A Modest Member of Parliament [Bert Kelly], “Equality is all very well but it won’t help India,” The Australian Financial Review, April 16, 1971, p. 3. Reprinted in Economics Made Easy (Adelaide: Brolga Books, 1982), pp. 140-42, as “Equality (2).”

Three weeks ago Eccles ordered me to find out more about taxation. Ever since I have been going through hell; not only is taxation a distasteful subject in itself, but it is also very hard to understand.

Each day Eccles comes in burdened down with books about capital gains tax, value added tax, net worth tax, probate tax, indirect taxation and so on; taxes without end, all unpleasant, all unpopular and all requiring a degree in accountancy to understand.

The first thing we should ask ourselves is, what do we want taxes for? First, to supply the money to enable the Government to pay its way; this is obvious and easy to understand.

Second, taxes are used to keep the economy on an even keel. For instance, we know that taxes can take money out of circulation and so lessen the risk of inflation.

But in all the literature about taxation that Eccles has forced me to study (if not understand) I find that it is accepted by most that a taxation system should have a third function, namely, to make people more equal.

When I read this I was attracted to the idea. There is something so fundamentally fair about equality, about assuring that no one gets too far ahead of his fellows. It fits so exactly into our national method.

You remember how our national hero, Ned Kelly, went clunking around in his armour, robbing the rich and giving the spoils to the poor so as to make everyone equal. And ever since Ned’s unfortunate early demise we have been obsessed with the idea of keeping the big bloke in his place.

And there have been good political marks in it. There are more people below the average property line than above it. And as it is votes I want, I am likely to get them if I preach Equality with a loud voice.

But sometimes I wonder if I am right. The first time I went to India I was incensed by the gap between the very rich and the very poor.

I said to myself: “Why should Australia be trying to help the poor people of India with Colombo Plan aid while the very rich Indians who have so much wealth are so indifferent to their plight?”

But I now know that India’s chief requirement is investment capital.

She could get this through taxation, in which case a lot of money would come from the rich people of India and this would make them more equal. But a lot of it would stick to the Indian tax-gatherer’s fingers, so the amount available in the end for investment would be surprisingly small.

And certainly the process discourages the rich Indian from being rich (or from being found to be rich). The fact is that you are more likely to improve the lot of the poor Indian by accepting the inequalities, galling though this may be to your egalitarian ideals.

Eccles says that it is worth remembering that during the Industrial Revolution in Britain it was the inequalities of their system that allowed capital to accumulate in the hands of entrepreneurs and so made the revolution possible.

If we want equity to make Jack as good as his master, well and good. If you feel that there is something fundamentally socially evil about big differences in wealth between citizens, that is all right by me.

And if you think that wealthy people tend to be morally worse than people who are not so wealthy, and so it is our moral duty to take some of their money away to make them morally better, then again I will go along with you.

But the truth is, that the dynamic that makes the economic cake bigger is the desire to get ahead of your fellows — to be unequal with them. And as soon as you destroy the incentive, I grant that you will get equality, but you will also get a smaller economic cake.

So, in the articles about taxation which will follow in the next few weeks, I will be less concerned about equality than I should be if I were politically wise or morally worthy.