I thought this was a pretty good description of what a progressive tax really is.
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http://www.gold-speculator.com/casey-research/37824-daily-dispatch-spend-then-tax.html
Last week, I wrote an article titled “Spend, Then Tax,” to which one dear reader responded with a useful dissertation of the principles of taxing income. It follows here…
David,
Pertaining to some of the issues raised in your*Spend, Then Tax*piece. First, I agree with all of your observations. The one thing I never hear anyone point out, however, is this…
When people talk about the rich paying their “fair share” – and meaning a greater percentage of their income – no one ever points out that they're ALREADY paying not only a disproportionate share of the nation’s total tax receipts (as you point out and quantify in your article), but ALSO that each individual wealthy taxpayer is also paying a greater DOLLAR amount to receive the same services as their less wealthy counterparts.
To develop and explain this a little further, I see three possible systems of income taxation:
(1) A Flat Fee*(sometimes known as a poll tax) – here everyone receives the same BENEFITS from the government (e.g., military protection), so each taxpayer would have to pay the same DOLLAR amount for having these services provided to them – just as everyone has to pay the same amount for a can of green beans at the grocery store, regardless of their income level. If the tax levied was $15,000 per taxpayer, someone earning $100,000 would pay $15,000, and someone earning $50,000 would also pay $15,000 – and one could easily and logically argue that this is actually quite fair, since BOTH taxpayers are paying the same DOLLAR amount to receive the same SERVICES.
(2) A Flat Percentage*– this is more merciful to those who earn less, as it requires people who can AFFORD more to PAY more – because everyone is required to pay the same PERCENTAGE of their income for receiving exactly the same services. If the tax rate was 15%, someone earning $100,000 would pay $15,000; whereas someone earning $50,000 would pay only $7,500 – even though BOTH are receiving the same services. One could easily argue that THIS system would actually be somewhat unjust, because it takes “ability to pay” into account – different people would pay different DOLLAR amounts for identical BENEFITS.
(3) A Progressive Percentage*– this system, however, takes things a step further – and is logically (and morally) indefensible – and is the system under which we currently operate. Here a person earning $100,000 might pay a 25% tax rate, resulting in a tax payment of $25,000; whereas someone earning $50,000 might pay a 10% tax rate, resulting in a tax payment of $5,000. This methodology should be dismissed out of hand as being TOTALLY unfair – yet it perfectly describes our current system – and there are numerous voices (the “class warfare” crowd)*who claim that what we are doing is STILL unfair to those taxpayers who earn less.
So advocating for a*(2) a Flat Percentage*ALREADY represents a compassionate concession, as it results in each higher earner paying a larger number of dollars for the services they are receiving, whereas TRUE equity would require*(1) A Flat Fee*– where everyone is benefitting equally from what is being PROVIDED by the government, so each has to pay equal DOLLAR amounts.
So any logical, moral argument ought to be solely a discussion between*(1)*and*(2), but there is NO logical or moral case to be made for*(3). We spend all of our time debating*(2)*and*(3), however, without ever pointing out (or getting credit for the fact) that*(2) a Flat Percentage*would itself STILL be basing each taxpayer's tax amount on their ability to pay. We can concede that while some may legitimately find THIS to be inequitable, in the interests of being a humane and caring society, we are willing to concede and utilize a*(2) Flat Percentage*– but that there is NO moral justification for charging a wealthier person a higher PERCENTAGE of their income.
We don't get credit for the fact that the flat tax so many of us advocate is already tilted in favor of those who make less income – as they still get the same BENEFIT of the government's services while paying a lower DOLLAR amount to receive them. This item goes unmentioned not only by our ideological opponents (who advocate progressive tax rates), but also by OUR side.
Just something I thought you might want to bring up with your readers at some point, as it makes clear how a Flat Tax would be inherently more just than our current system – as well as noting its “progressive” element in terms of total dollars to be paid by each taxpayer.
