Is this society just or equal?
Most of us would say not. Most of us, that is, except Fraser Nelson. He says:
But these ratios, and this society, would not “warm the heart” of any redistributionist.
My example shows that if inequality is high enough, even a regressive tax system will involve the rich paying a large share of tax.
What’s more, if inequality rises, so too will these ratios. If our dictator and his cronies rob the poor of half their income and divide it among themselves, the share of total taxes paid by the top 1% will rise from 20.4% to 24.7%, whilst the share paid by the top 5% will rise to 78.5%. By Fraser’s reckoning, our society has become more redistributionist. Which it has - but in precisely the opposite direction that Fraser would think.
So, the share of taxes paid by the rich tells us nothing about whether society is equal or the tax system progressive. To believe they do is to commit a plain logical error.
Stephen Pollard describes Fraser’s post as “incredibly important.” It is, because it shows just how badly the right can misunderstand what redistribution means.