A guest post by Camryn Brown:
“We must fix wealth inequality” appears to be an idea with rising support and “tax” appears to be the solution those supporters have in mind. I would argue that anyone proposing to fix anything must take care to avoid making the problem worse. This is as simple as fixing the right thing and not breaking things that’re working well. I would argue that tax looks like a poor solution to wealth inequality when you really unpack how wealth inequality works to have negative outcomes.
Let’s start from the premise that wealth inequality creates problems such as a breakdown in social cohesion which in turn creates mental health crises, violence, and so on… and that we are all in agreement that we don’t want society to break down like that. OK? OK.
If we are to fix or avoid these negative outcomes of wealth inequality, we must first understand how it has those negative outcomes. Here’s where the prevailing wisdom gets it wrong. It’s not because of material deprivation. As our rich are richer than ever before, so our poor are also richer than ever before. Our societies and economies have never been better at meeting the material needs of our poorest citizens. This is because we aren’t living in a zero-sum game. Bill Gates having more does not mean you or I have any less. Indeed, it is the opportunity to achieve unequal wealth that motivates people to work hard, be innovative and creative, and invest well – things that create new and better jobs, stronger economies, governments that can afford to do more, and prosperity in general.
So, then, by what mechanism does this good process turn bad? How does wealth creation reduce social cohesion? The answer is simple. It’s jealousy. If I have what I need but still feel bad because you have so much more, that’s simple jealousy. There isn’t an economically rational reason; there is an emotionally irrational one. This jealousy is sometimes dressed up as being morally justified – “we are all humans, each equally valid with existences of equal worth, so how can we justify this wealth disparity?” – but this doesn’t stand up to scrutiny. First, it again depends on the false concept of wealth as being fixed or limited rather than limitlessly created. If your extreme wealth is not depriving me in any way, how can it be an affront to my existence? Second, our long-established concepts of morality explicitly warn us against this way of thinking. I’m not Christian, for example, but I know “thou shalt not covet” is one of its ten primary rules – rules clearly intended to promote social cohesion, which is our aim.
This being the case, I question why taxing the wealthy is the go-to solution. It doesn’t resolve the jealousy, it actually buys into it and validates it. Do we really want to build a society on giving in to negative emotion? Shouldn’t we focus on reducing the tendency to feel jealous rather than giving in and eliminating what people feel jealous of? To me, the necessary solutions look like pride in one’s own achievements, satisfaction in one’s own comforts, a less materialistic conception of success and happiness, and so on. These are not simple fixes, even compared to tax legislation, because we cannot simply put better thoughts into people’s heads. Achieving a society that is stronger than jealousy requires both honesty and hard work. As a society we seem to have convinced ourselves that it’s important to treat all values as equal, but some values that work better than other values and we should be willing to put in the effort to say so, explain why, and live the example. As a society we seem to have convinced ourselves that competition is hurtful and to be avoided, but it is too beneficial to cast it aside and we should be willing to be hurt by it and to support those who are hurt by it rather than taking the easy way out.
Taxing the rich doesn’t address what’s not working about wealth inequality, yet it does inhibit what is working about it. The true solution to the negative consequences of wealth equality is to be, and to create, better humans.