Government approach to income inequality
To the Journal editor:
One idea, proposed by conservatist economist Milton Friedman, is to provide a minimum income for the poor. Such a program would be more efficient since it would eliminate many welfare programs requiring fewer government workers to run.
Besides the poor, we need to address the problem of disappearing jobs. Globalization has been a factor where some have been displaced by competing workers that pay lower wages as compared to our country.
Another factor eliminating jobs has been automation reducing the number of workers required. One example has been the coal industry. Lastly, Artificial Intelligence (AI) threatens to destroy millions of jobs in the foreseeable future with a robotics workforce,
The government can reduce income inequality by providing minimum income to everybody between 18-64 at $1,000 per month. This guaranteed income will essentially eliminate poverty, provide income to those who are displaced by globalization, automation and by AI. (Yang, 2018).
To pay for this Andrew Yang, an American entrepreneur, has proposed a 10% consumer tax. In addition, others have proposed raising the tax rate on the wealthy who have been favored by previous tax cuts to help cover the cost.
The welfare of the wealthy is not significantly improved by lowering their taxes below 70% due to law of diminishing returns (Diamond, 1970).
An increase in income to wealthy individuals provides declining satisfaction given their already abundant income.
Also, such a tax rate encourages one to invest to avoid paying taxes on their income. Lastly, such a program would grow the economy and increase employment.
Apart from lifting millions out of poverty, the plan promotes efficiency and a shrinking of the federal bureaucracy. By having something to fall back on, workers could go back to school, and/or pay for child care in order to work or transition through job loss.