Higher taxes on the rich actually wouldn’t lower inequality that much

Up isn’t down, black isn’t white, and higher taxes on the rich don’t do nothing about inequality. The question, though, isn’t whether they do anything — it’s how much they actually do.

The answer might be less than you think. That, at least, is what William Gale, Melissa Kearney and Peter Orszag found when they simulated what raising the top tax rate would do to inequality as measured by the Gini coefficient. It turns out that increasing the top rate to 50 percent would only reduce the Gini, where 0 is perfect equality and 1 is perfect inequality, from 0.574 to 0.571. We would still be the 99 percent.

Or would we? The problem, as Marshall Steinbaum of the Washington Center for Equitable Growth points out, is that this looks at what happens when we raise taxes on the top 1 percent, but then tries to answer that by looking at a measure, the Gini coefficient, that doesn’t tell us a whole lot about the top 1 percent. It is better at showing us what is going on at the middle of the income distribution than at the tails. So the way this has been set up all but guarantees that it will say taxes can do less about inequality than they really can.

– The Washington Post

Read the full article here.