“This basic framework for tax law doesn’t make much sense,” writes Yale’s Robert Shiller in today’s New York Times. “Instead, future tax brackets and rates should be contingent on the extent of future inequality. Tax law should be based on a principle that might be called inequality insurance: the taxes would be collected in such a way as to insure that the level of inequality, after taxes and transfers, does not exceed the levels present when the law was enacted. If such indexing were put in place today, the brackets and rates would adjust whenever inequality worsened beyond today’s levels.” Shiller ends his piece by endorsing the myth that income groups are essentially static and calling for expanding the transfer state to address a problem he admits does not yet exist. “When the top tenth of the population has attained such a high percentage of society’s wealth that it can effectively block any reform, it can be counted on to use its power to keep its riches. America ought to act now to make to sure this never comes to pass.”
More Irrational Exhuberance
