As we know there's a lot of talk around today about inequality, the screaming increase in it, the necessity of something being done about it and so on. At which point, in The Guardian from someone deeply involved in the shouting about this:
Lucas Chancel is a French economist who worked with Thomas Piketty on the World Inequality Report 2018
We would, I think, hope that someone working that deeply within the subject would get things at least around and about right, yes?
It’s hard to exaggerate the difference between western Europe and the USA when it comes to inequality. In 1980, these blocs of similar population and average income were also similar in income inequality: the top 1% captured around 10% of national income, while the poorest 50% took around 20%.
Things have changed dramatically since then. Today, the top 1% in Europe take 12% of income (in the US, 20%) while the bottom 50% have 22% (in the US, 10%).
Well, no, as another recent paper puts it:
According to official measures, which are based on income, inequality has risen steadily in the US since the early 1970s (DeNavas-Walt and Proctor 2015). An important limitation of the official statistics is that they are based on pre-tax money income, which does not account for tax credits and in-kind transfers such as housing benefits and food stamps, which have increased sharply over time. Income inequality still rises for measures of income that more closely reflect family resources available for consumption, but the rise is less noticeable.
Broadly speaking (not quite, the change started in the mid-70s) US income shares changed from being post tax post benefit to being pre- tax and benefits. That is, the current US figure is, largely enough, income inequality before the things done to reduce inequality, while the old one was after. The European numbers are post reduction all along.
That is the sort of thing we'd hope an inequality researcher would both know and tell us, yes? But it gets worse:
Generous welfare states need to be financed, of course. Europe is a patchwork of taxation systems. But overall the continent has been good at protecting progressive taxation – which has not been the case in the US, Britain and also countries such as India, where inequality has mushroomed. Progressive taxation is a proven tool against entrenched privileges at the very top; it also helps finance investment and public expenditure designed to lift income levels at the bottom.
The US tax system is *more progressive* than near any of the European ones.
For progressive here is not a synonym for "lots of taxes" nor even for high rates. It has a specific meaning - if average tax rates as a percentage of income rise as income does then the system is progressive. The more they do so the more progressive the system is. And that US tax system is more progressive than European ones by exactly that definition.
The cause is that the US is largely (many parts have sales taxes but at lower rates) free of regressive consumption taxation, relying much more upon the very much more progressive income tax. This is not an arguable point it is a simple fact.
This really is something we would hope someone shouting about progressive taxation would know - that the US has a progressive, more so than much of Europe, taxation system.
But apparently not. Which does rather call into doubt everything else this person, and his ilk, are trying to tell us about inequality, taxation and the joys of progressivism, doesn't it? A pity, because conversations about what we should do would work rather better if we started from where we actually are, no?