Scheppach on the Opportunity States Have to Attack Income Inequality

The surge in spending on Medicaid and other COVID-19-related health-care services, coupled with the collapse in revenues, is already devastating state governments' finances. It's likely to be years before revenues return to pre-pandemic levels. But the recovery will also provide an opportunity for states to rethink the way they tax their citizens and deliver services to them, and to replace existing policies with those that focus on reducing income inequality. States have far more policy levers than any other level of government, and it is time for them to provide the leadership on this issue.

It seems clear now that the greatest long-term threat to our nation and to our democracy is the growing disparities in income and wealth. According to recent statistics, the top 1 percent receives 22 percent of the nation's income and holds 40 percent of its wealth. The COVID-19 downturn is worsening these disparities: More than 20 million individuals are now unemployed, at the same time that the stock market's performance has preserved or increased billionaires' wealth.

In the rebuilding of state governments, it is critical to make changes in spending priorities, tax systems, the organization of government and the way services are delivered. While just about every policy area has an impact on inequality, the three most important are education, health care and taxes.

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Raymond C. Scheppach