Sunday, December 5, 2010

Why a Progressive Tax is fair


A flat tax could work if it was high enough, didn't allow for any deductions, taxed all income such as capital gains the same as earned income.

That won’t happen, so the progressive tax system is all that's left. Besides raising revenues, progressive taxation is designed to prevent one group of people from eventually attaining all the wealth.

Over the past 30 years, according to IRS data, the richest 1 percent has tripled their share of America's total income, after taxes, while the bottom 90 percent has seen their share drop over 20 percent.

The tripling of income by the wealthy is the result of money-transferring financial strategies, government deregulation, and tax cuts -- not because they worked three times harder than everyone else.

With our current federal tax system, the wealth generated by the 95% who work for wages goes to the investing class. As they become richer most of the political power of the country goes to them as well.

Teddy Roosevelt warned us about it, “To maintain a functioning democracy within a republic you can't allow one small group of people to attain all the wealth and power. There would be no difference between that and a monarchy or aristocracy!”

Being 'fair' isn't the end game. The end game is maintaining a democratic republic with a thriving middle class of productive and engaged citizens.

In other words, money isn’t everything. An equitable distribution of our nation’s wealth would not mean the end of our Republic or make us Commies or Socialists.

6 comments:

Anonymous said...

If you feel our policies and institutions are unfairly transferring wealth to the wealthy, then policies and institutions should be changed. For instance, tax policy that encourages off-shoring of jobs is an example of something that hurts employment and benefits the wealthy. Just taxing the wealthy at a higher rate doesn't fix the problem and unfairly taxes those who came by their wealth ethically. Your arguments really come down to, "it's not fair that the rich are rich, so we should take it away." I don't believe in using taxation to "fix" things. Just as I don't believe in high cigarette and alcohol taxes to change behavior. I think we understand each others views on this and should agree to disagree. I can't wait to see what you have to say about wikileaks next week. I hear the unibomber's old place in Montana is for sale. I finally have a place to go work on my manifesto.
Jamie

Doggie said...

I'm disheartened at what you took away from my post. Agreeing to disagree is one thing but it would be nice to be heard. The right and the left don't even seem to hear each other, let alone be able reach consensus. By the way they cut the price of Kaczynski's property in half. You could hole up there for $65,000.

Anonymous said...

Dave,

I really go out of my way to listen to all sides, not just rant my own opinion. I get my news from multiple sources on the left an right. I thought I should end it before I really pissed you off. As we've discussed privately, that is not my objective. If you want to continue, to summarize your position:
1.) You believe that inequities in our institutions and tax system have lead to the current position where wealth is unjustly piled on a rather small minority of the population and the wealthy should be taxed at a higher rate to fix these inequities.
2.) You believe that it is fair to tax the weathy at a higher rate because they won't miss it as much as someone who earns less.

Have I misstated anything?

In my household's income bracket the current marginal tax rate is 28%. That is a lot to give to the federal government for each additional dollar I earn. A whole freakin' lot. The marginal tax rate on the highest earners is 35%. That is a gobstopping whole freakin' lot. If the tax cuts go away it would rise to 39.5. That's not fair, it's robbery. It's popular to think that the rich (I'm not one of the rich, by the way) are getting a free ride on taxes and the Bush tax cuts really gave them a gift. Well the rich are paying boatloads of taxes, 35%, and a dollar amount that is huge.

Really, I believe that taxes will have to rise to fix the economy. I just don't think it is fair to tax the rich at a higher rate.

Jamie

Doggie said...

Your second point is close, a person earning exactly enough money to pay for food and housing cannot afford to pay any taxes without it causing material damage, while someone earning twice as much can afford to pay up to half their income in taxes. This is only an example, not what I think should happen. As for your tax rates, compare them to the rates under Ike. We have functioned as a society quite well under much higher rates. I can go into much greater detail but I think we're beating a dead horse. I wish comments posted on the front page of this blog because I think our back and forth is the most important part.

Doggie said...

Actually there's quite a bit more than that. There are deductions, shelters, control of the rules, etc. That's why I have to get off this for now. There is also an argument that the wealthy have a greater interest in maintaining societal goods typically supported by taxation such as security of property rights, defense and infrastructure, because they have much more to lose if these fail than poor people do.

Doggie said...

One last thing. Here are the tax rates we'd revert to.

• Up to $16,750: Rate rises from 10 percent to 15 percent
• From $16,751 to $58,200: Stays same at 15 percent, but entire bracket pays 5 percent additional on the first $16,750
• From $58,201 to $68,000: Rises from 15 percent to 28 percent
• From $68,001 to $137,300: Rises from 25 percent to 28 percent
• From $137,301 to $209,250: Rises from 28 percent to 31 percent
• From $209,251 to $373,650: Rises from 33 percent to 36 percent
• $373,651 and up: Rises from 35 percent to 39.6 percent