Lecture9 - o Why is tax system so complex Simple taxes can...

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Lecture #25: Outcomes: Income Inequality, Taxes, Spending, and Politics Income inequality is being propelled by growth from the top, not decline from the bottom What’s causing this? o Part is that for high level positions, many companies don’t look outside This eliminates market constraints o Shift from manufacturing to service economy Much more competition, keeps wages down o Decline of organized labor o Decline of minimum wage Redistribution o Neither side discusses the issue Democrats Because of dependence on wealthy people for campaign contributions They do redistribution, just don’t discuss it Republicans Needs votes from low income people to win elections Taxes o Progressive The higher the income, the higher the proportion paid in taxes o Regressive The higher the income, the lower the proportion paid in taxes
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Unformatted text preview: o Why is tax system so complex? Simple taxes can be avoided If the system were simple, people would be able to find ways to orient their personal finances to avoid paying taxes So people that say we need to simplify our taxation system are retarded • If you do, be prepared to pay higher taxes in order to pick up the slack from the people that aren’t paying any o So is our system progressive, regressive, or what? Actually it’s about flat So in actuality the redistributive impact is zero • Spending o If you reduce the deficit by cutting spending, you redistribute wealth from low to high o If you reduce the deficit by raising taxes, you redistribute wealth from high to low...
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