The Bush administration has done little to alleviate either of these conditions. So, when income gaps widen, more of the potential of poor people—even the smartest and most innovative poor people—will inevitably be wasted. The wealthier people who own America's companies won't have as skilled a workforce, or as fast a flow of new ideas, as they might have had otherwise.
Perhaps more important, abolishing taxes on saving would give people every incentive to receive all their income from financial assets rather than wages and salaries. For some, spending all day adjusting one's portfolio might make more sense than taking a job. Even people who work will seek ways to avoid taxes, for example by being paid solely in stock options or high-interest bonds.
Of course, those people would probably be chief executives and other financial sophisticates, rather than home health workers, call-center operators, and short-order cooks. Eventually, the new incentives could lead to a whole new way of classifying people: working and upper-class would be replaced by taxpayer and free-rider. Titans of industry, heirs and heiresses, and wizards of Wall Street wouldn't pay for national defense, cancer research, or President Bush's trip to Mars. All those costs would be borne by America's breadwinners.
It sounds like a recipe for the kind of social unrest that can make an economy stagger, stagnate, or worse. A political backlash would seem almost inevitable. And something worse—like a riotous manifestation of anticapitalist sentiment—would become a real possibility for the first time in decades. And that's what could happen if the theory works.