Yes. You are correct. I’ve parsed this better in other posts. I meant equal in the amount of time we work for the government. Thanks for calling it out.
I’m trying to answer this and can’t figure out where the problem is. Can you reword it?
Huh? How/why are the rich inferior to the non rich?
I always find it hilarious when people argue for a “flat tax”. You know what a real flat tax would be? We pick some value, say, $30,000 a year, and everyone is taxed until they’re at that value. That would be completely flat, and hey, flat is good, right? Everyone’s treated equally, so obviously that one is fair, right?
To go further, if you were King, and both those individuals wanted to double the land they were working, it would obviously benefit you—and everyone else—to give the land to the more productive person. In fact, if he was not very interested, it would benefit you and all those in your Kingdom to offer the productive fellow an incentive to farm more land. Maybe by reducing his tax rate. Everyone would have more corn than if you didn’t, or apportioned land to the two guys equally.
Do you mean my last paragraph? Maybe I misunderstood you. I was responding to this:
Maybe it would help if you explained what you mean when you talk about someone being more productive from a tax standpoint, and what you you mean when you talk about someone being more productive from a “measure of the man” standpoint.
Thanks. Okay. The measure of the man comment had to do with how people came by their wealth, or how they spent their days. someone could register very low on this scale, yet be a highly productive person from a tax standpoint. A professional football player who plays very little and earns $400,000 is a pretty productive person from a taxation standpoint. More productive than a construction worker, who would score much higher on the “measure of the man” scale. Does that help?
I don’t appreciate having my arguments dismissed as “crap”. I was responding to mag’s hypothetical restaurant owners. As M4M said, there’s no clinching argument for a progressive tax. I was just trying to come up with some examples of government services that would be more likely to be used by a larger business than a smaller one. Maybe some guy is really so great a chef that the can start from the exact same conditions and ingredients and charge ten times as much, or maybe he’s just using extra government services in building his restaurant empire. In the real world, it’s probably a bit of both. I don’t think there’s a way to write the tax such that it could really tell the difference, and it’s complicated enough already.
While we’re discussing fairness, I’ll throw this into the mix. The tax code doesn’t make allowances for the cost of living in different areas. Someone could buy and maintain a 2,000 square foot house on an acre of land in Iowa and be taxed at a certain rate. Someone who wanted to enjoy that same lifestyle in Manhattan would have to make millions. Why is the government punishing city dwellers? Does it cost the Army more to defend an acre of Manhattan than an acre of Iowa? The city dweller has a higher income, pays more tax, but isn’t getting any more from the government. Would you all support lowering taxes on city dwellers and raising them on people who live where it’s cheaper?
The lazy idiot already suffers. The incentive is built into the market. He makes less money from selling his yield than his smarter, harder working neighbor. Or do you think the government owes him additional punishment on top of that?
Like I said, forget all that. Two guys produce a product, and society values one of them more. That guy makes more money as a result. How should they both be taxed? There is no need to add additional layers into the mix. Two guys have the same access to the same materials, but society is willing to pay one of them more. Neither have additional benefits from the government, but our tax structure says the talented one owes us more. But not just more, a disproportionate amount more.
One guy makes $50k off his burgers, I make $500k off my burgers, because society values my burgers. So first we need to figure out a reason why I should pay 10 times as much in taxes. And then figure out why I should pay 15 times as much.
We need to be able to answer that scenario before adding in what ever else there may be (ie lunatics with pitchforks). In fact, all of that can be eliminated when you realize that we both have nothing until our first sale. Like with the farmer, he goes a full fiscal year without seeing a dime. Only after harvest does he benefit from his labours, and you want him to owe more as a result. There is no way he benefited more in that year than his lazy neighbour.
Well, I do, but that’s not the point. Society, on the other hand, feels the opposite, that he’s some how entitled to more. He should get the same access to police, fire, roads, and health care. For what? Failing as a farmer? If he wants more benefits he should be a better farmer. As long as I’m not doing anything to impede him, why should I pay more?
And there’s the crux of the problem. Society won’t really allow a person’s income to reflect his marginal product. Poorer people get greater welfare contributions, they spend less, and their lower income is partially offset.
But it goes both ways. By not taxing all inheritances/capital gains 100% and whatever the hell else, the wealthy are allowed to experience income that’s greater than their marginal product.
My whole post was full of additional benefits that a business makes use of as it expands and becomes more profitable.
Can we come up with exceptions? Sure. How about someone who invents something, sells the rights, and lives off the millions in royalties for the rest of his life. Well, I suppose he has the patent office to thank, but how much work was it to review his application, stick it in a drawer, and assign him a number. That was a couple hours of a bureaucrat’s time, and he’s going to be paying for it the rest of his life. Forget working 12 hours for the government and 28 for yourself, this guy’s not working at all and the government still takes a bite. Does that suck? Depending on your point of view, maybe it does. Is there any way to eliminate such unfairness from the tax code? None I can think of, unless we want to write a new chapter for every person in the country.
