I would say that inequalities which are caused by luck: initial social position, differing natural talents, etc are unacceptable, whereas those caused by differing life choices (I choose to be a poet instead of an investment banker therefore I get paid less, etc) and differing levels of effort would be acceptable.

I think this points to a very fundamental difference in philosophy between extreme left-wingers (dare I say, Communists, in a purely descriptive, value- and implication-free sense) and the rest of us, and I don't think this gulf can ever be breached. But then, as someone pointed out:

Why is it objectionable that people get paid differing amounts because of "differing natural talents"? Why not pity those poor chickens, pigs, and cows. Wasn't their fault they were born like that. Should a klutz who chooses to be a juggler (though he works hard at it) get paid as much as a talented juggler?

On the other hand, I have a lot more sympathy for this point:

Where there are rich and poor it is very common that the rich are rich precisely because they have succeeded in some way or another off the backs of the poor. I think it is this suspicion that makes many people uncomfortable with economic inequality. For myself I find it hard to see what beyond greed motivates the very richest to amass wealth in such an extreme fashion. In London if you picked any random City CEO and made him redistribute a tenth of his yearly bonus he could thereby vastly improve the lot of all the cleaners in his company. But it's not the cleaners who hold the power, so it's never going to happen without coercion, is it?

In an ideal world, we would be able to siphon off the *undeserved* wealth and distribute it to the poor. Unfortunately, we do not live in an ideal world, and trying to siphon off too much wealth (deserved or otherwise - depending on whether you think rewarding natural ability is unjust) will result in wealth - both deserved and undeserved - from migrating and just disappearing. Progressive taxes and other redistributive mechanisms are, fortunately or otherwise, the best tools we have to deal with this problem.