Tuesday, July 14, 2015

Atkinson on Inequality

I recently finished reading Anthony B. Atkinson’s recent book Inequality: What Can Be Done?  It doesn’t duplicate what Piketty did in Capital in the Twenty-First Century, but in some ways I like it better. Atkinson’s examination of the determinants of income distribution focuses more on product and labor markets, and on the social context in which markets operate. Atkinson does not believe that we are condemned to increasing inequality because r is greater than g. He points to other times and places where inequality has been reduced even though growth rates were low.

Atkinson points out that government policy had a lot to do with decreasing inequality in the past, and he proposes a long menu of options to consider at this point. In this he differs from Piketty, whose policy proposals are mostly limited to a global wealth tax. His fifteen proposals include comprehensive redesign of the income tax, to make it more progressive and to introduce an “earned income discount”, rather than the present discount for capital gains. He proposes a progressive lifetime capital receipts tax in place of the estate tax. He believes that all young people should receive a capital endowment when they reach adulthood, and that there should be a taxable “participation income” and a substantial child credit.

Many of these ideas would not get a lot of support in the U.S. today, or even in the U.K., Atkinson’s home. But they are cleverly designed to deliver help to those in need while preserving incentives and garnering strong political support. Everyone is eligible, but benefits are taxable at progressive rates. They borrow their best features from the design of successful programs like Social Security. Political action may be long coming, but planting these ideas in the public imagination now is important.