I think that marginal utility might have something to do with why we tax the rich more than the poor.
I think the OPs question is related to the question of whether someone can ever pay enough tax - at some point is your obligation filled, or does society take more and more and more as your income rises.
I’ve always thought it gets farcical after a while to try and pretend that someone paying millions upon millions is just paying their share - in an ideal world you could probably say that once you have paid for the dole of a thousand fellow citizens, you can stop paying tax, but in real life we still need that tax money.
Why does one twin owe more to society?
He doesn’t.
But he can pay more, and that 100,000 hurts him less than his brother’s 10.
So we take it from him, and put him in jail if he refuses.
It’s probably wrong, but the alternative is worse - I can live with it.
I think the OP understands why a neurosurgeon pays a lot more in taxes than a butcher: it’s easy to see why the neurosurgeon gets paid more, he is adding a lot more worth to the economy. The tricky thing about the brothers is that what they are producing seems to be superficially identical, so why does one owe more than the other?
The answer is that they aren’t producing the same thing: one produced a work of art worth a million dollars, and the other produced a piece of crap. One produced one million dollars worth of goods and services and increased the GDP by one million dollars: the other produced and added $100. What they did is as different as what a butcher and a neurosurgeon does, and the superficial similarity is a red herring.
How do we know the first painting is a million dollar piece of art? Because someone was willing to pay that. How do we know the second was only worth $100? Because someone paid it. It seems circular, but the whole basis of a free market economy is the idea that things really are worth what people are willing to pay for them.
Sure, but it’ll be taxed at 10%.
Because one brother produced a product that was desirable to society, the other produced crap.
Both put in the same effort (did the same thing), but were rewarded differently. Are you suggesting that they should have both been paid the same?
How bad off is the first brother, and what should be done about it? How low should his taxes be, to offset the fact that society doesn’t value his work?
“Two people making identical use of the system,”
But the law is there to protect them both equally, regardless of how much they make. And again, the point of having them equal is that those costs you mention don’t change before the sale compared to after the sale.
If they had both sold their drawings for $100, the same system would need to be there to protect each of them. The system doesn’t suddenly cost more because one of the drawings was valued higher.
This point is important because every time I ask this question someone tries to twist it to suggest the richer brother owes more to the system. But it’s not the case here. He didn’t use more electricity or roads to produce his art. And afterwords there is no guarantee that he’ll suddenly be more of a burden on the legal system as compared to the other brother.
In short, the costs you are describing are there and need to be funded regardless of the value of the drawings.
If I’m hired to protect a man’s $100 income, and whatever property he can purchase with it, how much should I be paid? Should I be paid that same amount if I’m hired to protect the wealth and belongings of a millionaire? A billionaire? Bill Gates’ fortune?
what you “owe” in taxes isn’t a one-off, what-have-i-consumed-up-until-this-point-in-government-services deal.
That’s a good question.
Consider your typical Brinks truck driving around to ATMs. Do the drivers get paid by the hour, the number of stops, or the total value of the money they are carrying?
If you are hired as a security guard, how would you even know the value of the residents you’re protecting?
The likely followup to this would be to point out that a house with a million dollars in it is more likely to get robber, or at the very least its a higher target. But then again, poor houses in poor neighbourhoods also get broken into.
And with regards to the scenario in the OP, the rich brother has more to lose. But so does the guy that bought the drawing. Technically they both have $1million to lose, but only the artist is paying tax.
Right, and Robot Arm’s comment implied the rich brother owed more because of services-he-might-use-in-the-future.
did the guy writing the $1 mil check to Sotheby’s have a big, blue, goofy genie as a friend or something? how’d he get the money tax free?
which is a perfectly valid justification for imposing tax (among many others)
No no, in my question, I’m not employees of a security company, I’m the entire collection of entities exclusively charged with providing security for the life, liberty, property and pursuit of happiness of, variously, a man with $100 yearly income, a millionaire, a billionaire and Bill Gates. Do you think I can take care of Bill and his stuff using the same amount of labor and resources with which I provide security for Mr. Hundred Dollar?
