Excellent Questions

Friday 3 February 2012 - Filed under Uncategorized

Bleeding Heart Libertarians on the question of inequality, and dealing with inequality via taxing the rich:

First, why should reducing income inequality be a worthy goal? If we are concerned about the poor, then we should focus (as Rawls famously does) on improving their lot in absolute terms, regardless of the effect of such improvement on the gap between them and the rich. Again, this is common currency in academic circles, but I don’t hear anyone in our public debate making the point.

Second, conceding for the sake of argument that reduction of inequality is a worthy goal, why would increased taxes achieve that? I want to hear economists on this, but it seems pretty obvious to me that tax increases cannot reduce inequality unless we also eliminate corporate welfare and other forms of unjustified and unproductive public spending. Moreover, surely a concern with the public debt animates the call for higher taxes. Exactly how will servicing the debt reduce inequality? For higher taxes to reduce inequality, taxes should be used to transfer wealth to the poor, not to the likes of Solyndra (I’m ignoring here the dynamic counterproductive effects of wealth transfers.). Yet, if the President gets his way, it is at least dubious that this is what will occur in the current political and economic climate.

Exactly right. I’ve said it before that any idea that an effective way to deal with poverty is via taxing the rich is nothing short of envy. It’s not based on a philosophy that sympathizes with the poor, but is rooted in a desire to have what the rich have. Were their focus on helping the poor, it wouldn’t necessarily, as Obama and movements like Occupy insist, mean closing the income gap between the rich and poor; raising the standard of living for the poor would be seen as a good in itself regardless of whether it closes any gap in wealth. In a complex economy which constantly allocates wealth based on billions of consensual transactions between consenting parties, helping the poor raise their standard of living, and closing a gap in supposed inequality are completely separate issues.

2012-02-03  »  madlibertarianguy