Thursday, December 07, 2006

Next Stop: Socialism

Greg Mankiw reports on an idea of economist Bob Shiller:
The IRS should be instructed to automatically adjust tax rates to keep economic inequality from getting worse, according to a new proposal outlined by Robert Shiller, a Yale University economics professor.

"We have a serious problem, and it's a problem of growing inequality," Shiller said on December 6 at a Library of Congress discussion in Washington. Shiller developed the proposal with Len Burman, director of the Tax Policy Center, and the two are planning to write a book on the idea.

"We need a standard or principle of income inequality. We don't have one now," he said. Inequality provides motivation to work harder and benefits hard work, hesaid, so "we do want some inequality, but we don't have any clear idea about where we're going and what is appropriate."

The standard, which Shiller calls "inequality indexation" of the tax system, would instruct the IRS to adjust brackets and rates whenever inequality worsened beyond an agreed-on level.

Well, at least it's a moderated form of socialism. Rather than try to ensure complete equality, they agree that some amount of inequality is acceptable, but it just can't be excessive. But even in this scaled back form, it's scary to think that the government might take action to make people more "equal" in this manner. My question for them is the following: Would they prefer that people be equally poor as opposed to being unequally rich? To me, the latter is clearly the better option. I wonder how they would view this.

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