Stiglitz Offers a Path Forward for Continued Economic Growth
In a new white paper for the Roosevelt Institute, renowned economist Joseph Stiglitz lays out a comprehensive tax reform proposal to restore equitable and sustainable economic growth. Stiglitz offers his proposals as a better way to approach the continual budget crisis. He points out that the budget crisis is not economic, but political. The U.S. has no shortage of lenders, rather it is political obstacles that lead us from one budget crisis to another. Through sensible tax reform that promotes growth while reducing inequality, Stiglitz offers a path forward for continued economic growth. In short, his argument lays out exactly why equity is the superior growth model.
As he points out, while the Great Recession significantly contributed to the growing levels of inequality, for most Americans, the economy wasn’t delivering even beforehand. Increasing poverty rates and decreasing median incomes have substantially diminished the ranks of the middle class. Moreover, the racial wealth gap tripled between 1984 and 2009 due to lack of opportunity and barriers in workplaces, schools and communities. Comprehensive solutions that begin to change structural inequities are needed to reverse the damage caused by inequality.
Stiglitz first looks at reforming the corporate tax code. In 1943, corporate income taxes comprised 39.8 percent of revenue. In 2012, that number was down to less than 10 percent, not because corporations have become less profitable or played a less important role in our economy. Rather, Stiglitz details how corporations have become experts at tax avoidance. Coupled with incentives that encourage multinational corporations to invest abroad by not taxing funds that aren’t repatriated to the U.S., corporations continue to post record profits and engage in a worldwide race to the bottom to pay the lowest tax rate. Stopping this practice by raising the corporate tax rate but providing incentives for domestic investment and job creation will restore needed investment and capital in the U.S.
It’s not just corporations that are not paying their fair share. Our current tax system favors those that already have accumulated wealth. The low tax on capital gains, for example, provides benefits only to households in the top income quintile—roughly 1.7 percent of after-tax income in 2013. More than half of the benefits of the ten major tax breaks go to the richest 20 percent of American households and only 18 percent go to the bottom 40 percent. The preferential tax treatment for existing wealth is one of the drivers of the increasing racial wealth gap. White families have more inherited wealth than African-American families and the under-taxing of that wealth contributes to the wealth gap.
These are just a few of Stigliz’s tax proposals. In addition to more proposals on corporate and individual taxes, he proposes reforms to environmental taxes, inheritance and estate taxes, and improving management of government owned resources. The full list can be found here.
Hand in hand with tax reform should be a comprehensive policy agenda that addresses structural barriers that increase inequity. All-in-Nation provides an equity agenda that allows all to fully participate and prosper and access to financial security can begin to eradicate the racial wealth gap. Without equity, our economy cannot grow and our nation cannot prosper.