Monday, October 24, 2011

Mark Thoma makes a bold claim: Raise Taxes on the Wealthy

It's pretty amazing how what used to be a platitude has become a taboo (at least in the US). The ever-reasonable Mark Thoma makes a restrained case for progressive taxation and gets disheartened by the aggressive bile he receives from online commenters.

Thoma points out that the US economy hasn't, by any serious measure, prospered as a result of the declining fiscal burden faced by the super-rich. But his argument also receives strong support from comparative analysis. A quick look around the advanced world shows that the most unequal societies are also the worst performers in the post-crisis scenario. In Europe, egalitarian Sweden, Holland and Germany are the strongest performers, whilst less progressive economies such as Ireland, Greece and Italy suffer (not to mention the UK). In North America, Canada is in much better shape than the US.

The crisis has laid bare the bankruptcy (figuratively and other) of the Anglo-American model of inequality-fuelled growth. Put another way, there is no equality/efficiency trade-off.