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September 29, 2015: An important message for politicians: Raising taxes does not reduce inequality

often, issues have an intuitive answer that comes quickly, but just as often, that intuitive answer can be wildly inaccurate. The Democrats have proposed higher taxes on their definition of the wealthy, as a solution to the Obama-exacerbated problem of income inequality. Those of us in the working world know that job creation leads to demand for more employees leads to higher wages leads to more wealth for the working class. But in Rio Lindo, they’ve created a plan first unveiled by the Underwear Gnomes:

Good thing Cartman gets it. Didn’t know he was a Democrat. Here’s the Democrats’ version:

  1. Raise Taxes on the wealthy
  2. ???
  3. Incomes are now equal!

Peter Orszag of Bloomberg has looked at the research, and as you now expect, that plan fails completely. It does, however, provide loads of additional funds for the government to pass out to their supporters. The first paragraph says it all:

“Very often, proposals to even out income inequality advise one of two things: Expand people’s access to education and/or raise the top tax rates. Yet even a big increase in the share of people with a college degree would have only a minimal effect on earnings inequality, research has shown. And now it turns out that a substantial increase in the top marginal tax rate wouldn’t do any better.”

Bloombergview Article by Peter Orszag

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