Friday, October 27, 2006

Interactive Controversy, Take Two 

Alright, so that first one wasn't very controversial. Hey, that's what this is all about. It did provide for our next topic, however.
The subject was brought up of hoarding of money, and the wealthy. It was asked: what should be done about it?
I think a quick thought into how one gets wealthy is in order. The first method that comes to mind is inheritance. Whether with royalty, or the more capitalistically wealthy, often, the kids get a good chunk of money when their parents pass away. Next, there is innovative gain. That is, becoming wealthy because you had a good idea that made you lots of money. Google, Microsoft, and Ford all come to mind here (at least in the early years). The founders had a good idea, and it made them lots of money. In between the last two is the situation where someone rises to a level of power (CEO, company President, etc.) that they are making large amounts of money. They did have to work to get to the position, but they had no ground-breaking idea that got them there or made the money. They just get the money because of the position.
Now, in my view, none of these are inherently wrong, morally, legally, etc. In a particular situation of one of them, someone can display immoral behavior to achieve one of these states, but that doesn't discount the paths themselves. However, the last method is perhaps more amorphous, and yet not. It involves someone specifically using illegal and immoral means to gain their wealth. Cheating, lying, stealing, blackmail, protection rackets, etc. I think we can all agree that this type of wealth gain should be stopped.
Okay. Now, the situation was raised in one of my comments as follows: a CEO is head of an extremely successful company. He is, however, hoarding as much of the capital gains as he can, becoming extremely wealthy while his workers most likely barely subsist. What can be done? Offhand, I would say that, legally, not very much. Why? I don't believe the state should be able to seize wealth from individuals who, while somewhat immoral in wealth gain, are not violating law, just to make the workers better paid. That idea sets off too many alarm bells to count. I think that it is instead up to the company and society to fix the problem. How so? Well, first other high executives should address the CEO to attempt to level him out, as it were. If that doesn't work, go to the board of directors. If that doesn't work, go to the entire body of stockholders. If that doesn't work, tell society what's going on, and...hm. I was going to say, encourage a boycott of the company, but that would end up hurting the workers more...I'm honestly not sure what to do at that point, since I've written off government reallocation of wealth *shudders*.
I guess a quick giving of my thoughts on what the best way to handle large amounts of excess capital might be in order. First thing to do is make sure all company assets are in good condition; machines running correctly, no broken things in the building, etc. Next is pay off debts. Then ensure proper stock dividends (investors do deserve it, what with their giving money to the company and all through stocks). Then, I would say, see if it's enough to perhaps raise wages in the long term. If the company is consistently making well above break even, wage increase is a good thing. If it only happens once a year or so, perhaps putting more away in savings for emergencies would be wiser. Then, after the rest of the company is taken care of properly, I see nothing wrong with a CEO earning a little extra. After all, they did just take care of all those finances.
A quick sidenote: those of you who haven't had an accounting class and such, keep in mind that companies have a lot of expenses, and even a company that is supposedly taking in a lot of profit, may actually be barely above breaking even. Trust me, it's crazy how many different things cost money.
I suppose I'll try to wrap this up now. Two final thoughts. First, I don't think it's wrong for a CEO to make more than a line worker, because his position truly affects the entire company all the time; a bit higher pay ought to be in order. Making exact numbers on that....I don't really want to get into that here, because there are way too many factors. Second, I'm strongly against government intervention and seizure of wealth when the only thing done wrong is making and keeping lots of money. If the company earns it through legitimate business, and the CEO decides to keep all the extra, while it may be immoral, I don't think it should be illegal. It opens up doors I don't think should be opened, and gives far more power to the government than I would like over our money.
I now invite you all to give your thoughts on this issue (or point out grammar/spelling errors), propose solutions, etc.

Return Desk (23)

23 Comments:

1) Three little words: RAISE MINIMUM WAGE.

2) Fix taxes so that people with money pay for stuff.

