Social Justice, Libertarianism

On Inequality

President Obama said in his State of the Union that one of his goals is to reduce wealth inequality, and advocated increased taxes on the rich to do that. His critics gave two answers.  The first is that higher taxes will stymie growth, and the second is that the President is waging class warfare.

Yet, outside the rarified circles of political philosophy journals, I haven’t heard many folks ask two other important questions about the President’s approach.  Yet these questions are, to me, obvious.

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.

Maybe I missed something, but none of the Republican candidates made any of these points.

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