Response to Krugman on Inequality

This is Paul Krugman's post in the New York times


This is my comment on his post. 

I wholeheartedly agree with the premise after all Ford himself saw logic to paying higher wages to his workers to generate new buyers for the cars they were producing. The same principle if extended to a macro level should increase the propensity to consume, to educate, to invest at a local national level thereby adding to Gross Domestic Product.

However it is one thing to agree to redistribute it is very much another how.

I claim that taxing wealth is the wrong approach as it disrupts the markets. The right approach would be to tax what generates revenue this way there are no liquidity issues and its non disruptive.For example imagine taxing bank savings or security investments or real estate all on an annual basis. Automatically, there will be a flight of capital, the securities market would collapse and the real estate market would freeze. The alternative if INCOME would be taxed at progressively higher levels or CAPITAL GAINS from the sale of all assets this would neither produce any disruptions in any market and there will be ample ability to collect.

Alternatively a worldwide policy of a minimum respectable wage disincentivising companies from relocating production on basis of wages alone, would induce companies to home grown production and a higher GDP. Equally incentives for companies to provide shareholders rights to workers with various schemes,thereby sharing company profits increasing worker participation and productivity and thus profits and equality.

No comments:

Post a Comment