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These giveaways are a pure transfer, from the rest of the population to corporations and the wealthy; but in a world of budget constraints, they are more than that, for they result in less spending on high-return public investments.
    End corporate welfare—including hidden subsidies. We explained in earlier chapters how the government too often, rather than helping people who need assistance, spends its valuable money helping corporations, through corporate welfare. Many of the subsidies are buried in the tax code. While all the loopholes, exceptions, exemptions, and preferences reduce the progressivity of the tax system and distort incentives, this is especially true of corporate welfare. Corporations that can’t make it on their own should come to an end. Their workers may need assistance moving to another occupation, but that’s a matter far different from corporate welfare.
    Much of corporate welfare is far from transparent—perhaps because if citizens really knew how much they were giving away, they would not allow it. Beyond the corporate welfare embedded in the tax code is that embedded in cheap credit and government loan guarantees. Among the most dangerous forms of corporate welfare are ones that limit liability for the damage the industries can cause—whether it’s limited liability for nuclear power plants or for the environmental damage of the oil industry.
    Not bearing the full cost of one’s action is an implicit subsidy, so all those industries that impose, for instance, environmental costs on others are, in effect, being subsidized. Like so many of the other reforms discussed in this section, these would have a triple benefit: a more efficient economy, fewer of the excesses at the top, improved well-being for the rest of the economy.
    Legal reform—democratizing access to justice, and diminishing the arms race. The legal system generates enormous rents at the expense of the rest of society. We don’t have a system in which there is justice for all. We have a system in which there’s an arms race, and those with the deepest pockets are in the best position to fight and to win. The details of the reform of our legal system would take me beyond the confines of this book—or even a much longer tome. Suffice it to say that the required reform is far more extensive than, and very different from, the litigation reform advocated by the Right. Embracing the conservative reform agenda, as trial lawyers correctly point out, would leave ordinary Americans unprotected. But other countries 4 have, for instance, developed systems of accountability and protection—where doctors that engage in malpractice are held accountable, and where those who suffer injury, whether as a result of malpractice or simply bad luck, are compensated appropriately.
    Tax reform
    Each of the seven reforms that we have described yield a double dividend: enhanced economic efficiency and increased equality. But even after we do that, large inequalities will remain, and to provide revenues for public investment and other public needs, to help the poor and the middle class, to ensure the existence of opportunity for all segments of the population, we’ll have to impose progressive taxes and, most importantly, do a better job in closing loopholes. As we’ve seen, in recent decades, we’ve been creating a less progressive tax system.
    Create a more progressive income and corporate tax system—with fewer loopholes. Our tax system, while nominally progressive, is much less progressive than it seems. It is riddled, as we have noted, with loopholes, exemptions, exceptions, and preferences. A fair tax system would tax speculators at at least the same rate as those who work for their income. It would ensure that those at the top pay at least as large a percentage of their income in taxes as those with lower incomes. 5 The corporate tax system should be reformed, both to eliminate loopholes and to encourage more job creation and investment.
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