Even before you asked my impression of income inequality in the US ("Who Has The Money?") I've been thinking through this question and the first thing that I struggle with is: Do I care? I have more money than many. Obama has more money than me. Romney has more money than him and Warren Buffet has more money than us all. So what? I'm not trying to minimize your question; I just don't see the point.
If we taxed Buffett and gave it to me, that would certainly change my life. But would it make the country better off? I would be richer, Buffett would be poorer. But other than that I don't think we can conclude much. Maybe that would make Buffett work less because he doesn't want to end up giving his money to me. Maybe I would work less becasue I could rely on Buffett to fund me. Maybe we wouldn't change our behaviors at all. Maybe our behaviors would change dramatically. Who knows? So what's the point?
I'm rather skeptical of most income inequality claims. I think most of them are deeply flawed. They'll look at a point in time and draw conclusions that may not be valid a cycle or a generation hence. They usually don't do well with the dramatic changes that take place in wealth over time. For instance the IRS has been keeping track of the Top 400 tax returns by Adjusted Gross Income since at least 1992. During that time, there have been 3,672 distinct primary filers, only 4 have been in the Top 400 each of the 17 years from 1992 to 2008, and fully 2,676 have been in the Top 400 only one year. I know, I'm looking at the top of the top, but I think it's instructive. Income moves around. A lot.
I hear the inequality arguments and am left unsatisfied. Wealth changes. I am wealthier than my parents, and I hope my children will be wealthier than I but who's to say that will happen? Maybe they will be, maybe not. And why is it unfair for me to be wealthier than someone down the street. Why would it be fair to give my wealth to someone else?
This is different than paying for government. But the wealthy pay more for government than the less wealthy. That is indisputable. So I come back to my question: Is there a problem?
The issue of inequality has been with us always. But the most recent bout of anxiety seems to have arisen from the election of 2010, when the Democratic majority was eliminated in the House and the filibuster proof majority in the Senate was also eliminated. At that point the Democrats stopped talking about stimulus and started talking about infrastructure and started talking about inequality, everyone playing by the same rules, and everyone getting a fair shot. I think it's a smokescreen.