Again and again inequality has been cited in the past months to explain shifts in the political landscape. Be it in the US, where Trump is the new synonym for revolution; the UK, which hopes for a better future on its own; or France, where the Front National has grown to be a significant political force nowadays.

It's easy to see why the people at the lower end of the income spectrum may support populists in the hope for a better future. They are not necessarily showing up solutions to the problem, but at least they acknowledge the problems of a part of the population that feels  not benefited from economic development in the past 10 years.

We all are part of the problem

As Dan Ariely explains, not only our politicians and the wealthy elite have issues recognizing the issue of inequality. Basically all of us underestimate the magnitude of inequality.

But even once we acknowledge the need for change, finding the right measures to address the problem may still not be that simple. For many people, relying on a pure play of economic forces and efficient markets seems as the root of, rather than the solution to the problem. But is that really the case? I would argue that a lot of the challenges we deal with have their roots in the very interventions we designed to address the problem.

Pain point tax systems

Robert Reich, the former U.S. Labor Secretary, nicely shed some more light on the topic in his movie "Inequality for All". Seeing Warren Buffet wondering why his tax rate is less than that of his secretary is a very powerful image.

While most people agree that the extreme form of inequality currently prevalent in places like the US (but also other countries) should be reversed, we're still looking for the silver bullet to do so. As the Economists puts it, there's many approaches being discussed to shift wealth from the rich to help the poor.

But the most obvious distortion of our economic system - the tax code - seems to be the elephant in the room everyone avoids to talk about. Before talking about the best ways to distribute money to the less-wealthy, one should check the balances and define where that money should come from.

Taxes have always been an instrument to fund governments, and in the past century or so they have also been applied successfully to address inequality. Progressive tax rates are a proven model that was successfully applied in the US until the late 1970's - unfortunately that was followed by a flattening of the curve. In addition to that, there is a tendency for separate tax deals for the wealthy (not only in the US, to be fair!).

While fixing the tax system by itself won't solve the problem either, it should be the starting point of the process. Redistribution will be next.

P.S. While I reference the US as an extreme example, these thoughts likely apply just as well to most other developed economies