Joshua Napoli

I never really understood why capital gains are taxed at a lower rate than income from regular income. It does seem like adjustments on the limits on IRA contributions should provide the government enough influence over increasing or decreasing savings. OK, taxes probably don’t bother entrepreneurship. Taxes probably don’t bother lottery players either. Low tax rates or “refundable” tax credits demotivating the less inspired end of the spectrum seems more plausible, but I’m not sure how to check this. 32% of tax filers already pay no federal tax.

Expanding this group or giving extra refunds seems like a strange goal. It distorts the labor market, subsidizing low-value jobs. The rebates given earlier this year were supposedly not very effective; it seems
like refunds would have a similar level of effectiveness. Anyway, it seems that income tax is a pretty blunt tool for moving wealth between different groups.

The “rule of law” benefits people in direct proportion to their income and accumulated property. It’s not clear to me that diminishing marginal utility for income is a good reason to tax richer people at a higher
rate. It seems like there should be a better way to enrich people who have lower incomes right now.

The news around the UAW highlights a better way for getting more wealth to lower skilled people. Through the union, auto workers have clearly captured more more of the value that they produce (and we can’t give

the UAW too much blame for the collapse of the auto manufacturers, since the German companies prosper despite higher compensation rates).
Unionization also provides a nice consistent structure where the legislature where the courts and legislature can make more predictable adjustments to the balance of power between labor and management.

Perhaps “broad” employee ownership would align everyone’s interests and give better results than unionization, but I don’t know the examples. Maybe ownership is too always easy to lose… not even “management” can hold on to it.

The minimum wage should be another way to help low skilled people capture more income and also to nudge people into more productive activities. A marginally higher minimum wage is not incompatible with
the most productive state economies. A gradual increase in minimum wage would increase unemployment somewhat, but on the whole it could be beneficial to economic growth. Lower valued positions are priced out, making workers more readily available for relatively higher value positions.

Minimum Wage versus Per-Capita State GDP

Sources for the plot: US Department of Labor and Wikipedia.