Greater Inequality in One Easy Step

[cthulu2016]

Cutting taxes on the rich is an easy way to achieve more inequality.


This chart is one of several from this pretty interesting article:

Why is the U.S.’s 1 percent so much richer than everywhere else?

http://www.washingtonpost.com/blogs/wonkblog/wp/2013/08/09/why-is-the-u-s-s-1-percent-so-much-richer-than-everywhere-else/

[Recursion]

1. That's a pretty undeniable correlation

Cool find, thanks.

[cthulu2016]

2. Interesting that nobody in the chart has *raised* them (net) since 1960

[Recursion]

4. It is

Though I think as a broad statement most economists agree the taxes in the late 1950s were "too high" in some sense or another.

[cthulu2016]

9. Capital flows probably limit policy diversity

[Recursion]

10. What's the macro trinity?

Free flow of capital, independent fiscal policy, floating currency: pick any two.

[Bunnahabhain]

11. From a process analysis POV

Fast, cheap, high quality...pick any two.

[Bunnahabhain]

3. An interesting factoid

On that chart the US and Switzerland are the two outliers at opposite extremes. However, if one compares their Gini coefficient of wealth (how unequal the ownership of wealth is in a country) they are nearly identical! In fact, Switzerland is actually a tiny bit higher, .803 vs. .801

http://en.wikipedia.org/wiki/List_of_countries_by_distribution_of_wealth

There is no denying income in Switzerland is far less unequal than in the US and many other OECD countries but I find it interesting the actual ownership class between the US and Switzerland has about equal shares.

[Recursion]

5. Wealth Gini vs. income Gini are interesting comparisons

I lived in Switzerland for a while and I remember that
A. Property was expensive, and
B. Property ownership was still very restricted to the rich

[Bunnahabhain]

6. I am not sure what to make of it

It either shows that unless the bulk of an estate gets taxed away at death an elite class will always remain or that it's possible to create a system of more equal incomes through strong taxation...or both?

[cthulu2016]

7. That struck me also, but my take was that the whole world has become Switzerland

Switzerland was famous, way back when, as a haven for the world's rich. It still is, but not so singularly/peculiarly as it was,

The chart covers only change since 1960 and Switzerland hasn't *cut* taxes on wealth during that time and has not experienced much *rising* inequality. It most likely started out the 1960 period with already low taxes and high inequality and simply stayed the course.

(Spain and Switzerland were both neutral in WWII... don't know if that caused relatively low taxes in the 1945-1960 period, but they are the two least tax-cutting on the chart. Of course Spain went from Fascism to European-normal since 1960, which might account for their failure to tax-cut)

Meanwhile, lots of other folks during that conservative half century wanted to be more like Switzerland, cutting taxes on the rich and achieving Swiss-style inequality. As you note, we have caught them in that measure.

Finance used to be a small part of American GDP. Since Reagan it has grown to a rather large part of GDP.

One assumes that finance was an out-sized part of Swiss GDP in 1960, since it was an international banking center. Finance in the USA has been catching up during the "Let's be more like Switzerland" era.

[Bunnahabhain]

8. Interesting take

[Recursion]

12. Hm. I'll have to think on that.

Very interesting point.