Better Insurance Against Inequality
APRIL 12, 2014
Economic View By ROBERT J. SHILLER
Paying taxes is rarely pleasant, but as April 15 approaches it’s worth remembering that our tax system is a progressive one and serves a little-noticed but crucial purpose: It mitigates some of the worst consequences of income inequality.
If any of us, as individuals, are unfortunate enough to have income drop significantly, the tax on that income will plummet as well — and a direct payment, or negative tax, might even be received from the government, thanks to the earned-income tax credit. In this way, the tax system can be viewed as a colossal insurance system, guarding against extreme income inequality. There are similar provisions in other countries.
But it’s also clear that while income inequality would be much worse without our current tax system, what we have isn’t nearly enough. It’s time — past time, actually — to tweak the system so that it can respond effectively if income inequality becomes more extreme."Respond effectively if"???
"There are a thousand hacking at the branches of evil to one who is striking at the root."