--Blame Jared

By Anonymous Anonymous, at 10:33 AM  

1.)Um....and the company raises prices, and we raise minimum wage, and so on, and the rich guy still keeps his proportion of wealth. Thus, the only people actually punished are consumers....which includees the people on minimum wage.
2.)Um...this kind of misses my point. I believe that some people rightly earn large amounts of money in their life, through intelligent investments and inventions. You want to take that from them just because they have more? Yes, let's punish people for innovation, investment, and ambition. I'm sure that'll help the economy long term. I mean, who wants to actually keep much of the money they earn? Seriously, I never said I didn't think CEOs deserved higher pay. As stated, their decisions affect the entire company. I'm just against stuff that leans towards Enron and such, where they have ridiculous perks. And of course, inevitably, the really rich will get out of taxes if we make it more specific, leaving the burden not on the poor, but the middle class.

By Blogger Knight's Disciple, at 10:50 AM  

In direct response to Jared:
1) Minimum wage destroys free-market capitalism. If, as a CEO, people will do the same job for less money, it is my duty as a capitalist to choose the venue with the highest profit. The entire concept of minimum wage forces enterpirsing individuals to either lose money by working domestically or to earn their entire potential by outsourcing to other countries.
2) As for taxes, the entirely of tax law can be re-written to be less than a page long and still fund the gonvernment in its entirety. A simple percentage of earnings for anyone who makes over the poverty line of $15k per year.

~Paronomasiac

By Anonymous Anonymous, at 11:16 AM  

As interesting as your answer #2 is, Paronomasiac, it doesn't address the argument implicit in Blame Jared's #2. Certainly a flat tax is feasible; but is it the best option for society?

Here's one way to argue that it isn't. If the extremely wealthy face a progressive income tax (say, one taking away 45 percent of their incomes versus 15 percent for someone less fortunate) they still have vast reserves. A billionaire who loses 45 percent of his wealth still has 550 million dollars, which most people would still consider incentive enough to become a billionaire. And that way, people earning 40 thousand dollars can keep more of their wealth and provide for their families more effectively. But the incentive to generate wealth still exists for both people, whether the tax rate is flat or progressive.

We could argue that the progressive income tax is less fair. But why? Why is a single tax rate more fair than taking more from those who can afford to give more? The reason is not self-evident.

Furthermore, there is the question of inheritance. Why should anyone get to be born a billionaire? What principle of justice requires that, what social purpose is served, and what economic purpose is served?

By Anonymous Wilson, at 2:51 PM  

1) Technically, providing humane working environs, benefits, and ensuring employee welfare are all "anti-capitalistic", too, but are we really advocating an abandonment of those principles? Raising the minimum wage would probably cause companies to increase prices, but as more people than minimum wage earners buy products, it would still be a net gain for them. I am unconvinced it would really do that much good, but mathematically it would do some good.

2) In my humble opinion, there is nothing wrong with a progressive tax. I don't have a problem with a flat tax, either. What I do have a problem with is our tax code, and how lobbyists can and do manipulate it to allow people out of the tax laws. Tax laws, be they flat or progressive, should not be overly-fluid. If they are, we get the system we have now, which definitely favors a rich man who can employ a lawyer to find all the breaks and loopholes for him.

By Anonymous Barbour, at 7:30 PM  

As for minimum wage, I think the point is, prices have gone up while the minimum wage has stayed the same for 12 years. Don't tell me that's not a bit out-dated. One seemingly good idea that I've heard suggests that we link the minimum wage to the consumer price index. If prices rise, so does the minimum wage. The idea here is to ensure that employees are guaranteed enough money to live on in exchange for the work they do. Doesn't seem unreasonable, and if our economic system would crumple under that kind of strain, I humbly suggest that we should change it regardless of how fantastic it may be in all other respects.

Anyway . . . Sharpton, call me cynical, but I'm pretty sure the vast, overwhelming majority of wealthy people don't deserve even the slightest fraction of the money they have/make anymore than the legions of the world's have-nots deserve the blight of poverty. And I know you're not going to sit there and tell me that the average CEO works harder than the guy who spends 40-50 years on a factory assembly line. Money gravitates towards the deserving far less often than American capitalist propaganda might lead you to believe. Really, though, (speaking of) you need to read Atlas Shrugged. I think you'd really appreciate its ideas and how they are articulated (no joke, I actually think it's a good book, myself).