How about a pragmatic argument. The flat tax argument seems to be that the government should be encouraging people to work hard, innovate, and make as much money as they can, or at least to not punish them after they’ve done so. Well, we’ve got a progressive income tax, and have for decades. Have people stopped trying to become rich? Have Americans stopped innovating and striving to be successful since the income tax came into being? We’ve had our ups and downs, especially lately, but for the most part the American economy has kicked ass.
We should have a progressive income tax because we’ve been testing the idea for a while, and it works.
No, don’t come up with exceptions, address the point at hand. The two guys are not expanding–yet. At the start, both use the same resources to produce a product, but society values one of them more than the other. As a result, one person gains more income than the other.
What is the justification for making the more successful individual contribute more in taxes? And then what is the justification for a further progressive taxation?
You made reference to expansion, but that isn’t even related to profitability. A chef with a larger restaurant can be considerably less profitable than a smaller one. But even though as per your description, the larger (but less profitable) restaurant would be less taxes.
I’m not denying that there are a whole host of benefits each business makes use of. I agree that there are, and I agree that they should be paid for.
What I disagree with, is the notion that what each person pays should be proportional to their income.
You’ve said it all right here. It’s not hard at all to see why you ought to be quite willing to pay as much as is needed. You’ve said that society values your burgers, so there is a benefit to you for society to continue so that you have someone to buy your burgers. Don’t you like having a market for your burgers so that you can continue to make $500,000? If you do, pay for it. If not, don’t.
Using the same resources to produce a product? So there’s two shops the same size, on the same street, consuming the same utilities at the same hours, buying the same amounts of raw materials from the same suppliers, both owners educated at the same public schools, paying the same interest on the same student loans, with the same zoning variances from the same town council, and one of them is so gifted that he makes ten times the profit that the other does? I don’t believe that such a perfect, clinical comparison exists.
And you didn’t address my pragmatic argument. If a progressive tax is so unfair, why do we have so many people becoming so rich and successful in this country? And working damn hard to become so, too.
But if you think you can write a tax code that’s absolutely fair to absolutely everybody under absolutely every circumstance, go for it.
That’s an argument for some taxation, but not progressive taxation. I’m more than willing to pay taxes. I’m more than willing to contribute to make society better, and thereby improve my quality of life. But we’re looking for a justification for progressive taxation.
The other guy has just as much a need for society as I do, if not more since his profit margin is razor thin. When the economy goes to shit, I’ll be fine, he’ll be screwed.
What is happening in society that requires me paying taxes in proportion to my income? Why is society so dependent on my taxes to begin with?
Does fairness enter into the equation for you? If it does, if we could devise a another system that would work, but would be fairer than what we have now, is that worth looking at?
Did you already reject the diminishing marginal utility thing and I just missed it? Because if not, that’s what my answer to you would be.
Uh? It exists all the time. I just gave you the example of two restaurants. Given a handful of ingredients, two chefs will come up with entirely different results. One will be more profitable than the other. One produces a bland flavourless burger on a soggy bun that people aren’t willing to pay for.
Two artists can use the same amount of paint to produce entirely different work, one profitable, the other not.
Two carpenters can use the same amount of wood/time/labour to produce vastly different chairs. Society will decide which one they are willing to pay for. Check out this bear a guy carved out of a piece of wood. He can charge $2500 for that. I can’t do that. Given the same chainsaw and piece of wood I would not be able to charge $25.
Ultimately because we live in a consumer driven society that seeks to earn more income. The progressive tax rates that we have allow enough reward so as to keep people earning more.
But just because it works well enough, or has worked for the past few decades, isn’t a justification. If anything, that’s simply a justification for more government spending.
I tried, the world wasn’t ready for it. Ultimately, “fair” is a relative term. Under my proposal, most people would be forced to pay more.
Run that one by me again.
I used to think we had progressive taxation because it was “easier to earn the second million than it was to earn the first.” So you tax the first at 20% and the second at 50%. Now I’m pretty sure we do it because we can.
Sure it does, I thought that’s what this whole thread was about.
Good luck defining what’s “fair” though. We’ve already discussed equal utility, equal burden across all cumulative taxes, equal hours worked, equal pay for equal services, equal rates, equal incentives, and equal social mobility. (We even covered feudal precedents, were those equal, too?)
And even if you could get everybody to agree on what sort of “fairness” we’re trying to implement, you then have to encode it in a written, enforceable document that would maintain that fairness.
I agree with Measure for Measure, there’s no clinching argument for it. I don’t think there’s one against it, either. I just think the real world is too complex for that. My posts barely scratch the surface of that complexity.