The IMF, for long a custodian of capitalism, has called for higher income taxes, which it says will not damage economic growth, while a Tory minister has suggested we need to get away from the idea that people are custodians of their homes for their children. The debate is interesting, but new technology will make it one of the most important topics of our time.
Actually, while inequality of income in the US is a growing problem, in the UK it has only become noticeably worse before taxation. Taxation and tax credits have done much to even the balance. Although there was a sharp rise in income inequality in the UK in the 1980s, which has not been corrected, but post tax it hasn't got any worse since. A more serious issue is inequality of wealth.
Back in September, Vince Cable spoke on the subject of inequality at the Resolution Foundation, and surprisingly forthright he was too. "Inequality is no longer an issue for idealists: it can lead to asset bubbles, reckless behavior and low demand," he said. Turning to wealth inequality, while acknowledging it is a major problem, he said: "Tackling the problem of property ownership disturbing distribution is politically fraught."
And that just about hits the nail on the head. It used to be argued that trying to correct inequality is the politics of envy. A rising tide lifts all boats, the last thing you should do is tax wealth creators, as that can make everyone worse off.
But the experience of the last few years, indeed decades, tells another story. In the US, while the economy has grown massively, median income is no higher today than 40 years ago. In the UK, it is not so serious.
But what is an undeniable fact, is that the golden age of economic growth across most of the developed world occurred in the 25 year period after world war 2, when inequality of both income and wealth was was less. We celebrate the ideas of Reagonomics and Thatcherism, but don't forget, ever since the introduction of these ideologies, economic growth has deteriorated. This does not prove a causal link, of course, it just needs to be borne in mind.
Now the IMF has said: "While some policies may have conflicting effects on growth and distribution, our empirical evidence shows it is possible to achieve inclusive, sustainable growth with the right mix of policies. Efficiency and equitality can and must go hand-in-hand."
It also looked at universal basic income (UBI), but warned of the cost, saying: "It would cost the average advanced economy 6.5 per cent of GDP to provide a UBI set at 25 per cent of median per capita income," but added "estimates vary considerably across countries."
Meanwhile a video has been leaked from a fringe meeting at the recent Conservative Party conference of Jackie Doyle-Price, Under Secretary of State. She said: "The reality is that the taxpayer shouldn't necessarily be propping up people to keep their property and hand it on to their children when they're generating massive care needs.
"We've got to a stage where people feel that they are the custodian of an asset to give to their offspring but actually we need to get back to a stage where actually homes are for living in - they shouldn't be seen as that."
She has run into a storm of protest of course, nothing gets the UK electorate's hackles up like the idea of inheritance tax, or worse taxing wealth.
It's odd. People say they worked hard for the increase in the value of their wealth via rising property prices, and react in horror to the idea of funding income tax (which is a tax on hard work) cuts, through increases in inheritance tax.
But what is clear is that new technologies such as AI and robotics, maybe 3D printing, may well exacerbate this. At the same time, if new technology pushes down on prices, and creates an economy where demand lags behind potential output, universal basic income - which just like inheritance tax, is money for nothing, but may have a more positive effect on the economy by boosting demand - could be funded by central banks printing money.
The debate over inequality is often met with a hysterical reaction, but we are approaching a point when it needs to be discussed, as a matter or urgency.
