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Sunday, December 24, 2006

Efficiently attacking inequality

Since discovering the Pigou Club, Kitchen Linker has gotten a little interested in tax policy. Here's a great article on this that has nothing to do with Pigou or energy. Sebastian Mallaby on Attacking Inequality in the Washington Post:
Fixing these egregiously regressive programs could yield really juicy benefits. On a back-of-the-envelope calculation, raising the minimum wage might transfer $10 billion a year to poor workers; call it $20 billion if you want to stretch the assumptions generously. But if you eliminated just a quarter of the subsidies in the tax code, you would liberate about $180 billion a year -- enough to finance a big expansion in the earned-income tax credit plus a cut in the regressive payroll tax. And this sort of redistribution would not risk higher unemployment or compromise economic growth at all. Democrats on the left and right ought to be embracing it.


chumly said...

Does this mean that poor people will be able to buy gas now?

Kitchen Linker said...

Chumly, Kitchen Linker supposes that's a veiled attack on an energy tax, under the supposition that one would be regressive.

Only under the most naive analysis would it be. The poorest will bear the brunt of global warming, so anything done to mitigate it can hardly be regressive. This is especially true on a global scale, but also in the USA -- see Katrina.

Also, Kitchen Linker's preferred implementation is one Al Gore has endorsed -- a tax shift from the regressive and job-destroying payroll tax to an energy tax.