Short answer: It all depends on what else is happening in a country, especially related to other indicators of well-being. For example, if high inequality is coupled with high poverty and low social mobility, then we have three problems. If high inequality is coupled with low poverty and high social mobility, it’s not clear to me that we have a problem. That’s because income inequality only measures income distribution in a given year and say nothing about how long specific households stay in their respective income brackets. In countries with high social mobility, more households move up and down income levels over time, meaning that for many households being rich is less a permanent condition than a fortunate yet transitory period of life. What’s wrong with that?
Whether income inequality is a problem boils to its causes and effects - and these are likely to vary across countries. Consider, for instance, the following:
Obviously a limited dataset, but I do see a few patterns. As a rule, happier countries have lower levels of crime and inequality. Countries with low or medium levels of inequality tend to have relatively low poverty rates. Countries with high inequality appear to have greater social mobility from the bottom than countries with low inequality. But exceptions abound and, besides, patterns do not a cause-and-effect make.
So how much income inequality is ok in the US? It’s complicated, but I’d say let’s get it down to “medium” via reasonable tax increases on affluent households, coupled with better poverty-reduction programs.
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Links:
https://worldhappiness.report/ed/2019/ http://worldpopulationreview.com/countries/crime-rate-by-country/
https://stats.oecd.org/index.aspx?queryid=36324
https://data.worldbank.org/indicator/NY.GDP.PCAP.KD.ZG
https://www.oecd.org/social/soc/Social-mobility-2018-Overview-MainFindings.pdf
All accessed on November 21, 2019.