You mentioned ridiculous perks. I'm pretty sure that somewhere around the time you cross the $50 million mark (and probably long before, but we could haggle about that, I'm sure), you have what I would call an obscene amount of money . . . more than you could ever possibly need . . . and you have to start pretty much making up ways to blow the stuff (space tourism, anyone?).

I honestly don't see what the problem is with taking a larger percentage of money from people who have more of it. In a completely clinical and abstract sense it doesn't seem fair, but in reality, well . . . Cry me a river Mr. Billion Dollar CEO. In fact, you can cry all the way to the bank. In the words of Cabaret's Money Song: "You can take it on the chin/Call a cab and begin/To recover on your/Fourteen karat yacht . . ."

--Blame Jared

By Anonymous Anonymous, at 10:34 PM  

Jared-
I wouldn't suggest that a CEO works harder, per se, but does he still add value to the company, and what kind of impact do his actions have? In that, I would suggest that he does merit a higher wage; that said, I don't think it should be obscenely higher. As far as deserving...it really all depends on your perspective, I suppose.
I would argue that rather than just blowing off obscene amounts of money, as you suggest (though I might disagree with it being obscene), the wealthy can invest in society itself. Say what you will about Microsoft's business practices, but Bill Gates has given, and is still giving, incredibly large amounts of money to various world aid organizations and scholarship groups. Personally, if I ever got anywhere in that level of money, that's what I'd do. Think of all the things you could do when money isn't really that much of an object...
I suppose if there is a progressive tax, I'm going to have to go with Barbour, and say that it needs to be plainly simple. Also, I would suggest that it shouldn't be hiked up by a percent every year or something. I don't believe our government has the right to take away that much of a person's money. We can argue until we're blue about whether they deserve it or not; I still dislike much in the way of taxes, but recognize it as a necessary evil.
Wilson-
What would you propose we do about inheritance? I personally connect it with private property, and the right to do with it as we wish. Certainly one of the oldest traditions in existance is that of inheritance. Of the three things you brought up as how they would be served: preservation of private property. Going the step beyond income taxes and minimum wage, to say that someone can't pass down more than "X" amount of dollars, gives me chills. It reeks of too much control. As anyone who knows me knows, I hate large levels of government control. Besides, even more than with taxes, there will be loopholes in that system, such that it would become worthless, unless we institute a near-totalitarian government. "Uh-oh Bob, you didn't pay your taxes this year; the men in black masks are coming for you now." In other words, why shouldn't a parent have the right to see their estate pass down? Certainly they should strive to provide for the child. Now, personally, I wouldn't pass down billions of dollars. Maybe a few million, especially to support land estates and such, and provide for education (because goodness knows it will cost that much by the time I die of old age) and so on. Otherwise, I would leave even more to charities. That said, I don't believe I, or my government, has the right to tell someone else how much to pass down. Especially if a government can't tell someone who they can or can't marry, or any number of other things where people insist on personal freedom, certainly we can't tell them what to do with that which is already theirs, including passing it down.

By Blogger Knight's Disciple, at 7:54 AM  

The problem with inheriting a fortune, KD, is that it has nothing to do with the principles underlying the right to private property. The heir has done absolutely nothing to merit the fortune, yet the fortune gives him or her great power. What's the difference between a kid who inherits an estate from a capitalist and an heir who gets the estate by virtue of being an hereditary aristocrat?

The idea that the capitalist should be able to do whatever he wants with his wealth is all well and good, but but we already compromise this principle by having taxes at all. Why not establish taxes that will require the person earning the money to put it back into the economy before his death rather than endowing it on someone who hasn't earned it?

You mention Bill Gates. This is interesting for two reasons. First, while Gates is using his enormous economic power for good, he is also using it to advance abortion rights around the world. He by himself has more power than some governments, at least in economic terms, and he is using it for what I'm sure you consider evil. The same applies to Warren Buffett, who donated vast sums of his money to such causes. Interestingly enough, though, Buffett does not believe in passing on vast wealth in a family. Buffett disparages the idea of the "lucky sperm club" for rich heirs.

