Economic inequality is harmful when it results in centralization of power, where decisions are increasingly top-down and made by a smaller number of people who are more out of touch because they're more insulated by wealth. This leads to bad decisions, and unhappiness among the increasing number of people who sense that they have no meaningful participation in society.

"Can you have a healthy society with great variation in wealth?" Only if there is no great variation in power, and this would require redefining wealth as something disconnected from power, like consumption of luxuries.