Raising taxes on the wealthy would reduce inequality

The argument

The argument begins with what an undifferentiated tax system does over time. The current tax system in most Western capitalist societies creates economic polarisation, dividing society between those with economic means and those without — not by taking more from the poor than the rich, but by leaving the existing distribution broadly intact while the pressures acting on each end diverge. The mechanism lies in what a tax bill leaves behind rather than in what it collects. A system that taxes the poor and rich at a similar rate ignores the fact that the same proportion means something different at each end of the scale. For a wealthy household, what remains is ample once every necessity has been met. For a household on a lower income, what remains is what must cover the growing price of essential goods — housing, transport, and food — whose costs rise regardless of what anyone earns. Similar rates therefore leave those on lower income with less money available to meet precisely the expenses they cannot avoid, while leaving wealthier households a surplus available to save or invest. That is how one group's position compounds while the other's erodes. Higher rates of tax on the wealthy as opposed to the poor serve as a check on that process. They slow accumulation at the top and relieve pressure at the bottom, acting on the distance between the two rather than on either end in isolation. What this preserves is the critical middle class — the part of the distribution that a polarising system hollows out as households are pushed toward one pole or the other. Keeping it populated is what ensures that there is room for social mobility, since movement between the ends of a society requires a middle to move through. On that basis, the wealthy should have to pay more in taxes.

Premises

Counter-arguments

The vast majority of wealth and job creation is created through the ingenuity of a minority of individuals who often recycle their wealth by re-investing it into the wider economy. A higher tax on the wealthiest in society disincentivises this behaviour and is often seen as punishing success. It is no surprise that some of the most productive economies in the world with the highest levels of job creation also have lower levels of personal and corporate taxation.

Rejecting the premises

[Rejecting P2] Raising taxes on the wealthy only serves to deincentivise wealth creation.