By Anonymous wilson, at 12:00 PM  

Wilson-
I would think I would get a little benefit of the doubt with my Bill Gates example. Certainly I knew he supported ventures that I disliked, but he was the most immediate example that came to mind. Perhaps a better one might be the often cited R.G. LeTourneau? Gave large amounts of his fortune away, but still had more than enough to live on (presumably once his company got off the ground). The point I was trying to make was a general one; people with great wealth can indeed have great influence. I may not like the influence some of them have, but I cannot protest their ability to do so. It is their right.
On the issue of inheritance, I would like to ask: where is the line to be drawn on your proposed taxes? As in, at what economic point would a parent be allowed to pass something down to their children? (And incidentally, if the government took away all a person's money upon death, I highly doubt it would go into the economy. I figure it would go to the government, if not the pockets of politicians; talk about the undeserving.) Also, what of a will that passes estate to one's spouse? Is that no longer to be allowed, other than a survival pittance? Also, there are wide loopholes around your idea; one could simply pass the wealth along slowly as soon as one had children, in simple money transfers. Are we to ban the ability of parents to give money to their children at all? Again, where is the line you would draw? The necessary regulations for this system would probably grow towards tax law size quickly, which is decidedly not a glowing feature.

By Blogger Knight's Disciple, at 6:53 AM  

Random comment...Wheeler, I could not stand Atlas Shrugged. You really liked it?

By Anonymous Barbour, at 3:04 PM  

I'm neither an economist nor particularly economically-minded, so my contributions to this discussion would likely be mediocre at best. But I have some questions that the rest of you might be able to answer:

#1) I can see the financial value of a progressive income tax, and I can see how it still leaves the rich with more money than the poor (so it's not really socialism). But for me the issue of "fairness" arises when it comes to nailing down exactly how "progressive" the tax is to be. How do we decide how much more to tax the rich? If the rich/poor rate-ratio is 45/15, why not 55/15? Why only have two tax brackets (I think that's the right term): why not 90/80/65/45/27/10? How is the breakdown done, and where does it stop?

#2) Regarding estate/inheritance taxes: In theory (if there were no tax loopholes), hasn't a person's wealth already been taxed when it was received? Isn't an inheritance tax effectively taxing the same wealth again? Does that mean we should tax money every time it changes hands, or are there guidelines for when the exchange of money is not taxed? Or is it always a function of how much money the parties involved have?

--An Inquisitive Layman

By Blogger Martinez, at 5:15 PM  

KD asked:

where is the line to be drawn on your proposed taxes? As in, at what economic point would a parent be allowed to pass something down to their children?

I am largely unconcerned with that question at this point. I would set the line fairly high; I have no real desire to deprive the world of silver spoons or family businesses. In fact, I think small-to-middling family businesses should be left alone. However, I deny that taxing away a portion of a truly massive fortune upon death is a violation of anyone's property rights. Property is for live people, not dead people, and it's for people who earn it, not people born into it. This country is never going to reduce spouses and heirs to "a pittance." For the exact rates, politicians can haggle about the details. I'm only concerned with the general principle.

And incidentally, if the government took away all a person's money upon death, I highly doubt it would go into the economy. I figure it would go to the government, if not the pockets of politicians; talk about the undeserving.

"Going to the government" is one way that money goes into the economy, because the government spends that money on roads, shipbuilding, postal workers, scientific research, and other things that play a part in the health of the economy. I may not be a true Keynesian, but I admit that Keynes was right that government spending can spur economic growth in some cases.

Also, the whole point of taxing the wealthy at a higher rate is to allow the less wealthy to keep more of their incomes. What I am proposing, in other words, is meant to reduce taxes for most of the population. I am not suggesting that we give the government more total money.

Furthermore, a high estate tax would send money into the economy by causing the wealthy to spend or donate their money before they died. We both seem to agree that the billionaires are unlikely to leave much behind for the government to take.

As far as whether politicians would pocket the money -- I assume you mean through higher salaries for themselves -- that just means we need to vote the bums out. There's no other solution to that problem, no matter where the money comes from.

