Market Mad House

In individuals, insanity is rare; but in groups, parties, nations and epochs, it is the rule. Friedrich Nietzsche


Steps Government Could Take to Reduce Income Inequality

The question that our political leaders need to ask is not if income inequality is real but what they can do about it. Unfortunately, some of the strategies political leaders are most likely to promote to deal with income inequality, such as increased union membership and trade restrictions, probably would not have much impact.
Fortunately, there are some measures that our leaders could implement that might reduce income inequality or at least deal with some of its effects. Actions that may reduce income inequality include:

  • Abolish the payroll or withholding taxes, which take a percentage of a person’s salary. These hit the working poor heavily, and they do not raise enough money to cover the costs of programs like Social Security and Medicare. A better solution would be a national sales tax like the Fair Tax or increased taxes on higher-income individuals. Allowing the working poor to keep all of their pay would boost their incomes and the economy.

  • Abolish the Obamacare requirement for businesses with more than fifty employees to provide health insurance for all full-time workers. This discourages hiring and encourages the use of contractors and part-time employees.


  • Set up a real national health insurance program so employers do not have to provide health coverage for workers. That would make it cheaper and easier for employers to hire people and make it easier for people to start businesses and change jobs, which could lead to opportunities for higher income. Such a program could help people avoid poverty because high medical costs are one of the major causes of bankruptcy and poverty.


  • Create a guaranteed income program to provide all Americans with at least a minimum income. This could serve as a safety net to keep people from falling into poverty and serve as a cheaper substitute for expensive social programs.


  • Offer free or reduced cost college to all Americans to increase education and reduce student loan debts. This could help people train for new jobs and increase opportunities.


  • Increase investment in research and development to facilitate the creation of new technologies and new industries.


  • Eliminate those taxes that discourage creation of new businesses and industrial development. Some of these measures include the inventory tax and property taxes in some areas.


  • Encourage the building of affordable housing for the working class. One way to do this would be to get rid of zoning, rent control, and other restrictions that prevent the construction of new housing in many regions.


  • Make it easier for people to take advantage of freelance opportunities or start businesses. Ways to do this would be to create a real national health insurance system and to eliminate the income tax for people that make less than $100,000 a year. Another would be to eliminate arcane laws that discourage self-employment, including some zoning restrictions.


  • Eliminate the income tax for individuals that make less than $100,000 a year and couples that make $200,000 a year. That would give people more money to spend and reduce the high cost of starting or running a business.


  • Give every American a tax-deferment of up to $250,000 for funds kept in FDIC-insured savings accounts or certificates of deposits. This would make it easier for Americans to save and to accumulate funds for business or investment.


  • Pass a national right to work law to eliminate mandatory union membership, which discourages hiring.


Just a few of these measures could boost the economy and reduce some of the effects of income inequality. They would not get rid of the problem, but they could reduce its burden on average people.