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A Radical Proposal To Fight Poverty In The Developing World: Tax The Rich More Than The Poor (Vox)
May 24, 2018
From the article (op-ed by Charles Kenny and Justin Sandefur)
The world’s poorest people have been getting richer recently, but they remain incredibly poor, with 10 percent of the world’s population still consuming $1.90 or less a day — a small fraction of the resources available to people at the US poverty line.
Here is a radical proposal that could improve their lot: progressive taxation and welfare systems.
That may seem so obvious as to not be worth mentioning. In the developed world, government taxes together with transfer systems like welfare payments are readily accepted as one way reduce the gap between the rich and the poor. That’s true even in the United States, where laissez-faire is a state religion.
But new data on taxation and spending in the world’s poorest countries suggests that progressive tax-and-transfer systems are far less common than you would think. In general, taxes are less progressive in those countries, financial transfers are much smaller, and the bulk of social spending is soaked up by broken health and education systems. The net effect is often that tax-and-transfer policies leave poor people worse off, not better.
Tax and transfer systems reduce inequality in the rich world but can exacerbate poverty in the poorest countries