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For us normals, tax 'reliefs' and allowances are in place to incentivize you to do certain things that society values: save for a pension, start your own business, get married, rear a child, cycle to work, drive a low-emissions car, donate to charity, rent out your spare room, or care for an elderly relative.

Overall, tax doesn't make people poorer. That is just the direct impact that we can most clearly see. Tax does three key things. Firstly it disincentives some activities. Secondly it raises money that can fund things that make life better. Thirdly it can be used to change the way wealth is distributed.

Taxation for equality incompatible with fat tails: Such a tax, meaning to punish the wealth generator, is popular but absurd and certainly suicidal: since the payoff is severely clipped on the upside, it would be a lunacy to be a risk taker with small probability bets, with wins of 20 (after tax) rather than 100, then disburse all savings progressively in wealth tax. The optimal strategy then would be to go become an academic or a French-style civil servant, the anti-wealth generators. To see the cross-sectional problem temporally: Compare someone with lumpy payoffs, say an entrepreneur who makes $4.5 million every twenty years, to an economics professor who earns the same total over the period ($225K in taxpayer-funded income). The entrepreneur over the very same income ends up paying 75 percent in taxes, plus wealth tax on the rest, while the rent-seeking tenured academic who doesn't contribute to wealth formation pays say 30 percent.)