The Triumph of Injustice: How the Rich Dodge Taxes and How to Make Them Pay
Emmanuel Saez
In my review of Gabriel Zucman’s “The Hidden Wealth of Nations,” I commented that his treatment of corporate tax evasion through the use of offshore incorporation felt cursory, and I wished he would have given it a separate book. He hasn’t done that exactly, but here, with co-author Emmanuel Saez, he treats the overall progressivity of the US tax system over time, very much including corporate taxation.
Saez and Zucman are both proteges of Thomas Piketty, and I have to say I think they have improved upon their master’s approach. The general style is similar, with a heavy focus on careful collection of statistics that are not easily gathered from any one source, and little to no econometrics or mathematical modeling. Yet in place of Piketty’s 700+-page tome, Saez and Zucman are producing very punchy sub-200-page super-papers that communicate a clear message: here, it is that the US tax system as a whole (considering income, consumption, corporate, payroll, and other taxes) is essentially a “flat tax” for the vast majority of the population, and actually becomes regressive at the very top (the richest pay a lower proportion of their income than the rest of us). This is a change since the 1980s, before which taxation was more progressive. Saez and Zucman put forward some good, dare I say common-sense, arguments for why taxing labor and capital at different rates exacerbates inequality, why the extent of tax avoidance/evasion is a choice that the government makes, and why extra-Laffer top marginal tax rates (higher than that which would maximize tax revenue) may be socially optimal. Alongside this, they have interesting discussions of tax incidence (who does the corporate tax really fall upon?), and the evolving role of value added taxes (VAT), which they find to be less desirable in a time of high inequality than they were in the more equal time and place in which they were first implemented.
Best of all, Saez and Zucman created a companion website (taxjusticenow.org) to allow the public to interact with their data and simulate the effects of different policy choices. This is a really creative move for a pair of academics, and even more than the conciseness of their book and clarity of their prose, opens up their findings to a much broader audience than those who’d be willing to read a Piketty-type tome.
I also felt frustrated while reading this book, not anything to do with Saez and Zucman themselves, but because of the clash with the US political situation. Although S&Z’s policy proposals aren’t bulletproof, they are thought-through ideas that struck me as feasible. It’s sad to me, then, that most presidential candidates aren’t talking about these types of policies, and even if they were, they would have zero chance of getting past the Senate–barring some significant upheaval of the status quo.