To help the poor, we must remove barriers to social mobility and improve tax climates

In conversations about income mobility—a staple of the 2024 election—there is no consensus about the main barriers to mobility. There is a persistent confusion among academics and policymakers about intertwining income mobility, poverty, and income inequality.

There is a correlation between income mobility and inequality, but it may well be that there are barriers and variables affecting both at the same time. There has been no causation demonstrated in the economic literature one way or the other.

However, if there is a consensus (albeit misguided), in our current academic and policy conversations, it is that the main way we should combat inequality and improve mobility are either through taxing the rich or increasing transfers to the poor and tweaking the welfare system.

Yet there are many misconceptions even about specific issues regarding taxation, or "the rich" for that matter. One perspective, mainly spouted by congressional progressives like Elizabeth Warren, Bernie Sanders, and Alexandra Ocasio-Cortez, is that the wealthy "don't pay their fair share."

The confusion of such elected officials is mirrored in a recent survey by the Tax Foundation . The results show people are even confused about how much the rich actually pay and the top marginal tax rate. Only 22 percent of people surveyed got the right answer to the first question and, as it relates to the second one, many people are also incorrect. Tax literacy is extremely low in America.

Despite whatever is the right amount of taxation and "fair share" paid by the rich, social mobility shouldn't even come down to bringing other people down, but rather that everyone is able to climb up. U.S. policymakers need to focus on removing the barriers that create inequality in the first place—even before the tax and transfer system shows up.

The other misconception when it comes to taxation and social mobility is that we need to increase corporate taxation to reduce inequality and increase mobility. However, corporate taxation is the most harmful for economic growth, which in turn is the engine for more social mobility. When a business is able to take on additional risk, make an investment, hire more workers, and enter new markets with innovative products, that cycle creates opportunities for individuals to take advantage of new and better opportunities.

Ill-advised corporate tax policies can throw a wrench into that process. Countries like Ireland, with a low corporate tax rate , typically attract businesses large and small, while other Western countries may see companies leave—taking the jobs with them.

Then there are Scandinavian countries, which have lower, better-designed corporate tax policies compared to other countries, and they are home to some of the best outcomes for social mobility and lower inequality. The Tax Foundation's ranking of corporate tax systems around the world places the Scandinavian countries and the Baltic countries far ahead of the United States, Canada, or Mexico. And Scandinavia consistently outperforms the European Union writ large in terms of economic growth.

The Archbridge Institute's "Social Mobility in the 50 States" report includes data from the Tax Foundation's state business tax climate ranking , where all 50 states are assessed on their tax environment which fosters more business creation and job creation. It is an attempt to generate a consensus on what are the main barriers to social mobility. And the numbers don't lie: Some of the best ranked states in the report, such as South Dakota and Wyoming, also have better environments for entrepreneurship and economic growth. Workers in those states reap the benefits.

Instead of supporting an environment of innovation and competition, overregulation and the newly proposed global minimum tax aim for the equality of outcomes rather than the equality of opportunity. Complex regulatory and tax policies breed inequity because those who have the most resources to lobby and influence policy gain an advantage. When rules are stable, simple, neutral, and transparent, everyone has a chance to win—businesses large and small, and by extension Americans working for a wide range of employers.

We should certainly care about the disadvantaged, but focus of our policy conversations should be to remove barriers, so that more people can climb the income ladder. A proper understanding of taxation and social mobility can go a long way in helping the poorest among us, while also creating a more dynamic America.