The post by AthanasiusKircher is the first I've seen that hints at the fundamental problem. Yes, income inequality is a fatal condition as history will attest. I suggest that it is a natural outcome of human nature: humans are naturally acquisitive and many are greedy. I.e., a typical individual wants all the marbles and to hell with anyone else. What we see today is a result of that fact of human nature.
That's one reason why so-called civilized societies have rules. For example, you can't just grab your neighbor's stuff and claim it's yours. Without rules by which humans can actually live in proximity and cooperate and share, there would be no "civilization" at all. That issue is believed to be one factor in why Neanderthals died out and Cro-magnins thrived.
What we don't have yet is adequate rules about distributing the rewards of our labors. It's winner take all. Sure you need someone to scrub the floor, put together iPads, design buildings, but you pay them as little as possible so you can keep as much as possible. Etc. etc.
My ideal solution does not assume anything about how one chooses to use the rewards of his/her labors. It merely requires that those rewards are fairly (by some definition) distributed. That is the fundamental missing piece. Few, if any, countries have truly rule-free economies. The US certainly has many rules in play but we need to address this hugely important missing piece. Here's my modest proposal:
1) The ration of highest to lowest compensation (salary + benefits + bonuses + ...) per unit of time worked can be no more than 500:1. Today it is at least 8000:1 and probably growing.
2) At the end of the fiscal year, if profits are higher than projected, the excess is shared among all workers in proportion to their regular compensation. If profits are lower than projected, i.e., the enterprise suffers a loss, then those with the highest compensation take the hit and those within the range of less than 50:1 of the lowest unit compensation are not affected. (This is based on poor management taking the blame.)
Note that none of the above mentions taxes. Taxation is necessary for development and maintenance of common infrastructure, defense, safety, etc. and "how" taxes are defined or distributed is important but is not the basic issue. The basic issue is fairness in the rewards of labor (by which I include not only manual labor but scholarly work, innovation, art, management, etc. etc.).
I believe that my model above would create well distributed wealth that would allow for simpler, more uniform taxation. What that would look like will be for future generations to decide.
