Inequality, Spending and Tax Burdens
Dec 14, 2021
Consider the following three claims:
- “Income inequality should be reduced.”
- “Government spending should increase.”
- “The tax burden on everybody below the top n% of taxpayers should not be increased.”
Statements 1–3 become incompatible in a world where income taxes fund the government and where 35-40% of income tax receipts[0] come from the top 1% of taxpayers[1], statements 1–3 become incompatible. This limits to two the number of these objectives that a society can sustainably pursue.
[0] In fact, individual income taxes in the United States make up slightly less than half of Federal income tax receipts, the balance coming from payroll, corporate and several other taxes. The share of government revenue coming from individual income taxes is slightly lower in the United Kingdom.
