Momentary Schizophrenia

A socialist and a libertarian capitalist are arguing about income inequality in the UK:

S: "Allowing some people to earn many millions of pounds every year is wrong. And, as in the example of private equity fat-cats, paying a smaller proportion of their huge incomes in tax than a cleaner? A menial labourer pays more on every pound of his £15 k salary he earns than a guy earning £1 million? This cannot be justified! I propose a "maximum salary" (as suggested today on Guardian Unlimited's CiF...) - people can only earn a maximum of 100 times the average income (around £1.7 million in the UK) and can only accumulate an estate 50 times this amount! The excess should be paid in tax or given to charity!"

LC: "Why? It's not as if central government gave these people that money - why should it be theirs to take? Wealthy people like Bill Gates, JK Rowling, Robert Dyson etc have contributed to the richness and diversity of the world we live in, should they not be rewarded?"

S: "Overcharging for a second-rate OS, writing overhyped children's books and designing a better vacuum cleaner? Anyway - giving excess income to charity should be mandatory, but which charity you pay into shouldn't be. Then you would be able to choose the reward for your labours: which particular way to make the world a better place. Anyway: "central government" provide the basic infrastructure and commons that allows the free market to exist, also recall that "central government" is democratically elected by a majority (or at least a plurality) of voters."

LC: "That's actually a good point about choosing which charity to give you excess to. Maybe Diab is right, but it still feels like an imposition to me - what happens if the wealth is inherited?"

S: "I guess in this case inherited wealth would also be limited."

LC: "Right, so what about genetic characteristics? What if someone is more intelligent due to the activation of a particular gene that enhances the early development of the hippocampus?"

S: "That would be the part of the brain that controls spacial mapping and influences mathematical understanding?"

LC: "Right, so how do you redistribute genetically inherited traits?"

S: "First off: wealth is not a genetic trait. I would quote "each according to their ability to each according to their needs but we both know that's a broken idea anyway..."

LC: "Agreed."

S: "Secondly the "elite" would still have a (crude) reason to create wealth, beauty, and help people - they could choose how the excess money they spend is spent. They just have to give it to a charity. They could even make their own charity I guess."

LC: "I still think that an "upper limit" on wealth is an area the government shouldn't legislate on. It's like capital punishment, the state has no right to murder people, and it has no right to prevent people becoming ludicrously wealthy. Also, if charity becomes compulsory, it will be less valued generally - it will become just another tax. I also don't think a few extremely wealthy people are a problem, inequality should be solved by increasing the wealth of the people at the bottom by encouraging them to aspire, rather than handing them cash confiscated from the very wealthy."

S: "The problem is that in many cases the people at the bottom of the income scales are there simply because of circumstances beyond their control, like intelligence - a concept I am not entirely comfortable with - but nevertheless there are differences in people's ability to comprehend, visualise, and affect their environment, it is beholden on those who can do so to help those who can't, or at least ensure they are happy."

LC: "Well I can agree with that - I would do so by encouraging aspiration and demolishing the class system - why should a lawyer be considered any more worthy than a plumber? Both perform essential tasks but the former is still thought of as being intagibly "better" - I hesitate to attempt any sort of social engineering, but entrenched class prestige isn't helping anything."

And so on.

I don't personally agree with Diab that there should be a super super tax on the uber-wealthy. There is an article (subscription required) in this week's issue of Prospect magazine on taxing the wealthy. It quotes the eminently sensible comment of Jean-Baptiste Colbert that taxation is the art of "extracting from the goose the maximum amount of feathers with the minimum amount of hissing".

Another intriquing nugget in the article was that for several years the proportion of GDP taken as tax has remained constant at around 37% for several years.

I doubt very much that the kind of super super tax proposed by Diab will be implemented any time soon. And I do believe that the current hysteria concentrates on the rich, when it should be concentrating on the poor - the scandal is that the income of poor people has not increased in the same way as the income of the richest people.