Regards,
Greg
*
*
http://www.gold-speculator.com/casey-research/37824-daily-dispatch-spend-then-tax.html
Last week, I wrote an article titled “Spend, Then Tax,” to which one dear reader responded with a useful dissertation of the principles of taxing income. It follows here…
David,
Pertaining to some of the issues raised in your*Spend, Then Tax*piece. First, I agree with all of your observations. The one thing I never hear anyone point out, however, is this…
When people talk about the rich paying their “fair share” – and meaning a greater percentage of their income – no one ever points out that they're ALREADY paying not only a disproportionate share of the nation’s total tax receipts (as you point out and quantify in your article), but ALSO that each individual wealthy taxpayer is also paying a greater DOLLAR amount to receive the same services as their less wealthy counterparts.
To develop and explain this a little further, I see three possible systems of income taxation:
(1) A Flat Fee*(sometimes known as a poll tax) – here everyone receives the same BENEFITS from the government (e.g., military protection), so each taxpayer would have to pay the same DOLLAR amount for having these services provided to them – just as everyone has to pay the same amount for a can of green beans at the grocery store, regardless of their income level. If the tax levied was $15,000 per taxpayer, someone earning $100,000 would pay $15,000, and someone earning $50,000 would also pay $15,000 – and one could easily and logically argue that this is actually quite fair, since BOTH taxpayers are paying the same DOLLAR amount to receive the same SERVICES.
(2) A Flat Percentage*– this is more merciful to those who earn less, as it requires people who can AFFORD more to PAY more – because everyone is required to pay the same PERCENTAGE of their income for receiving exactly the same services. If the tax rate was 15%, someone earning $100,000 would pay $15,000; whereas someone earning $50,000 would pay only $7,500 – even though BOTH are receiving the same services. One could easily argue that THIS system would actually be somewhat unjust, because it takes “ability to pay” into account – different people would pay different DOLLAR amounts for identical BENEFITS.
(3) A Progressive Percentage*– this system, however, takes things a step further – and is logically (and morally) indefensible – and is the system under which we currently operate. Here a person earning $100,000 might pay a 25% tax rate, resulting in a tax payment of $25,000; whereas someone earning $50,000 might pay a 10% tax rate, resulting in a tax payment of $5,000. This methodology should be dismissed out of hand as being TOTALLY unfair – yet it perfectly describes our current system – and there are numerous voices (the “class warfare” crowd)*who claim that what we are doing is STILL unfair to those taxpayers who earn less.
So advocating for a*(2) a Flat Percentage*ALREADY represents a compassionate concession, as it results in each higher earner paying a larger number of dollars for the services they are receiving, whereas TRUE equity would require*(1) A Flat Fee*– where everyone is benefitting equally from what is being PROVIDED by the government, so each has to pay equal DOLLAR amounts.
So any logical, moral argument ought to be solely a discussion between*(1)*and*(2), but there is NO logical or moral case to be made for*(3). We spend all of our time debating*(2)*and*(3), however, without ever pointing out (or getting credit for the fact) that*(2) a Flat Percentage*would itself STILL be basing each taxpayer's tax amount on their ability to pay. We can concede that while some may legitimately find THIS to be inequitable, in the interests of being a humane and caring society, we are willing to concede and utilize a*(2) Flat Percentage*– but that there is NO moral justification for charging a wealthier person a higher PERCENTAGE of their income.
We don't get credit for the fact that the flat tax so many of us advocate is already tilted in favor of those who make less income – as they still get the same BENEFIT of the government's services while paying a lower DOLLAR amount to receive them. This item goes unmentioned not only by our ideological opponents (who advocate progressive tax rates), but also by OUR side.
Just something I thought you might want to bring up with your readers at some point, as it makes clear how a Flat Tax would be inherently more just than our current system – as well as noting its “progressive” element in terms of total dollars to be paid by each taxpayer.
Regards,
Greg
*
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