Tuesday, August 22, 2006

Income inequality: this year's pre-tax is last year's post-tax

Much discussion at Brad DeLong, Kevin Drum and elsewhere on the role of Republican leadership in increasing income inequality. Liberal economists agree that Republican tax policies have made post-tax incomes far more unequal compared to Democrats, but disagree over whether Republican policies are an important driver in economics in increasing pre-tax income inequality.

I've read much of the discussion, but I haven't seen it mentioned that previous years' increased post-tax income inequality will increase asset inequality, resulting in increased inequality in pre-tax interest income. Maybe I'm missing something, but tax policy should have strong pre-tax income effects in subsequent years. I think there's a good case to be made that Republican policies have wide-ranging negative effects. That's why they want to distract us with a permanent war.

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