As part of their presidential campaigns, Senators Warren (D‑MA) and Sanders (D‑VT) are both proposing a new annual wealth tax to address the issue of wealth inequality.

However, wealth inequality gives very little indication of poverty versus prosperity.

For example, Ethiopia, Burma, and Pakistan have significantly smaller wealth gaps than the U.S., but most would choose a home here.

Much of wealth inequality in the U.S. comes from the positive effects of capitalism.

We have a dynamic market economy that allows entrepreneurs to increase their wealth by innovating and creating technologies that benefit all of us.

This system provides opportunity for wealth to be self-made, not just inherited.

On Bloomberg’s list of the 100 wealthiest Americans, 73 are self-made and 27 have inherited wealth.

Wealth inequality also stems from the negative effects of cronyism and crowding-out.

Cronyism unfairly benefits the wealthy when the government protects and subsidizes businesses at the public’s expense.

Crowding-out refers to government-created hurdles to saving and wealth-building.

These include programs like social security, which is expensive for the taxpayer, and disincentives private savings.

Plans to bridge wealth inequality should aim to expand everyone’s wealth, not divide it up.

Otherwise, broad-brush denunciations of wealth are a useless guide to policy.

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