Feb. 17 (Bloomberg) -- Reforming the tax code to eliminate tax loopholes used by the wealthiest Americans would help narrow the income gap between the rich and the rest of the society, according to former U.S. Treasury Secretary Lawrence Summers.
“Closing the loopholes that only wealthy can enjoy would enable targeted tax measures such as the earned-income tax credit to raise the incomes of the poor and middle class,” Summers wrote in an opinion piece in the Washington Post today.
Stagnant wage gains, a wider gap between growth rates for productivity and median family income, and a rising share of income going to profits are all evidence of inequality, which leads to fewer opportunities for the poor and middle class, said Summers, who was Treasury secretary from 1999 to 2001. Such income inequality leads to less demand, he said.
“A generation ago, it could have been asserted that the economy’s overall growth rate was the dominant determinant of growth in middle-class incomes and progress in reducing poverty,” he said. “This is no longer a plausible claim.”
His comments come weeks before President Barack Obama reveals his annual budget, which represents a wish list for the administration. Obama’s fiscal 2015 budget proposal will be released in two installments, with the first released on March 4, according to Andrew Logan, a spokesman for Senator Jeff Sessions, the budget panel’s top Republican.
To contact the reporter on this story: Kasia Klimasinska in Washington at firstname.lastname@example.org
To contact the editor responsible for this story: Chris Wellisz at email@example.com