Education and Taxes Can’t Reduce Inequality

Very often, proposals to even out income inequality advise one of two things: Expand people’s access to education and/or raise the top tax rates. Yet even a big increase in the share of people with a college degree would have only a minimal effect on earnings inequality, research has shown. And now it turns out that a substantial increase in the top marginal tax rate wouldn’t do any better.

The economists Bill Gale and Melissa Kearney (colleagues of mine at the Brookings Institution) and I recently looked into the tax-rate question and found that even a big increase in the marginal tax rate for top earners would have shockingly little effect on after-tax inequality.

From Bloomberg View – Articles by Peter R. Orszag