It's harder for governments to tax their way out of rising inequality
- Written by Chris Doucouliagos, Professor of Economics, Department of Economics and Alfred Deakin Institute for Citizenship and Globalisation, Deakin University
Higher inequality makes it harder to raise taxes and therefore redistribute income to fight its spread, our analysis shows. This is because in the past, on average, inequality has reduced the amount of income tax governments can collect as a share of GDP.
We also found a similar, though smaller, effect with less visible indirect taxes. Our findings...
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