Taxes as a tool of economic equality

Americans are quite proud of, among other things, the line in our Declaration of Independence about all men being created equal.

For purposes of this post, we'll let slide that the Revolutionary-era authors' definition of men excluded men of color and all women. Now, for the most part, we try to hew to the equality ideal.

But it's tough, especially in hard economic times.

Practically and financially speaking, it's obvious that some people are more equal than others. That's the catalyst of the Occupy Wall Street and Elsewhere movement.

But there is a way to promote equality, say participants in a recent international gathering.

Taxes.

More than 400 senior tax policymakers and administrators from almost 90 countries participated last week in the International Tax Dialogue. The event was a joint initiative of the International Monetary Fund, the Organization for Economic Cooperation and Development, the World Bank, the European Commission, the Inter-American Development Band and the Inter-American Center of Tax Administrations.

During the two-and-a-half day conference, the role of taxation in reducing inequalities in income and wealth was a key topic.

Conference attendees sought to identify which tax policies have failed and which could play a greater role in reducing inequalities in the future.

The consensus:

Income inequality between countries has diminished significantly as economic reform in many emerging economies has spurred growth, significantly reducing levels of absolute poverty globally.

However, recent decades have also seen significant changes in the distribution of both wealth and incomes within countries, with notable increases in the share of income enjoyed by those at the very top of the income distribution in many countries.

A rising tide has not lifted all boats.

And globally, as here in the United States, tax experts find the devil in how to address such inequality is in the details.

The structural linkages between growth and inequality raise difficult issues about how best to raise taxes in a way which contributes to both growth and equitable development. 

That's what Americans, both as individuals and our lawmakers, are grappling with right now.

Congress is debating the payroll tax cut which ostensibly will help lower-income workers bring home more pay.

But how to pay for that tax break — will the wealthiest among us pony up more or will federal programs be cut? — is a major obstacle in passing the payroll tax extension.

Meanwhile, candidates for the highest office in the land are offering a variety of tax proposals, with each touting how his or her plan as the one that's best for America as a whole and best for you and I individually.

The truth is there are no quick and easy tax policy answers.

And even if there were, the current politicians and those who want to join them in D.C. after the next election are not inclined to push very hard for change despite their words.

They find it in their, not our, best interests to use taxes as a perpetual campaign tool, leaving any possibility of substantive tax reform until after — and in reality probably well after — the 2012 election.

You also might find these items of interest:

• Will the super committee's failure revive
  Simpson-Bowles tax reform proposals?
• 25 years of tax reform. More on the way?
• Congress' continuing, continual love
  of special tax breaks undercuts tax reform