(Mother Jones Magazine)
Of late, James Pethokoukis, the American Enterprise Institute’s resident economics blogger, has been attempting to “close the case on the inequality myth.” Wednesday’s edition argues that it doesn’t really matter if income inequality has gone up because wealth inequality fell after World War II. I don’t agree with that, but put it aside for a moment.
The paper Pethokoukis quotes argues that “the first and perhaps most obvious factor is the creation and the development of the progressive income and estate tax.” I note this only because Pethokoukis and the American Enterprise Institute are loud, committed advocates for eliminating the estate tax and moving toward a less progressive tax code. They host events on the subject and praise plans for a flat tax that would make the tax code less progressive and put an end to “the death tax.” Over the last decade, they’ve been winning. And wealth inequality, predictably, has been rising.
Pethokoukis’s numbers stretch from 1916 to 2000. In 2001, of course, the George W. Bush tax cuts were passed. The tax code became significantly less progressive, and the estate tax phased out over the course of the decade. In 2001, estates worth more than $675,000 were taxed at 55 percent. In 2011, estates are tax-free until they hit $5 million, and after that, they’re taxed at 35 percent.
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