Sweden has maintained a low Gini index in part by having more progressive tax rates. If Americans wanted to follow the Swedish example, they could. But what is the morally fair way to determine tax rates — other than taxing everyone at the same rate? The case for progressive tax rates is far from settled; just read Kip Hagopian’s recent essay in Policy Review, which makes a powerful argument against progressive taxation because it fails to take into account aptitude and work effort.
American views about inequality have not changed much in the past quarter-century. In their 2009 book “Class War? What Americans Really Think About Economic Inequality,” political scientists Benjamin Page and Lawrence Jacobs report that big majorities, including poor people, agree that “it is ‘still possible’ to start out poor in this country, work hard, and become rich,” and reject the view that it is the government’s job to narrow the income gap. More recently, a December Gallup poll showed that 52 percent of Americans say inequality is “an acceptable part” of the nation’s economic system, compared with 45 percent who deemed it a “problem that needs to be fixed.” Similarly, 82 percent said economic growth is “extremely important” or “very important,” compared with 46 percent saying that reducing the gap between rich and poor is extremely or very important.
Suppose we tax the rich more heavily — who would get the money, and for what goals?
Reducing poverty, rather than inequality, is also a difficult task, but at least the end is clearer. One new strategy for helping the poor improve their condition is known as the “social impact bond,” which is being tested in Britain and has been endorsed by the Obama administration. Under this approach, private investors, including foundations, put up money to pay for a program or initiative to help low-income people get jobs, stay out of prison or remain in school, for example. A government agency evaluates the results. If the program is succeeding, the agency reimburses the investors; if not, they get no government money.
As Harvard economist Jeffrey Liebman has pointed out, for this system to work there must be careful measures of success and a reasonable chance for investors to make a profit. Massachusetts is ready to try such an effort. It may not be easy for the social impact bond model to work consistently, but it offers one big benefit: Instead of carping about who is rich, we would be trying to help people who are poor.
James Q. Wilson, a former professor at Harvard University and UCLA, is the Ronald Reagan professor of public policy at Pepperdine University. He is the author of “American Politics, Then & Now,”
“The Marriage Problem: How Our Culture Has Weakened Families” and “The Moral Sense.”
Read more from Outlook:
Why it’s not “fair” to raise taxes on the rich
Occupy what else? Six more targets for the movement
Obama shouldn’t fear a little class warfare
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