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How Higher Taxes Can Fight Inequality While Promoting Growth [psmag.com]

 

According to the latest World Inequality Report, inequality is like the world's oceans: almost everywhere, and rising all the time. The United States is no exception. Its wealth gap today is as large as it's been since the turn of the 20th century. The authors of the report sound genuinely alarmed. "If rising inequality is not properly monitored and addressed," they warn us, "it can lead to various sorts of political, economic, and social catastrophes."

One of the report's authors is the French economist Thomas Piketty, whose 2014 doorstop Capital in the Twenty-First Century argued that free-market capitalism, left to its own devices, creates a hereditary aristocracy of wealth. As a solution, he proposed a worldwide wealth tax. Top Incomes in France in the Twentieth Century: Inequality and Redistribution, 1901-1998, his latest book in English (first published in France in 2001), is also about taxation. It charts the historical ups and downs of France's income and inheritance taxes. His conclusion is modest: Taxation can tame inequality if we want it to.

But such a conclusion might still prove controversial. It clashes with fundamental truisms of pro-market, right-wing political movements that decry progressive taxation as inefficient, unjust, and even opposed to the laws of human evolution. Among the intellectual architects of the pro-market movement, ascendant since the 1970s, was Friedrich August von Hayek, an Austrian economist, philosopher, and the subject of Naomi Beck's new book, Hayek and the Evolution of Capitalism. Taken together, Piketty and Beck's books address some of the most vital political questions of our young century. Can we do anything about runaway income inequality? And, if so, should we?

[For more on this story by PAUL W. GLEASON, go to https://psmag.com/economics/wh...-do-about-inequality]

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