Also, there are wide loopholes around your idea; one could simply pass the wealth along slowly as soon as one had children, in simple money transfers. Are we to ban the ability of parents to give money to their children at all?

Gifts are taxed too. Perhaps not as much as estates, you're right -- and no doubt the wealthy will resort to such schemes. It is possible that gifts to apparent heirs could be taxed at a higher rate once a personal fortune reaches a certain size, in order to bring taxes on such gifts into line with estate tax rates.

The necessary regulations for this system would probably grow towards tax law size quickly, which is decidedly not a glowing feature.

True, but the very simplest of all tax codes would be one requiring a single sum from everybody. I pay $10,000, you pay $10,000, Bill Gates pays $10,000. Simplicity is good, but I don't think it's the most important consideration.

Martinez:

But for me the issue of "fairness" arises when it comes to nailing down exactly how "progressive" the tax is to be. How do we decide how much more to tax the rich?

That's always been the question, actually. We have had a progressive tax for decades; we always have argued, and will always argue, about the exact rates to set. The same would be the case if we adopted a flat tax -- especially if, as most "flat tax" proposals actually involve, the poorest Americans wouldn't have to pay any taxes at all. How would we decide who gets off tax-free?

Why only have two tax brackets (I think that's the right term): why not 90/80/65/45/27/10? How is the breakdown done, and where does it stop?

Actually, I wasn't suggesting just two tax brackets. I would institute a very smooth slope for the tax rates, because any sudden jumps would discourage people at the top of one tax bracket from moving up into the next one, which would be bad for the economy (and bad for tax collections). And unlike the flat-tax people, I would include all of the poor who are not actually on welfare in the system: the tax rate would start at 0.00001 percent and move to ... whatever the hightest tax rate would be.

In theory (if there were no tax loopholes), hasn't a person's wealth already been taxed when it was received? Isn't an inheritance tax effectively taxing the same wealth again?

Yup. But this time, we're taxing it when the person who earned it doesn't need it anymore.

Does that mean we should tax money every time it changes hands, or are there guidelines for when the exchange of money is not taxed?

Well, we already tax money multiple times. Sales tax is a (state) tax on money that is also included in income taxes. So there's really no end to how often money gets taxed. I pay taxes on my income, I pay taxes on my purchase, the corporation who sells to me pays taxes on the money it gets from me, and the company's employees pay taxes on the money they get from the company, they pay sales taxes on their purchases, and so forth through eternity. Because each exchange of money corresponds to a generation of value, it makes sense for the government to be able to take a share at each stage.

Interestingly enough, though, one of my reasons for supporting the idea of the estate tax is that inheritance arguably does not generate value in the economy. So I think a "use it or lose it" principle makes sense.

Note that charitable donations are not taxed (or rather, they are taxed fewer times). That is a very useful part in making my scheme work satisfactorily. The wealthy, if they dislike the way the gummint spends their money, can always donate it to charitable organizations instead.

By Anonymous Wilson, at 6:55 PM  

I think it's mildly interesting that some of the people pushing most strongly for larger amounts of economic regulation and controls are also the ones who have most loudly chafed at all of the actions of the current POTOS that have been done in the name of national security. Seems a bit double-minded to me; you want almost nothing in one corner, and legions of laws and regs in the other. Maybe I'm missing something.

By Blogger Knight's Disciple, at 8:05 PM  

How is my position more contradictory than that of the Republicans? They push for strong presidential powers, yet they want the government to have no power at all over the economy. If your argument is valid, it cuts both ways.

However, there is actually no contradiction between telling the president he can't torture or declare war by himself, and telling billionaires they can't create an aristocracy for their children. If I had proposed torturing or killing the rich, you might have a point. As it is, both arguments are humanitarian, and both involve writing more laws and regulations. A government without extensive laws and regulations would be a government in which the people with power could do whatever they liked -- whether the powerful person were the president or George Soros. That's what laws and regulations are for.

You could also look at it this way: the individual's right to life is more important than a dead person's right to have a wealthy kid.

