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Six Tax-Based Ways to Tackle US Inequality

Summary:
Some of the leading candidates for the 2020 Democratic presidential nomination have proposed radical measures to reduce inequality, such as a wealth tax. But there are many other progressive tax policies that would be both easier to enforce and more likely to get a Democratic candidate elected. CAMBRIDGE – Three years ago, Donald Trump’s victory in the United States’ presidential election triggered a search for explanations of what is still a shocking outcome. One immediately came to dominate: his Democratic opponents had been insufficiently aware of the problem of income inequality, or had neglected to propose effective solutions. Cronies Everywhere PS OnPoint

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Some of the leading candidates for the 2020 Democratic presidential nomination have proposed radical measures to reduce inequality, such as a wealth tax. But there are many other progressive tax policies that would be both easier to enforce and more likely to get a Democratic candidate elected.

CAMBRIDGE – Three years ago, Donald Trump’s victory in the United States’ presidential election triggered a search for explanations of what is still a shocking outcome. One immediately came to dominate: his Democratic opponents had been insufficiently aware of the problem of income inequality, or had neglected to propose effective solutions.

That is presumably the logic behind the radical proposals to tackle inequality coming from some of the leading candidates for the 2020 Democratic presidential nomination. Senator Elizabeth Warren, for example, has proposed an annual tax (originally of 2%, but now up to 6%) on the richest Americans’ wealth.

The problem with the wealth tax is not that it is radical. Like many economists, I would support a high carbon tax – also a radical policy, but the most economically efficient way to respond to the global problem of climate change. A wealth tax, however, simply is not the most efficient way to address the problem of inequality.

In fact, there are at least six practical policy changes that could make the US tax system more progressive. They have all been proposed by mainstream Democrats such as President Barack Obama – who also advanced the Patient Protection and Affordable Care Act and other...

Jeffrey Frankel
Jeffrey Frankel, a professor at Harvard University's Kennedy School of Government, previously served as a member of President Bill Clinton’s Council of Economic Advisers. He directs the Program in International Finance and Macroeconomics at the US National Bureau of Economic Research, where he is a member of the Business Cycle Dating Committee, the official US arbiter of recession and recovery.

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