Redistribution

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​In thinking about the role of law in redistribution, taxation offers a natural starting point. More and higher progressive income taxes would be the most obvious and direct way to achieve the goal of wealth equalisation. As every good billionaire offering to pay more taxes knows, if you have a good heart you will be keen to pay more and more taxes to bring the masses up to your own level, so if equality is our goal then presumably nobody will complain about having to pay for it.

This reasoning is predominant in modern wealthy countries, where there is now a political consensus (however uneasy) that governments will levy taxes not only to provide public goods like roads and fire brigades but also to redistribute wealth from rich to poor, to share the wealth around by taking from those who have earned it to give to those who have earned less or earned nothing at all. Leaving aside for a moment the role that markets could play in addressing this situation, and sticking with the redistribution strategy for a moment, we must still ask the prior question: how much redistribution are we aiming for?

Should taxation interfere with wealth as little as possible, or should it go as far as necessary to reduce economic inequality? Assuming that nobody is trying to achieve a perfectly equal state of affairs where everybody has exactly the same amount of wealth (that would be vaguely sinister), at what point does the income gap become unacceptable?

​If the economy is growing as it should and everybody is getting wealthier, so the wealthy are wealthier, and the poor are also wealthier, why is the income gap such a cause of consternation? The same question may be asked even when the ‘gap’ refers to the speed at which the wealthy are getting wealthier, compared to the speed at which the poor are getting wealthier. People work and accumulate wealth at different speeds and that is not necessarily a problem to be fixed by imposing various kinds of wealth creation ‘speed limits’ to try and level everybody down. If the poor are getting poorer, and now they are starving while the rich get richer and flaunt their wealth around, that would be an entirely different matter. But most people complaining about the income gap are concerned simply with inequality, and simply want everybody to be more equal in social and economic terms. Everybody knows, don’t they, that catching up with their neighbour is much more important than being proud of their own modest achievements.

This is a particularly pressing concern when nation states are compared, because poor countries are creeping slowly towards greater wealth, while the wealth of the richest nations grows in leaps and bounds (see Angus Deaton's Great Escape). Nobody seems to be happy about poor nations slowly but surely getting richer, not even if their growth speeds up every single day, because it’s pretty obvious that they will never catch up with the rich nations that are getting richer exponentially. This is a huge problem. Unless inventors can be persuaded to stop pursuing innovative ideas, or at least just maybe wait until the people of South Sudan have received their food aid, then the gap will never be closed and countries will always be unequal.

Now, a good case could be made that it's immoral for wealthy countries to seek scientific progress because surely it's really not on to spend money on heading for space while people in Africa are starving, and still patiently waiting for foreign aid to arrive and feed them? You would think someone would notice how incongruous this is, but no. On one side innovation continues, while on the other people are preoccupied with measuring how much richer some countries are than others. 

One solution would be to declare a moratorium on creativity, invention, and human progress, in the interests of Justice and Fairness: this would allow time to levy more progressive taxes, plus time for the billionaires who want to pay more taxes to find a way to do that - it's probably not very easy to volunteer to pay more, which is why they have to keep pleading with the government to raise the level of taxes. 

Saying they were “deeply concerned that too many New Yorkers are struggling economically, and the state’s ailing infrastructure is in desperate need of attention”, the millionaires urged “the governor and the legislature” to pass “the 1% Plan for New York Tax Fairness”

People who want to contribute more to help the poor are in a quandary. It must be tough, wanting to give a bit of your money to help the poor, but being unable to do so because the government hasn't created the right platform for that to happen. Obviously these millionaires have good hearts and that's why they want to give more money to the poor but they can't easily do so, because the legislature hasn't passed the right laws forcing everybody to give more. I suppose it would be quite wrong to expect them to just go ahead and give without the right laws in place; no, they first have to be sure that everybody else is being forced by law to join in, otherwise what's the point?

This is one of the features of the inequality debates: those who want to help don't just want to help - they want everyone to be compelled by law to help, so that it's fair.