Taxing the Rich to Fund Welfare Is Nobel Winner’s Growth Mantra

How do you spur demand in an economy? By raising taxes, not cutting them, says this year’s winner of the Nobel prize for economics.

Reducing taxes to boost investment is a myth spread by businesses, says Abhijit Banerjee, who won the prize along with Esther Duflo of the Massachusetts Institute of Technology and Michael Kremer of Harvard University for their approach to alleviating global poverty. “You are giving incentives to the rich who are already sitting on tons of cash.”

Abhijit Banerjee

Photographer: T. Narayan/Bloomberg

A better approach would be to raise some taxes and distribute the money to people to spend, Banerjee ...