But in the example above, MC Hammer would have to buy 6 or 7 $20million homes to spend the 4x annual salary that you (and incidentally I) have paid for our homes. I doubt he has done so.
That is the point -- 6 people earning $5million a year would spend more on homes than 1 person earning $33million a year. So a larger number of people earning a lesser amount would spread more money through the economy. The huge bias in earning that we see does NOT spread wealth as effectively as a smaller bias. I think we still need some sort of bias to encourage people to put in the effort, but the system as I see it now looks to have gone too far. Taxing is a way to push this bias back towards the middle ground.