Is Income Inequality Beautiful?

I was surprised to learn, thanks to Forbes magazine, that income inequality is “unrelentingly beautiful.” I thought it was a bad thing?

John Tamny of Forbes argues that it is indeed unrelentingly beautiful. Tamny is very fond of the adverb in that phrase; in 2013, he found income inequality “unrelentingly brilliant.” His point seems to be that income inequality leads to improved quality of life for all because it drives innovation. Without income inequality, there would be no incentive to expend effort and take risk. Great inventions like the cell phone would not exist if the people who invented them weren’t incentivized to do so.

By Tamny’s argument, we should abolish all taxes on the top earners and we’ll soon have flying cars and a cure for cancer.

Those concerned with income inequality are not trying to abolish it outright. They are trying to reduce it. Even Bernie Sanders agrees that some level of income inequality is necessary. The human body needs iron to make hemoglobin yet no self-respecting doctor would ever trumpet the unrelenting brilliance of dietary iron without cautioning against over-indulging.

The incomes of the wealthiest skyrocket while those of the poorest stay flat

And we are over-indulging in income inequality. In recent years, the incomes of the wealthiest have skyrocketed while those of the poorest have stayed flat. Even after the financial crisis of 2008 and the resulting bank bail-outs, the average Goldman Sachs bonus has been in the hundreds of thousands of dollars every year, while meanwhile one of the main reasons the unemployment rate has fallen is that so many people have given up trying to find work.

It’s not hard to see Tamny’s real aim. The proposed remedies for reducing income inequality usually focus on taxing the wealthy. Many people, presumably including a healthy chunk of Forbes’ readers, don’t like this idea. You could argue that the wealthy already pay more than enough tax, but this is difficult when the incomes of the rich are growing so fast. You could try arguing that taxing the rich is a bad idea because it creates disincentives that hurt the economy, but this is tricky because the United States has seen many periods of economic growth coupled with higher tax rates on the rich. So Tamny strives to head off these arguments by positing that the problem these measures would solve is not even a problem. He is in effect telling the cancer patient trying to decide between chemotherapy and radiation to skip both and embrace the cancer.

You have to at least give him points for unrelenting chutzpah.

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