A note on redistribution

There is a point to keep in mind following the state of the union address in the USA.

We may believe that more redistribution is required to meet/maintain our social contract.  That is fine.  We may believe that more redistribution is “morally right”.  That is fine.

But lifting taxes in of itself isn’t redistribution.  The higher revenue from taxes must then be passed on to the poor – providing it directly as a transfer is the most obvious way.

Having the government lift taxes, and then arbitrarily use it for “industrial policy” or some other pet project is not redistribution – it is a large institution taking advantage of its position to waste other peoples resources for its own sense of pleasure.

If society wants redistribution it should get it, but this implies higher benefit payments (or policies that increase equality of opportunity directly) not just higher taxes.  It involves actually redistributing income, not taking it and pissing it in the wind.

  • It is redistribution, just not the sort you want 😉

    • You are right.  It is redistribution – just not necessarily from the rich to the poor 😀

  • Keith Ng

    Is Obama’s argument that they have to raise taxes so they can have new redistributive spending, or they have to raise taxes otherwise they’ll have to cut spending/take on more debt?

    I’m trying to find the paper (I think it’s from the Center on Budget and Policy Priorities) on the distributional impact of spending cuts, but it’s pretty much what you’d expect – spending cuts, in general, hit the poor the hardest. In which case, taxing to avoiding budget cuts is progressive.

    • If there counterfactual was cutting spending on the poor then indeed balancing the budget through progressive tax increases would be redistribution.

      I wasn’t aiming at this comment to be solely about the US – I just sort of felt that people were jumping on the “increase tax to reduce income inequality” line without thinking about what to do with the income.  I don’t really want to see it thrown into corporate welfare, opps I mean industrial policy.

      Add to that the fact that Obama mentioned a whole bunch of industrial policy, and I decided to have the post based on the US 😉