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How to tackle inequality without triggering a backlash

An alternative to raising taxes.

United Auto Workers members walked in the Labor Day parade in Detroit in 2019. Research indicates that government policies that strengthen unions can help reduce economic inequality.
United Auto Workers members walked in the Labor Day parade in Detroit in 2019. Research indicates that government policies that strengthen unions can help reduce economic inequality.Paul Sancya/Associated Press

Democrats have long agreed on the need to reduce economic inequality. But raising taxes is not as politically popular as liberals might hope. Fortunately, there’s another way to go. It’s called pre-distribution — and it has the potential to help Democrats combat inequality without triggering a popular backlash.

The term was coined by Yale political scientist Jacob Hacker, who noted in a 2011 paper that the traditional liberal approach to fighting inequality often begins and ends with redistribution — government taxes and transfers that take from some to give to others. In that framework, governments accept the pre-tax allocation of incomes as a given and later try to reduce the resulting inequalities by taxing higher earners more.

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Hacker argued that this approach missed some of the root causes of inequality. And it played into conservative critiques of government overreach, not to mention people’s general dislike of taxes.

Instead, he urged progressives to focus more on pre-distribution: the ways in which the market distributes its rewards in the first place, before the government collects taxes or pays out benefits. Pre-distributive policies change how markets work so they are less likely to produce unequal outcomes in the first place. Examples of pre-distributive policies include strengthening unions, which a wide body of research links to lower income inequality; tougher antitrust enforcement to reduce the market power of powerful employers, which can suppress workers’ wages; raising the minimum wage; and rolling back unnecessary local occupational licensing restrictions that often do little to protect consumers while entrenching inequalities in the labor market.

Although liberals have long pushed for many of these policies, the Biden administration now has a chance to tie them together as part of a cohesive philosophy to tackle inequality. Jared Bernstein and Heather Boushey, two of the most influential left-of-center economic thinkers in recent years, have praised pre-distributive approaches; both were recently appointed to Biden’s Council of Economic Advisors.

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As a matter of economic policy, pre-distribution may be better at reducing inequality than redistribution. Despite the attention paid to Europe’s more generous welfare state and its higher tax rates, a new paper by the economists Thomas Blanchet, Lucas Chancel, and Amory Gethin finds that pre-distribution accounts for up to 90 percent of the gap in inequality between Europe and the United States. Another new paper concludes that “the reason why overall inequality is much smaller in France than in the US is entirely due to differences in pretax inequality” — not differences in taxes and transfers.

Pre-distribution is also pragmatic. With Democrats holding razor-thin majorities in Congress, major tax increases will be hard to pass. Any way of reducing inequality that relies primarily on administrative tools, such as revisions to labor regulations to strengthen employees’ bargaining power, or tougher antitrust enforcement, will appeal to an administration that wants to get things done quickly.

What’s more, despite a sharp increase in inequality over the last five decades, Americans are no more likely to support redistribution, even as taxes on the wealthy have largely fallen. New research by political scientists Kenneth Scheve of Yale University and David Stasavage of New York University finds that many voters — including some who are concerned about rising inequality — believe that everyone should be taxed at the same rate. At the heart of public support for this “flat tax” policy, Scheve and Stasavage argue, are broadly shared beliefs in “equal treatment”: If one person, one vote makes sense, why shouldn’t one person, one tax rate?

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Another recent paper finds that while Americans generally support progressive taxation, they prefer tax rates close to the status quo. And while other research indicates that informing Americans about the full extent of income inequality makes them more concerned about the issue, it only increases their desired top tax rate by less than one percentage point.

None of this is to dismiss the importance of redistributive social policies like Medicaid or food stamps. We need both pre-distribution and redistribution to fight inequality and to raise revenues for public investment. But this does suggest that the Democrats would be wise to emphasize a pre-distributive agenda. It can make a real difference in combating inequality. Much of it can be implemented through regulatory and administrative reforms. And by tapping into Americans’ belief in equal treatment norms, it’s likely to prove more popular than a focus on redistribution. After all, 65 percent of Americans support labor unions, while two-thirds of Americans support raising the minimum wage to $15 an hour.

At its core, the political message of pre-distribution is simple. It’s about unrigging the system to create a more nearly level playing field. That’s a goal most Americans should be able to get behind.

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Bryan Schonfeld and Sam Winter-Levy are PhD candidates in politics at Princeton University.