Rising wealth inequality needs a policy response. The sense among the less well-off that their incomes are stagnating while the super-rich grow ever richer is fuelling populist anger and protest. Yet proposals from Elizabeth Warren, a frontrunner to be the US Democratic party presidential candidate, for a wealth tax should be left as a last resort. Such an ambitious measure runs the risk of failure. Policymakers should first reform the existing system.

Contrary to the comments of radical leftwing politicians on both sides of the Atlantic, billionaires should exist. Those who come up with valuable ideas, take risks and build successful companies are entitled to the fruits of their labours. But their fortunes are not only down to their own talents: bigger markets thanks to the internet and globalisation, and the rise in the value of financial assets because of falling interest rates, have boosted wealth.

A key principle of taxation is that those with the broadest shoulders should bear the heaviest burden. The wealthy are the most able to fund public services. Yet many of the super-rich pay lower marginal tax rates than the poorest. Existing US taxes on capital incomes are lower than those on workers. Warren Buffett, the investor and third-richest man in the US, famously pointed out he paid a lower rate of tax than his secretary thanks to his dependence on capital gains rather than salaried work.