Thursday, March 12, 2015

Dylan Matthews — The government is the only reason the US has more inequality than Sweden

The entire difference comes after taxes and transfer spending. As the chart above shows, Germany and Ireland both have significantly more pre-tax/transfer inequality than the US, but significantly less post-tax/transfer inequality. In other words, their tax and welfare systems are much, much more progressive. Meanwhile, the Netherlands and Sweden, which have famously egalitarian economies with generous welfare states, have the exact same level of pre-tax/transfer inequality as the US. It's not that their societies naturally produce more equitable distributions. Their governments simply do more redistribution.
The government is the only reason the US has more inequality than Sweden
Dylan Matthews


Dan Lynch said...

Yep, taxing the rich and spending on social programs is a proven way to reduce inequality.

the countries that do the most to cut inequality through taxes and spending actually have less-progressive taxes, on average. They use regressive revenue-raisers like value-added taxes (VATs) to finance extremely progressive social spending.

I wonder if the basis for that claim takes into account America's highly regressive state and local taxes, and our FICA tax?

Yes, Europe pays 20% or so VAT, but we pay 12% FICA, and 6% or so sales tax. Our property taxes tend to be horribly regressive and are the biggest ding for many working class Americans.

Finland even has progressive traffic fines.

NeilW said...

"Yes, Europe pays 20% or so VAT,"

Possibly the silliest tax ... in the world.

A French idea. But one that turned out more like their proposals for a ten day week than the metre.

The arguments for sales tax surely come from the puritanical dislike of consumption and the obsession with saving as the only pure form of religion.

Other than that it is a very silly idea.

Matt Franko said...

"A French idea..."

Well at least they didn't saddle you guys over there with a 'statue of liberty' to have to deal with all the time so it could be worse....

NeilW said...

It's a useful prop in films.


Matt Franko said...

Ha! One of my favorites:

Can't beat Chuck Heston...