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11/18/14

US Tax System: Inequality, Unbelievably, Gets Worse - by Steven Rattner

The Democrats’ loss  in the midterm elections was unfortunate on many levels, but particularly because the prospect of addressing income inequality grows dimmer, even as the problem worsens.

To only modest notice, during the campaign the Federal Reserve put forth more sobering news about income inequality: Inflation-adjusted earnings of the bottom 90 percent of Americans fell between 2010 and 2013, with those near the bottom dropping the most. Meanwhile, incomes in the top group rose.

Lower taxes means less for government to spend on programs to help those near the bottom. Social Security typically provides a retiree with about half of his working income; European countries often replace two-thirds of earnings.

Similarly, we spend less on early childhood education and care. And another big difference, of course, is the presence of national health insurance in most European countries.

All told, social spending in the United States is below the average of that of the wealthiest countries. And other governments help their less fortunate citizens to a greater extent than we do in ways that are not captured in the income statistics. The United States, which is the only developed country without a national paid parental leave policy, also has no mandated paid holidays or annual vacation; in Europe, workers are guaranteed at least 20 days and as many as 35 days of paid leave.

To his credit, President Obama has succeeded in keeping income disparities from growing even wider, by such measures as by forcing tax rates on the wealthiest Americans up toward fair levels.

Meanwhile, on the programmatic side, among the many meritorious aspects of the much-maligned Affordable Care Act are its redistributionist elements: higher taxes on investment income and some health care businesses are being used to provide low-cost or free health care to a projected 26 million Americans near the bottom of the income scale.

Read more: New York Times



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