How’s that? You’re saying the guy who bought the painting can afford $1M discretionary expense, but he pays no taxes? Or are you just confused about the difference between income and a commercial transaction?
How does any of what you said relate to their income?
Consider an apartment building with 100 units. Does the resources required to provide security vary from one unit to the next?
If the brother’s live across the hall, in the same building, how have your expenses changed with regards to protecting life, liberty, etc?
More to the point, consider your overall expenses before the sale of this piece of art vs after the sale, how have they changed? You had a system set up and in place based a couple of artists. One sales a cheap drawing the other a work of art. Did you rush out and hire more staff?
Allow me to try again: wealth was created as part of this commercial transaction. The artist had $1 worth of art supplies that someone else valued at $1million. So prior to the transaction, the police has four people to protect: two artists with $1 each, a guy with $100, and a millionaire. After the transaction you have two people with $100 in assets, and two with $1million.
At what point would you (the entire collection of entities exclusively charged with providing security) alter your behaviour and thus incur more expenses?
huh???
Seriously? See posts #10 (John Mace) and #18 (Robot Arm) for pretty much the same argument. Higher income correlates with higher benefit derived from government systems and protections. Income is not the best measure of that utility (income isn’t the same as wealth, which is a better measurement), but there is a direct proportional relationship between the two.
Okay, so that pretty much sums up why I’d like to see a justification for the difference in taxes paid.
Both brothers still have an equal need for for all the social services the government provides (ie police). And neither get any more or any less in proportion to their income. As I said, after the sale, the government doesn’t do anything. Nothing changes. 11 months could go by before the government sees any of that revenue. And thus 11 months could go by before the police department learns that there is a millionaire that needs more services.
Likewise for copyright protections. The system is in place and there for both brothers equally. If both drawings had sold for $100 they’d still both need protection. The courts don’t get any of the money until the end of the fiscal year (or quarter), it’s not like they ran out and hired more bailiffs.
We also have no idea what either brother does with their income, and how it gets turned into wealth. The rich brother could consume all of his income leaving him with little to no wealth. So then what police protections does he get? More, same, less?
I think the whole “with higher income comes greater benefits” argument just confuses things. Because government acts communally, it’s very difficult to figure out exactly how much more benefit a rich person receives than a poor person. And using this argument as a basis for justifying different tax rates quickly leads into a trackless morass.
Here’s the justification I prefer: In a fair tax system, the burden should be shared equally. The amount of pain I experience in paying my taxes should be roughly the same as the amount of pain you experience in paying your taxes. However, since different individuals possess different levels of resources, the same dollar amount may represent different levels of pain for different people. An amount that’s trivial for a rich person to pay may represent a back-breaking burden to a poor one.
A progressive income tax, while not perfect, is the best system we’ve come up with for sharing the pain equally.
Are you joking? I can’t tell.
Because it seems patently obvious that no two people (especially of disparate classes) enjoy equal benefit from government services. Rich people don’t get Medicaid, and poor people don’t have the SEC to watch over their equities.
Do you honestly think that Donald Trump and a bum on the street cost the same amount for the police to protect just because they are both humanoid bipeds?
But in any case, a society that chooses taxation as the means to raise revenues for government operations has rejected an alternative of user fees for the same services. This makes sense because poor people may not afford the cost of police protection, but they require the service; but rich people have no need at all to pay for welfare that they will never use.
Therefore, people are not taxed in relation to how many services they use or are eligible for. The cost of governmen writ large is spread out on the basis of ability to pay.
So, your questions about how much in services the rich use compared to the poor has nothing to do with why the rich pay more in taxes. They are unrelated concepts.
I wasn’t the one that brought it up. See posts #10 (John Mace) and #18 (Robot Arm).