That aside, the basic reason IMHO income is more distributed in Europe is not taxation. It’s that their systems make it harder for speculators and CEOs etc. to skim off so much money to begin with (which is what matters most, not the re-distribution angle.) Am I right?

First, the argument against Obama is that tax progressivity does not determine the effect of the fiscal system on inequality. It is not that, other things equal, a more progressive tax system is worse. Some have made that argument, basing their claim on the incentive effects of high marginal tax rates. However, the post does not make the argument. Rather from the claim that something is not “the key” follows the claim that it should not be an aim. This is the oldest rhetorical trick in the book.

Second, and more importantly, raising taxes on the rich is much easier politically than raising the taxes on the non rich. This isn’t just electoral politics. Discussing optimal policy is a parlor game unless one asks how it will be enacted. There is no evidence at all to support the claim that the incorrect beleif among progressives that progressivity is “the key” to reducing inequality will cause reduced total tax revenues. There isn’t even an argument.

The evidence presented is, I think, based on the assumption that Europe is perfect. If European taxes aren’t very progressive, then taxes shouldn’t be very progressive. Otherwise what is the point of noting that European taxes aren’t very progressive. It sure doesn’t show that taxes can’t be progressive.

Importantly, different countries are, uhm different. The USA has an extremely unequal distribution of pre-tax income. Other things equal, that would mean that the US can raise an extremely high share of GNP as taxes by taxing the rich. In the USA a small fraction of workers are self employed. This makes it easier to collect income taxes. Many people receive huge compensation from large firms which keep track of everything. They can be taxed. The USA isn’t Europe. Even if it were true that European policy is optimal for Europe, it would not necessarily be optimal for the USA.

The key policy relevant assertion in the post is “Moderate or high levels of tax revenue can’t come solely from higher rates or new taxes on the rich; the math simply doesn’t work.” What math ? Where is that math ? It certainly isn’t in the post.

There is now a fairly large blogoliterature all making the same argument based on the same few data points. If someone has addressed the question of what the math says about whether moderal or high levels of tax revenue can come solely from higher rates or new taxes on the rich in the USA, I would like a citation.

Evidence from Europe or the USA during the period of a much more equal income distribution does not count. The share of income going to the rich has an effect on the amount of revenue which cain be raised by taxing the rich.

Isn’t the reason for the economies listed having systems of taxation that are ultimately flat, the fact that they combine progressive income taxation with regressive indirect taxes (VATs etc)?

And if this is the case then surely raising indirect taxes is hardly going to help with reduce inequality?

For example: suppose someone’s net worth (total assets) is $100 billion and he had no income last year (or perhaps even lost money). In the US he could conceivably pay $0 tax. In France he would pay $1.8 billion.

It’s funny, though – if I were living in France (or any other European country, but France makes a good example), and getting involved in politics, one of the major things I’d try to get reformed is the fiscal overemphasis on the VAT and payroll taxes. While I don’t agree with everything he writes, Timothy Smith’s book France in Crisis (http://books.google.com/books?id=2XHfgEOhP3wC&dq=France+in+Crisis&printsec=frontcover&source=bn&hl=en&ei=7Q3qSZG1DNOrtgfkn5GRBg&sa=X&oi=book_result&ct=result&resnum=5), does usefully point out that payroll taxes in France add a huge cost onto the creation of new jobs, and we all know the impact of VAT taxes.

The size of tax collected aside, I personally prefer the American (Federal) system which puts more of an emphasis onto taxing income and wealth, over a system that emphasizes taxing payrolls.

I note in passing that individual effective rates for all taxes in the US aren’t flat across income quintiles (ack. Economist’s View), and household rates for Federal taxes alone aren’t flat(.pdf) (ack. CBPP) either. That doesn’t prove that Prof. Kenworthy is wrong, but maybe he could give us a reference.

1) building of infrastructure, funding defense, basic government services
2) Taking middle class money now to give it back down the road on the assumption middle class taxpayers won’t save it. Ie, Social Security and Medicare
3) To fund social programs to help the poor

But the last few posts haven’t been about any of that, they’ve been about mitigating income inequality, an issue which affects the middle class. But if you tax the middle class more, you defeat the whole purpose. It makes no sense to tax me an extra $1000 and then give me a $1000 EITC. It doesn’t even make sense to tax me an extra $1000 to give me a $5000 EITC. Why not just not tax me more at all and give me a $4000 ETIC?

1. What is the functional difference between refundable tax credits and government transfer programs? Are greater progressiveness of the tax code and increased transfer programs actually two different policies or the same policy?

2. I think there should be a division here between what is and what can be. It is the case that “inequality reduction is achieved not through taxation but with government transfers,” but that’s a descriptive statement, not an axiomatic statement. Governments could choose one strategy, they just happen to choose another.

3. If we want to increase taxes on the middle class, why do so through a VAT? That seems like the bluntest possible instrument to accomplish the targeted objective. Why not just increase the marginal tax rates on the middle income brackets instead?