This review of Tony Atkinson's new book on inequality by Thomas Piketty summarizes the issues very nicely. It has been widely recognized that income inequality has been growing in most developed countries. This is partly due to changes in government policies which have redistributed income to the rich. That has been accomplished in Britain and the US by replacing progressive taxes with regressive taxes. Atkinson has proposed a restoration of the progressive income tax and the inheritance tax. He would also eliminate regressive tax policies that were introduced during the Thatcher regime in Britain. This would help to reduce inequality in Britain well below the level of inequality in the US, where it is the highest, and bring it closer to the level of inequality that prevails in Europe and other OECD nations. Atkinson pairs the inheritance tax with a system that would provide ordinary citizens with access to capital for investment purposes. Inheritance income would be more equally distributed in order to increase social mobility.
Piketty describes other methods of reducing income inequality in Britain, and he points out that Atkinson does not discuss some of the problems with the use of tax havens in Europe which might make it difficult to deal with tax policy at the national level. On the other hand, Piketty understands that dealing with the politics of tax policy at a local level may make it easier to get things done. In any case, much can be done to reduce income inequality simply by reversing many of the redistributional changes in tax policy which were successfully engineered by conservatives.
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