The Economist

Green Army: Communications

Almost 100% of China’s rural population now have basic health insurance … and a majority have basic pensions. …
China’s minimum wage … rose by an average of 17% [in 2011.]
(Asia, Special Report: Inequality and Social Mobility, 13 October 2012, emphasis added)

A True Progressivism

Bold moves are needed to tackle inequality and boost growth …

1. [Curbing] cronyism and [enhancing] competition …
   • [Freeing] monopoly sectors [such as mining and railways in China.]
   • [Freeing the] financial sector, with market-driven interest rates …
   • [Removing] subsidies for too-big-to-fail financial institutions …
   • [Increasing] competition in … education. …


2. [More] targeted and progressive social spending.
   
   • [Replacing] expensive universal subsidies for energy with tailored social safety nets.
   • [Wider] use of conditional cash transfers [eg] tying social assistance to individuals’ investment in skills and education. …
   • [Shifting] government spending …
     • from transfers to education, and
     • from older and richer people to younger and poorer ones.
   [America] spends barely more than 0.1% of GDP on “active labour-market policies” to get the less skilled back to work, one-fifth of the OECD average.
   Only half of American children attend pre-school.
   China plans to have 70% of its children in three years of pre-school by 2020.


3. [Tax reform.]
   Economists argue about the disincentive effects of higher tax rates.
   [Some analysis suggests] that the optimal top income-tax rate could be as high as 80%. …
   
   In countries where the state is already large, rebalancing government spending should take precedence over raising more revenue.
   [Given] the mess that public finances in most countries are in, more tax revenue is likely to be necessary, particularly in less highly taxed countries such as America. ..
   • Closing the] “carried-interest” loophole, which allows private-equity managers to pay (low) capital-gains rather than (higher) income tax on their earnings.
   • [Withdrawing tax deductibility] for charitable contributions [and] mortgage interest [which disproportionately benefit the wealthy].
   • [Reducing] corporate tax rates …
   • [Narrowing] the gap between individuals’ tax rates on capital and labour income would [lead to] richer people pay[ing] higher average tax rates.
   • Higher property taxes …
   • [Reforming inheritance tax] so that it falls on individual beneficiaries [to reduce the risk of a hereditary elite.]