OECD: Tax reform needed to battle income inequality

A key global economic group said countries around the world should use tax reform as a way to battle income inequality.

The Organization for Economic Cooperation and Development suggested governments slash tax breaks mostly used by the wealthy, tax certain income now considered capital gains as ordinary income and take a fresh look at estate taxes.

The paper comes as the OECD, a group of close to three dozen market economies, including the U.S., said that income inequality had grown substantially over a three decade span.

The top 1 percent in the U.S. grabbed around 47 percent of the growth in pre-tax income from 1975 to 2007, OECD said, adding that even the top earners in Nordic countries grabbed a bigger share of the income.

“Without concerted policy action, the gap between the rich and poor is likely to grow even wider in the years ahead,” Angel Gurría, the OECD's secretary-general, said in a statement accompanying the report . “Therefore, it is all the more important to ensure that top earners contribute their fair share of taxes”.

Democrats in the U.S. have made battling income inequality a central plank in their electoral strategy this year, at the same time they're facing GOP attacks on the healthcare law.