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It’s not just left-wing progressives and Occupy Wall Street remnants who think US income inequality is a problem. A large 2014 Pew poll found that about two-thirds of Americans think the income gap has gotten worse and that government has a role in reducing that difference. Even 45% of Republicans think government should do something.
But do what exactly? Noam Scheiber in The New York Times summarizes research that found just 13% of wealthy Americans said government should “reduce the differences in income between people with high incomes and those with low incomes.” And only 17% percent said the government should “redistribute wealth by heavy taxes on the rich.” (Also, according to a different study, the wealthy view the income gap as reflecting the results of individual choices and mistakes rather than larger forces.) The rest of America, on the other hand, finds more appealing the idea of tax-driven redistribution. Scheiber points to a 2013 Gallup poll that found by 52%-45% Americans think wealth should be more evenly distributed with 52%-45% favoring tax hikes on the wealthy.
How will the next US president see things? The same as their donors, according to Scheiber:
Appearing at a candidate forum in late January, three likely Republican presidential contenders — Senators Ted Cruz, Marco Rubio and Rand Paul — all made a striking confession: They considered “the increasing gap between rich and poor” to be a problem. But on the question of whether the government should intervene to solve it, Mr. Cruz and Mr. Paul rejected that approach, and Mr. Rubio appeared to agree with them. When “government takes over the economy,” Mr. Cruz said, “it freezes everything in place. And it exacerbates income inequality.” He proposed lowering taxes and loosening regulations instead. …
Jeb Bush, arguably the most outspoken potential Republican candidate on the subject, has struck much the same posture as his more conservative rivals. “We believe the income gap is real, but that only conservative principles can solve it by removing the barriers to upward mobility,” Mr. Bush wrote when announcing the formation of a political action committee this year. Mr. Bush vowed to “celebrate success and risk-taking, protect liberty, cherish free enterprise.” … It’s not just right-wing presidential aspirants like Mr. Cruz and Mr. Paul whose statements on inequality diverge from public opinion. Hillary Rodham Clinton, though she has been more open to a government role in solving the problem, has yet to mention tax increases as a possible answer.
A few thoughts:
1.) The Gallup poll results on redistribution are roughly same as they were in back in 1985 and haven’t moved much except around the Financial Crisis and Internet stock bubble/bust. The numbers on tax hikes are also about the same as when that poll was first taken in 1999. So greater inequality has not been matched by a markedly greater desire for redistribution.
2.) Maybe one reason for the above results is that income inequality looks most severe when you look at the pre-tax, pre-transfer “market income” numbers of inequality researchers Thomas Piketty and Emmanuel Saez. But the 99% do a lot better – both in terms of inequality and income growth — when you factor in all the redistribution going on through the tax code and welfare state. Other recent research shows upward mobility has also deteriorated despite greater high-end inequality. It’s a complicated story.
3.) While Hillary Clinton has not proposed raising top tax rates, it is not hard to envision her, like President Obama, supporting a reduction in tax breaks favoring the rich and using that money for, say, universal preschool.
4.) How should Republican pols think about income inequality? This is my short version:
The big problem with high-end inequality is not that it necessarily reduces GDP growth. Instead, it increases the impact of barriers to income mobility such as poor schools, pricey colleges, weak public transit, and onerous occupational licensing schemes. If you can’t climb the ladder, then a top rung that’s ever further away becomes a bigger problem. While conservatives should applaud when an entrepreneur strikes it rich thanks to an innovative new idea, product, or service, they should freely criticize crony capitalist policies that benefit the powerful and politically connected, such as special tax breaks, strong intellectual property laws, or the safety net for Wall Street banks that are “too big to fail.”
5.) Let me also add that there is much to be said for limiting inefficient upper-end tax breaks — such as for healthcare and housing — and using some of that dough to expand tax credits that support work and increase take-home pay for working class Americans. At the same time, Republicans should continue to emphasize the need to increase the pace of economic growth as the greatest economic challenge facing America right now — even through polices such as reducing business taxes that may strike some as inegalitarian.Published in