By Anonymous Wilson, at 4:30 AM  

First, I wasn't saying I agreed with the policies of the current President or Republican party; it was simply a comparitive example, like my reference to Bill Gates.
Second, here's a big question: why does the government really need all the money they would get from taxing away inheritances and taxes on gifts? Beyond possibly national debt (not that they're making headway on that), I see no purpose in anything more than simple sales and income taxes. Why those? I do realize the government needs some kind of funding, and to me, those are the least of possible evils, as it were. Just speaking from my mental perspective, this is why: with income tax, depending on how I fill out the forms, I don't actually pay it out of pocket, it's just taken out beforehand, as if my salary were slightly less. I can handle that. With sales tax...*shrugs* it's just a price increase. Again, I can handle that. But taxing gifts? Taxing inheritance? What next? How about a tax for marriage, a tax for kids, hey, how about a tax for living and breathing? My point here is, I see the world with all these taxes and such that you propose spiralling into more and more taxes, until the government finally just takes everyone's money and then spreads it out such that everyone can just subsist on equal amounts. That sounds pretty fair, don't you think?

By Blogger Knight's Disciple, at 6:39 AM  

KD, that is an argument against all taxes, not against any particular kind of tax. You seem to think that lower spending means lower taxation of the rich, but it doesn't have to be that way. It might mean higher taxation of the rich and much lower taxes for everybody else.

The government has a lot of different expenses -- starting with a 500 billion dollar defense budget. This discussion is not about whether that spending should be lower. It's about how that spending -- however high or low it is -- should be financed.

I mean, with low enough government spending, the highest tax rate could be 5 percent -- and only 1 percent for people like us. That would still be a progressive tax. The same goes for the estate tax.

By Anonymous Wilson, at 6:51 AM  

KD, that is an argument against all taxes, not against any particular kind of tax. You seem to think that lower spending means lower taxation of the rich, but it doesn't have to be that way. It might mean higher taxation of the rich and much lower taxes for everybody else.

The government has a lot of different expenses -- starting with a 500 billion dollar defense budget. This discussion is not about whether that spending should be lower. It's about how that spending -- however high or low it is -- should be financed.

I mean, with low enough government spending, the highest tax rate could be 5 percent -- and only 1 percent for people like us. That would still be a progressive tax. The same goes for the estate tax; it could be 10 percent, say, if the needs of the government were low enough.

By Anonymous Wilson, at 6:54 AM  

Sorry for the double post. I got an error message after the first try, so I added a little to my comment before trying again.

By Anonymous Wilson, at 6:57 AM  

This is essentially what I am suggesting . . . sadly, I don't have the knowledge to use real numbers, but: Say we've got 20 people who each make $20,000 a year, and they're taxed 5% of their income. Now, say we've got a guy who makes $500,000 a year (we'll just stick to the lower end of wealthy for this example) and he is taxed 15%. Okay, so the poorer sods are now getting $19,000 a year, while the rich guy is still pulling in $425,000 a year after taxes. $75,000 is a lot more than $1,000, certainly, but I would submit to you that the 20 people are going to feel the sting a whole lot more than the one will.

What I suggest is that it would be far more reasonable for the 20 to pay a 1.25% income tax while the one pays 18%. Now the 20 (who have very little money to begin with) get to keep $19,750 (pretty much everything) and the rich guy still has $410,000 to blow. We have lowered 20 poor people's taxes 75% by raising one rich guy's taxes a mere 20%. If my "test case" rich dude was a billionaire, he could relieve the tax burden on hundreds of poorer people and the percentage of taxes he is paying would barely change at all. Now, how is that a problem?

Regarding something Wilson said, a further thought had occurred to me regarding the size of government and their spending and so forth. I think we will all agree that the really wealthy people in the United States are the ones who have both the most power and (obviously) the best money-managment skills. Perhaps if they were the ones paying all the taxes they'd be inclined to use their influence to "encourage" the government to stop burning it all up on half-wit ventures like the War in Iraq. Just an impractical, largely-irrelevant thought.

Finally, yes, Barbour, I did actually enjoy Atlas Shrugged. At the time time that I read it it was twice as long as any other book I had ever read, but it still held my interest. I thought it was a pretty good story, and more importantly I found the ideas and arguments it presented to be extremely interesting and challenging. I would say that it basically argues from Sharpton's position (more or less), but it carries the argument even further, challenging the very basis of Christian charity. It was good stuff.

