Feb
5
Blog Post 3
February 5, 2015 | Leave a Comment
After reading the first article, which summarized Thomas Piketty’s book in four paragraphs, I thought the book was rather interesting. It’s really useful that Piketty compiled all the data together in one place to show how it changed over time. I was disappointed when I read that the wealth gap only lessened when there were “high taxes, inflation, bankruptcies,” because it wouldn’t be really considered a success if the income gap decreased because of those reasons; there would still be numerous problems to solve. I wonder and hope that since this book captured so much attention, that the government would be more motivated to tackle the income gap. Since the book also has many predictions, such as how the “r” and “g” will increase, that gives us a starting point to figure out how to prevent it from increasing.
In the third article by John Cassidy about Piketty’s inequality in charts, I was confused by the last chart. I wasn’t sure what “rate of return” meant, and after the fourth article also mentioned it, I searched it up, and was finally able to understand the last chart and agree with what was said. I liked this article because of the graphs as opposed to all the writing in the other articles. That made it simpler to see just how large the gap was. After reading the fourth article from The Economist, I was surprised by Piketty’s solution to income inequality. An 80% tax rate on incomes above $500,000 seems extremely harsh, and I agree with the author about how that tax could deter people from trying new things. I know I personally always think, “tax the rich” as a solution to income inequality, but are there really no other ways to combat income inequality? It’s such a daunting topic and if nothing is done, the gap will most likely only increase and we would be stuck in trying to solve it.
After reading all the articles and an additional one, I was surprised to learn that the wealth by the top 1% is not necessarily because of how hard they work but rather because of their inheritance. If that’s the case, then I feel like taxing the inheritance would be a better idea than on income. It would only harm someone in the “top 1%” if they made $500,000/year but had a debt much larger than that and were still taxed on their income. Therefore, it might be better if inheritance is taxed because the heirs most likely aren’t in debt.
I read another article about how Obama proposed some changes that were “Piketty-like”, such as taxing the super rich and their heirs in order to try and combat the loophole in not paying taxes on capital gains, taxing big banks, helping middle-class people become motivated to find work, etc. I’m really interested to see if this works if it’s passed, because it is pretty much what Piketty suggested, although not as drastic as an 80% punitive tax. Of course there are also objections to his policies, and Piketty’s as well since they are related, such as it being unfair that the heirs are taxed for simply being wealthier than the majority. Taxing the inheritance might also be a double-edged sword because while it would be great if the wealthy’s inheritance is taxed, taxing a middle-class’s or poor family’s inheritance will only do more damage than good.
A question that arises from this plan could be that the top 1% might just increase prices to cover the tax, so how could the government prevent them from doing that? For example, if taxes on a bank are raised by $100, they could just raise fees by $100. Then the customer is $100 poorer, but the government provides tax credit that covers that cost, so everyone ends up breaking even and there is no change. Even worse would be that the banks don’t change prices but begins to eliminate jobs in order to cover jobs, which would then simply lead to less people working.
-Margaret Wang
