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René Dupart

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Should there be different income tax rates in a country where opportunities are fully equal but incomes are highly unequal?

I know the assumption of equal opportunity is very unlikely to occur in real life, but I would appreciate your different thoughts on fair and unfair inequality. Especially since income inequality has become a topic of much debate in our time.

I'm particularly interested why you would think different taxes are fair in this hypothesized situation. Is it then equality of outcome you perceive as more fair? Or is there perhaps another explanation?

It appears to me that in politics, equality of opportunity is much spoken about, but that it is not used as an argument for progressive taxation, at least not in a manner where a link is established between the steepness of taxes and their view on the equality of opportunity. I tend to think of progressive taxation as a corrective measure for the perceived level of inequality of opportunity, but I'd be glad to hear different views on this topic.

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  • Jan 15 2013: In a free market economy a flat tax won't collect enough revenue to ensure equal opportunity for everyone, at least that has never been the case in any real world country.

    There will always be jobs that the market pays higher rates for, but the number of these jobs will also be limited, in addition, even in a perfect meritocracy people will rise because of luck. So it's: "anyone can become rich", not "everyone can become rich". It's like running a marathon with 100 equally skilled runners: only 1 will win even though they are all of equal skill. I think in the end the confusion stems from an erroneous interpretation of statistics: if a group of people all throw a dice once the expectation values for the outcomes are the same for everyone but it's highly probable someone will throw a 6 while someone else throws a 1. Expectation values are the outcome of an infinite number of repeats: they aren't worth anything when the number of repeats is small. Therefore, since life is too short to have many careers, equal opportunities don't imply equality.
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      Jan 15 2013: your very first sentence is an oxymoron. in a free market economy, there is no tax. if there is tax, the economy can only be sorta free.
      • Jan 15 2013: Right, "sorta free" it is then, what I was trying to say is that very strict controls on income inequality would be needed to make a flat tax viable (otherwise you either crush the poor, or have very low revenue), the difference between such a society and a society that has a free market, except for taxes, is so large that the latter can be called a free market, even though it's technically not 100% free.

        @below

        I'm not sure a change in the progressiveness of taxes always needs to be backed up by a change in inequality, the progressiveness of taxes may not have been of the correct magnitude to begin with.
        • Jan 15 2013: Thanks John for your insights. Though it might seem like it, I'm not in favor of a flat tax. My point of view is that as long as there is -and in reality there will always be- inequality of opportunity, a corrective measure i.e. progressive tax is justified. But then it follows that a change in the progressiveness of taxes needs to be backed by arguments referring to changes in inequality of opportunity. Would you say this is a fair policy?

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