April 19, 2015
Neil Irwin had an interesting Upshot piece that noted polling data showing people do not favor much higher taxes on the rich. It questioned why it was that people were opposed to redistribution even though inequality has become a major national concern.
A major problem with this sort of analysis is that it treats distribution as though it is only a function of tax policy. This is clearly secondary. The upward redistribution of the last 35 years was overwhelmingly the result of government policies that structured the market to favor the wealthy.
For example, trade policy has been quite explicitly designed to put manufacturing workers in direct competition with low-paid workers in the developing world. The predicted and actual effect of this policy is to reduce their wages and also the wages of non-college educated workers more generally. By contrast, doctors and other highly-paid professionals (who comprise much of the one percent) have been largely protected from international competition. The argument for exposing these professionals to competition is the same as the argument for trade more generally: it will lead to lower prices and more economic growth. But because of the political power of these groups, free trade in the services of doctors and other professionals is not even discussed in polite circles.
The Federal Reserve Board has also quite explicitly adopted policies that keep unemployment higher than in the years prior to 1980. Higher rates of unemployment not only deny workers jobs, but they also reduce their bargaining power, thereby preventing them from getting wage increases. The government’s labor policies have also been much more hostile to workers over the last three decades, making it far more difficult to form unions. And, the government handed out trillions of dollars in below-market interest rate loans to rescue Wall Street banks and prevent the market from working its magic.
Given a whole set of policies that have redistributed a massive amount of income upward, it is understandable that many people would not trust the government to be taxing the rich to help the poor and middle class.
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