Income Equality, Innovation and Happiness of Nations

Quotes from a 2012 MIT paper: "Can't We All Be More Like Scandinavians?‏"

"The United States is richer than Finland, Sweden and Switzerland, with an income per capita (in purchasing power parity, 2005 dollars) of about $43,000 in 2008. Finland's is about $33,700, Sweden's stands at $34,300, and Switzerland's at $37,800 (OECD, 2011). The United States is also widely viewed as a more innovative economy, providing greater incentives to its entrepreneurs and workers alike,who tend to respond to these by working longer hours, taking more risks and playing the leading role in many of the transformative technologies of the last several decades ranging from software and hardware to pharmaceuticals and biomedical innovations.

"The United States does not have the type of welfare state that many European countries, including Finland, Norway, Sweden and Switzerland, have developed, and despite recent health-care reforms, many Americans do not have the type of high-quality health care that their counterparts in these other countries do. They also receive, much shorter vacations and more limited maternity leave, and do not have access to a variety of other public services that are more broadly provided in many continental European countries. Perhaps more importantly, poverty and inequality are much higher in the United States and have been increasing over the last three decades. Figure 4 depicts the evolution of the ratio of 90th and the 10th percentiles of the income distribution in these countries, and shows that the United States is both more unequal than Finland, Norway, Sweden and Switzerland, and that this gap has been increasing since the 1980s. Income inequality at the top of the distribution has also been exploding in the United States, with the top 1% of earners capturing over 20% of total national income, while the same number is around 5% in Finland and Sweden (Atkinson, Piketty and Saez, 2011)."

quotes above from www.economics.mit.edu/files/8086

Van Sloan's tax proposals to maintain the US lead in innovation while reducing its income inequality (which promotes nation happiness)

1. Revise the federal capital gains tax rate to apply only to activities that promote business innovation and efficiency:

a. initial public sale of stock for new companies

b. stock options issued to working officers of companies

All other capital gains would be taxed at the general income rate of the taxpayer

2. A new federal sales tax would be charged on personal expenditures over $1000. The sales tax rate on such purchases would have increasing rates at the $10,000, $100,000, $1 million, and $10 million levels.

3. Substantial and progressive federal inheritance taxes would apply to all estates over $1 million.

Revenues from these tax revisions could be used to raise US welfare spending to be closer to spending in Scandanavian countries. The combination of better welfare and greater income inequality should raise US hapiness levels, while maintaining the US lead in innovation and average incomes.