--Blame Jared

By Anonymous Anonymous, at 2:08 PM  

I am skeptical of your ILIT (Impractical, Largely Irrelevant Thought), Blame Jared -- mainly because the rich already pay taxes at a significantly higher rate than most of us. Progressive tax rates are a current reality, and the wealthy don't seem to have put much of a dint in our militarism.

Of course, that might have something to do with the fact that defense and reconstruction contracts are really hot business right now.

But these factors are only two among many, and there are plenty of wealthy donors backing Democrats, too. Wealth can only do so much when a majority of voters think Saddam needs shootin'.

By Anonymous Wilson, at 3:16 PM  

All quotes are from Wilson:

"I would institute a very smooth slope for the tax rates"
While that sounds promising, it leaves us with the problem of how to develop the details of the slope.

"That's always been the question, actually [...] we always have argued, and will always argue, about the exact rates to set."

I'm not arguing that we shouldn't have progressive taxes; I'm suggesting that this vagueness is a source of claims that progressive taxes are "unfair"; they're unfair because the specifics of their divisions seem more or less arbitrary. (I'm sure that's not the only basis for such claims, but I suspect it's one of them.)


"Well, we already tax money multiple times."
A very good point; thank you for bearing with and explaining away my confessed ignorance. :-)

Now for a new question (on a somewhat different topic):

"The problem with inheriting a fortune [is that the] heir has done absolutely nothing to merit the fortune, yet the fortune gives him or her great power."

Again, I'm not certain about this, but don't next-of-kin often inherit debts, as well? The "heir" hasn't done anything to acquire the debt, yet the debt gives him what is likely to be a burdensome responsibility. What are your thoughts on that?

By Blogger Martinez, at 3:34 PM  

Actually, as I understand it, heirs generally do not have to pay the debts of their parents. Debts can be collected out of an estate, but if someone dies totally broke, his creditors will probably die unsatisfied.

By the way, I agree that the seeming arbitrariness of the progressive tax rate can be frustrating. And I agree that it can be a problem. However, I think the comparative fairness of the flat tax is illusory; consistency is not always the same thing as justice.

This might be as good a time as any to note that I see a strategic reason to choose a flat tax over a progressive tax. Here it is: if everybody pays at the same rate, then everybody will have the same incentive to keep taxes low. So nobody will try to benefit themselves by raising only other people's taxes.

But perhaps even that strategic risk actually balances out. Suppose the wealthy -- who can afford to pay their 15 percent a lot more than I can -- decide they want more government spending? There are, after all, a lot of wealthy fans of big government out there. (George Soros, anyone? And most prominent politicians are actually fairly well off.) I can see them pushing for a tax hike to 20 or 25 percent, which they could pay a lot more easily than I could. In such a case, the flat tax would not be as much of a hindrance to high spending as we might expect. That's especially likely if the poorest voters didn't have to pay taxes at all -- and most flat-tax proposals include such a provision, as Paronomasiac pointed out.

By Anonymous Wilson, at 7:10 PM  

"However, I think the comparative fairness of the flat tax is illusory; consistency is not always the same thing as justice."

Unfortunately, the very idea of "fairness" or "justice" is a rather fuzzy one. That's why people can get away with talking about two different kinds of "fairness": Flat taxes are "fair" insofar as everyone pays the same amount, and progressive taxes are "unfair" in that respect. Meanwhile progressive taxes are "fair" because those who can afford to pay more (the rich) bear more of the tax burden than those with less to give (the poor), and a regressive tax is "unfair" in this sense. It's not so much that the "comparative fairness" is "illusory"; it's more that the comparison itself is flawed.

Which allows us to rephrase the debate as something of a values judgment: Which "fairness" is better?

Speaking of "fairness," it's good to hear that debt is not inherited; I, for one, think that such an inheritance would be decidedly unjust.

By Blogger Martinez, at 7:57 PM  

Post a Comment

This page is powered by Blogger. Isn't yours?