Why Soaking the Rich Won't Fix Income Inequality

As Congress works through a budget and Americans file their tax forms, both Democratic and Republican presidential hopefuls have been talking about the gap between rich and poor. Hillary Clinton noted “the overriding issues of inequality and lack of mobility” at an event last week in Washington. Jeb Bush said in Detroit last month that “[t]oday Americans across the country are frustrated. They see only a small portion of the population riding the economy's up escalator.” Neither candidate, however, talked much about raising taxes as a solution—in fact, Bush was clear that “no tax, no welfare program will save our system or our way of life.”

In that, they reflected popular opinion. Survey evidence suggests people want a more equal society. But even when given data about the extent of inequality, Americans are no more in favor of raising taxes to battle the problem. And perhaps that popular skepticism is justified—we have so skewed the tax system in the U.S. that it is not a very effective tool to reduce the gap between rich and poor. Without tax reform, simply raising tax rates won’t do much to help.