The egalitarian earnings subsidy scheme

How should society structure income redistribution so as to correct for ine liminable inequalities in marketable talent? This article explores the stre ngths and weaknesses of an 'egalitarian earnings subsidy scheme' (ESS) in w hich individuals receive (or pay) a subsidy (or tax) for each pound earned based on the difference between their earnings potential and their society' s average earnings potential. ESS corrects for brute luck inequality in ear nings potentials in a well-targeted fashion; implements an attractive conce ption of reciprocity; and, in contrast to an alternative lump-sum tax propo sal, does not entail the 'slavery of the talented'. However, any practicabl e version of ESS may undermine at least one other egalitarian objective - t hat of maintaining equality of status amongst unequally talented citizens. As a status-friendly alternative, we might try to approximate ESS through a more conventional redistribution scheme using taxes and subsidies that imp licitly 'tag' low- and high-ability individuals. While it is difficult to d raw any firm policy conclusions, it seems clear that the idea of talent-bas ed taxes and subsidies on the model of ESS should occupy a more prominent p lace in our thinking about tax-benefits policy to tackle earnings inequalit y.