Many posts in the economics blogosphere on the subject of progressive taxation today: Greg Mankiw discusses this paper, Mark Thoma points us to a WSJ article, and Brad DeLong links to Mark's post twice (here and here).
Inequality - both its level and the rate at which it has been increasing in Canada and the US - is a serious issue. But taxing the rich (and dealing with the resulting incentive effects) isn't the only policy instrument at our disposal; we can also reduce inequality by directed transfers to low-income households.
A couple of weeks ago, at the meetings of the Canadian Economics Association, Andrew Jackson presented a paper with the following table:
I've just ordered the Pontusson reference upon which this table was based, so I'll come back to this point as soon as I can. But it looks very much as though the Nordic countries - which are rich, devote a large fraction of their income to social programs and which do fairly well in reducing inequality - seem to have given up on tax policy as an instrument for income redistribution.