Wednesday Morning Links

Miscellaneous material for your mid-week reading.

- The Equality Trust examines the UK's increasing level of personal precarity - and how public policy needs to be changed to support the people who need it, not those who already have the most. And Eduardo Porter offers a reminder that tax cuts for the rich do nothing but exacerbate inequality:

Big tax cutters like the United States did not grow faster than countries like Denmark, which kept taxes high. What did respond to lower taxes was inequality: The income share of the top 1 percent grew much more sharply among big tax cutters like the United States than in countries like France or Germany, where top tax rates changed little.

The findings contradicted the basic proposition on Mr. Laffer’s napkin. Indeed, they suggested an entirely different dynamic: Lower taxes did encourage executives and other top earners to raise their incomes, but not in ways that benefited the entire economy, like working and investing more. Instead, they were encouraged to manipulate the system in ways that, in fact, reduced the pie for everybody else, putting every decision at the service of increasing their pay.

Think about tax avoidance or outright evasion — which simply hides money from the Treasury, reducing the government’s ability to fund often critical programs, at no gain to the economy. But executives have been known to use other tricks — say, options backdating or earnings manipulation, or simply lobbying the compensation committee of their company’s board, or putting corporate strategy at the service of the current quarter’s earnings to give the share price a bump.

Taking into account all the ways top earners respond to taxation, Mr. Piketty and colleagues suggested that the optimal top tax rate on the Americans with the highest incomes — the rate raising the most money for the government — could exceed 80 percent with no harm to growth. Loopholes would have to be closed to prevent avoidance, but only the mega-rich would lose out. From an economic perspective, soaking the rich would, in fact, do good.

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In more unequal societies, the rich have more power to distort policy making to channel more of the fruits of growth in their direction by, say, cutting taxes and government spending that might improve productivity and growth. Politics becomes more polarized. And it becomes more difficult to recover from economic shocks: Citizens in unequal societies are less likely to buy government promises that sacrifice today will lead to gains tomorrow.

- Stephen Gordon points out that blind anti-tax rage stands in the way of needed discussions of how to pay for the public services we all value. And Andrew Coyne comments on the absurdity of applying artificial preferences to small businesses.

- Jenny Gerbasi and Don Iveson discuss what's needed to establish an effective national housing strategy - with both public investments and meaningful tenant protections included in the mix. 

- Gareth Hutchins reports on a new study from Australia showing how the mining industry is highly susceptible to corruption. And Dogwood follows up on the Clark Libs' outsourcing of British Columbia's climate change policy to Alberta oil barons.

- Finally, Trevor Herriot exposes the Wall government's auctioning off of public land - while noting that there's been far too little public notice of the selloff of the natural commonwealth.