There seems to be an obvious solution to rising inequality: higher taxes. But there’s an inconvenient fact here. The way most advanced, industrial countries have made real gains on inequality is through relatively regressive taxes that fund programs that reduce inequality. In fact, America’s tax system is already unusually progressive by international standards. Our ongoing research suggests that this unusual relationship is not a coincidence.
The countries in northern Europe that have made the biggest strides in reducing economic inequality do not fund their governments through soak-the-rich, steeply progressive taxes. Instead, they have broad-based taxes that ask all workers to contribute to a generous welfare state. Countries with highly progressive taxes that disproportionately hit the rich — like the United States — tend to have the stingiest welfare states.
THE WAY A TAX SYSTEM FIGHTS INEQUALITY ISN’T JUST REDISTRIBUTION
The figure below makes this point clearly, showing that the more progressive a country’s taxes, the less the country does to reduce inequality.
http://www.vox.com/2014/10/8/6946565/progressive-taxes-are-not-the-solution-to-inequality
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