Reducing inequality

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We argued (here) that rising inequality is a drag on growth. But what has been done about it? Well, more than one might think:

The Obama administration’s success in undoing some of this inequality, although reflected in the recent, welcome census report, is less well-known. Most notably, tax changes enacted during this administration have increased the share of income going to the bottom 99 percent of families by more than the tax changes in any administration since at least 1960.

Under Obama’s leadership, Congress expanded the earned-income tax credit, increased the child tax credit for working families, and created a new tax credit for students and families paying for college — steps that together benefit 24 million households annually. At the same time, Congress reinstated Clinton-era tax rates for high-income Americans, restored the estate tax and applied Medicare taxes to the investment income of high-income households, putting unearned income on greater parity with earned income. All of these changes have increased the tax code’s progressivity.

The Affordable Care Act has also had a significant impact on inequality. Because of the law, 20 million more Americans have health insurance, gains that have reduced the uninsured rate to the lowest level on record. The law has sharply reduced inequality in health insurance coverage by age, race and income. The financial assistance that made this coverage expansion possible has also reduced inequality in after-tax incomes..

How Obama has narrowed the income inequality gap - The Washington Post

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And, lest not forget, apart from changes in taxes, the 14M+ private sector job creation since the financial crisis is not only providing employment opportunities, but finally the labor market is tight enough for wages to start rising:

Much current commentary takes as a given that wages in the United States remain stagnant. And given that average annual wage growth was only 0.1 percent annually from 1980 to 2007, that sentiment is understandable. However, a recent but unambiguous uptick in wages has shown that stagnation in workers’ pay is anything but inevitable. Average real wages for production workers have grown by nearly 6 percent since the end of 2012, more than all the wage growth from 1973 to 2007. And the Census Bureau reported that in 2015 the typical household saw its income grow by $2,800, or 5.2 percent, the fastest rate on record. Last year also saw the largest single-year reduction in poverty since the 1960s.

Moreover, these wage increases have been broadly shared. In fact, workers at the 10th percentile (who earn about $20,000 a year) have seen the strongest wage growth, in part because millions of workers have gotten a raise in the 18 states and the District — as well as the more than 50 cities and other local governments — that have raised the minimum wage. This is in part why households toward the bottom of the income distribution had record income gains last year that exceeded the gains by any other income group.

How Obama has narrowed the income inequality gap - The Washington Post

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And, of course, now is as good a time as any to remind people of the candidates different stances on the wealth tax...

Hillary Clinton’s proposal to strengthen the federal estate tax is the best idea yet to reverse our national drift toward extreme wealth inequality. Clinton proposes an expansion of the federal estate tax, our nation’s only levy on the transfer of accumulated wealth of multimillionaires and billionaires. The tax falls on fewer than two out of 1,000 estates, yet puts a brake on concentrated wealth, encourages charitable giving, and raises substantial revenue from those most able to pay. Her plan would generate $260 billion over ten years, exclusively from multimillionaires and billionaires, that she plans to use for investments in expanding opportunity, such as reducing college debt, simplifying small business taxes and expanding the child tax credit.

Hillary Clinton Channels Her Inner Teddy Roosevelt

Trump wants to abolish the estate tax altogether...

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Contrary to many perceptions, income inequality in the EU has fallen over the past two decades. In the EU as a whole, and in most EU members, absolute poverty is rare and income inequality is low. Strong welfare states have offered protection against inequality. However, income inequality has in some cases increased, measured on a country-by-country basis. Unemployment remains high in a number of member states, while the intergenerational divide between the young and the old has widened. Social mobility is weak, in particular in the more unequal economies of southern Europe, limiting opportunities for the children of poor and disadvantaged families.

An anatomy of inclusive growth in Europe | Bruegel