In plain English, the sentence says that taxation drives a wedge between what people potentially earn (the total pre-tax sum) and what actually ends up in their pocket. The problem is, once again, that for the system to reach an equilibrium, people should be able to spend whatever they earn on good they produce (this follows from an identity explained in Economics 101). Here they can't because they have to pay taxes - the tax receipts are spent on health care and public administration, not on goods (I looked up the book in case you are wondering :)).

My attempt:
The gradual increase of taxes and duties creates an ever-widening gap between the disposable income which could be potentially earned through employment and the actually earned income.