are being risen in Europe while direct taxes are kept the same (at least tax loopholes for the rich and corporations). This tax structure works specially well to cut demand from most of the population while keep wealth of a small percentage increasing.
Get rid of sales taxes, CGT and corporate taxes. Just keep income tax and treat all income equally. Capital gains would be income amortized over the duration of the investment.
Only tax income from transactions in your own currency. The major challenge would be taxing foreigners operating in a country through overseas corporations and tax avoiders operating from offshore companies. There would have to be some corporate taxes on foreign companies (maybe at average tax rate), with penalty tax for offshore tax avoidance schemes.
The component of tax for local government should come through land taxes.
I am not surprised that Stiglitz would completely ignore the rent-seeking behavior of statesmen.
"Fiscal stimulus" is rent-seeking par excellence.
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