To some degree I think that my views about income inequality bear some similarity to my views about global warming and climate change. In both instances I am favorably disposed to the issues but I’m skeptical about the solutions that are being proposed to address them. In the case of income inequality the solutions I, as I said in the comments, tend to be of the “Tax A to give B on behalf of C” sort where A are “the rich” C are “the poor”. B are generally doctors of medicine, educators, social workers, government bureaucrats, or what have you.
While these solutions may or may not address income inequality they will definitely redistribute from “the rich” to the not-so-poor.
While I think that there is good cause to think inequality is a problem, I will agree that solutions are tough. I think that there are a couple that would help. Tax all income at income tax rates, capital gains included. Tax total compensation. Tax code simplification. Require any special tax exemptions to be published on a website dedicated for such. Stiffer death tax. Set exemption at 7-10 million, then high tax rate above that. Max values of trusts at 10 million. Shifting to consumption taxes.
Steve
Income inequality appears to become more pronounced as technology becomes more sophisticated but no doubt there was inequality among tribes of hunters and gatherers. The question is whether the perceived social good of income equality will be the result of political coercion or voluntary. For example, there is not glaring income inequalities among the Amish given their renunciation of the trappings of modern life and communal social structure and the last time I checked no one was, figuratively or literally, holding a gun to their head to become egalitatarian.
Perfect income equality is actually a bad idea, generally speaking. It would result in very bad incentives or you’d have to come up with extremely convoluted incentive schemes. If we had as a policy income inequality I’d quit my job. After all, with such a policy I’d be assured of having just as much income as everyone else. I’d much rather relax and enjoy much more leisure time knowing that via government fiat I’ll have my income equalized.
It shouldn’t be hard to see that such a policy could quite easily result in income dropping below what it would be for most people than if we did tolerate at least some level of income inequality.
So the question is twofold:
1. At what level is income inequality bad?
2. Are there other conditions that make income inequality bad?
I think a good case could be made that income inequality coupled with an interventionist democracy is potentially problematic. Or in other words, income inequality in and of itself might not be much of an issue save perhaps when income is unequal.
Brad,
Yes, in smaller groups such as the Amish I’m sure that you could have less of an issue with equality and incentives. However, as a population grows and if that population does not all share the same cultural norms I’d argue you’d likely run into some serious incentive issues.
Steve V.-Yes, some inequality is good if it means merit is being rewarded. I would add that inequality plus crony capitalism should be bad. Inequality plus monopolies should be bad.
Steve
Whoops, this:
Should read as: