Timonthy Noah has a new book entitled the Great Divergence: America’s Growing Inequality Crisis and What We Can Do About It; Tyler Cowan reviews it and summarizes Noah's suggestions:
1. Soak the rich
2. Fatten government payrolls
3. Import more skilled labor
4. Universalize preschool
5. Impose price controls on colleges and universities
6. Reregulate Wall Street
7. Elect Democratic Presidents
8. Revive the labor movement
Cowen calls the book "a useful survey of left-democrat points of view on the problem" but doubts very many of these suggestions will have the intended effects, and then offers his own list. He wants innovations that benefit everybody, i.e., the kind he says led to the last "great equalization," 1870-1970.
Of course that period was a time in which income taxes were first adopted as a class tax, then expanded to a mass tax while becoming sharply progressive and featuring marginal rates as high as 90% before falling down to a more reasonable 70% by the end of the period. As a result, I like to think tax policy has something to do with the good things that happened in that period, like America's highest annual economic growth and, as Cowen puts it, its great equalization. If I had a wish to add to the list, I suppose it would be, figure out a way for workers to capture more of the gains from their contributions to aggregate economic growth. This could be but need not necessarily be imagined as a tax policy problem.