Key Arguments
- The current economic situation in the United States is grave, with extreme inequality, persistently high unemployment, and GDP growth far below potential, to name just a few problems. But the barriers to a solution are political, not economic.
- Reforms to corporate and personal income taxes will be essential in restoring economic vitality. Examples include implementing financial transaction taxes; increasing corporate tax rates while incentivizing investment in the U.S. and closing loopholes; increasing taxes on rent-seeking; reforming estate and inheritance taxes; and making personal income taxes more progressive.
- All reforms must be made with the understanding that deficit reduction in and of itself is not a worthy goal. Rather, taxation must be reformed to help grow the economy, improve distribution, and encourage socially beneficial behavior on the part of firms and individuals.
Tax reform in particular offers a path toward both resolving budgetary impasses and making the kinds of public investments that will strengthen the fundamentals of the economy. The most obvious reform is an increase in the top marginal income tax rates—this would both raise needed revenues and soften America’s extreme and harmful inequality. But there are also a variety of other effective possible reforms related to corporate taxation, the estate and inheritance tax, environmental taxes, and ensuring that the government gets full value when it sells public assets. This white paper describes the gravity of the economic situation in the United States, but also shows that there is a way out.
Author
Joseph Stiglitz
Chief Economist and Senior FellowAs chief economist and senior fellow at the Roosevelt Institute, Joseph Stiglitz focuses on income distribution, risk, corporate governance, public policy, macroeconomics, and globalization.