An Argument for Progressive Taxation

[rocketdodger]

I'm sure everyone here is familiar with the observable fact that the force exerted on a moving object by the fluid it is moving through is nonlinearly proportional to the velocity of that object.

The explanation for this phenomenon is simple -- as the object moves faster, not only are more particles of the air impacting it ( because it is moving faster through the air ) but each particle is impacting it with more velocity ( because it is moving faster through the air ). Each of those effects by themselves is fairly linear, but considering them together produces decidedly nonlinear changes in force as the object speeds up.

I was thinking that the same logic might apply to taxation. Consider:

1) For any amount of wealth generated by a process, a portion of that wealth can be rightfully considered as "owed to society" for helping to generate that wealth.

2) For any amount of wealth already in existence, a portion of that wealth can be rightfully considered as "owed to society" for remaining stable in a form that applies to the wealth.

Thus the more wealthy a group becomes, the more taxes are owed for both 1) and 2) and taken together constitute a nonlinear increase.

At face value this sort of makes sense to me. If I become very rich, certainly a large factor in that wealth gain of mine is the very fact that I was able to make the money in the first place -- I owe society for that, proportional to how much wealth I gained. But I also owe society for remaining stable in the future, because if it doesn't, my wealth ceases to be wealth -- I owe society for that as well, proportional to how much wealth I own. Add the two together, and as I make more money, I owe society a higher percentage of that money.

Thoughts? Note that I haven't specified what form such a progressive taxation scheme would take, or anything like that. I'm simply presenting a logical case for the very idea of progressive taxation in the first place.

 

[rocketdodger]

As far as implementation, it seems obvious to me that a flat income tax combined with a flat sales tax leads to a fairly simple and clear progressive taxation scheme, provided there are no loopholes.

Thoughts?

 

[Last of the Fraggles]

I'm sure everyone here is familiar with the observable fact that the force exerted on a moving object by the fluid it is moving through is nonlinearly proportional to the velocity of that object.

The explanation for this phenomenon is simple -- as the object moves faster, not only are more particles of the air impacting it ( because it is moving faster through the air ) but each particle is impacting it with more velocity ( because it is moving faster through the air ). Each of those effects by themselves is fairly linear, but considering them together produces decidedly nonlinear changes in force as the object speeds up.

I was thinking that the same logic might apply to taxation. Consider:

1) For any amount of wealth generated by a process, a portion of that wealth can be rightfully considered as "owed to society" for helping to generate that wealth.

2) For any amount of wealth already in existence, a portion of that wealth can be rightfully considered as "owed to society" for remaining stable in a form that applies to the wealth.

Thus the more wealthy a group becomes, the more taxes are owed for both 1) and 2) and taken together constitute a nonlinear increase.

At face value this sort of makes sense to me. If I become very rich, certainly a large factor in that wealth gain of mine is the very fact that I was able to make the money in the first place -- I owe society for that, proportional to how much wealth I gained. But I also owe society for remaining stable in the future, because if it doesn't, my wealth ceases to be wealth -- I owe society for that as well, proportional to how much wealth I own. Add the two together, and as I make more money, I owe society a higher percentage of that money.

Thoughts? Note that I haven't specified what form such a progressive taxation scheme would take, or anything like that. I'm simply presenting a logical case for the very idea of progressive taxation in the first place.

I don't think it necessarily follows from your logic.

You could argue that the marginal burden on society of someone going from making a million to making 2 million is less than getting to a million in the first place and therefore they should be taxed regressively.

After all, you don't send your kids to school twice if you are rich or need to have your taxes processed twice or visit the park more or whatever.

In fact you probably rely less on the social services that the government provides than your average man in the street.

Not saying I agree with that just saying its an argument.

 

[rocketdodger]

In fact you probably rely less on the social services that the government provides than your average man in the street.

Is this true, though?

This is what I meant when I referred to part 2) of my equation -- if you are a millionaire, even if you yourself don't rely on social services, you certainly have a vested interest in society remaining stable enough to where you don't get your millions taken from you by the restless masses, and stable enough to where you can buy something with those millions rather than need to barter like the cave men did.

Meaning, the wealthy rely on social services even more than the poor.

 

[Stimpson J. Cat]

You could argue that the marginal burden on society of someone going from making a million to making 2 million is less than getting to a million in the first place and therefore they should be taxed regressively.

After all, you don't send your kids to school twice if you are rich or need to have your taxes processed twice or visit the park more or whatever.

In fact you probably rely less on the social services that the government provides than your average man in the street.

Not saying I agree with that just saying its an argument.

It's an argument that is based on not thinking things through very well.

Consider the education example you mentioned.

Imagine Bob, a man who received a public high-school education, and now works the sort of basic low-income job that a basic high-school education qualifies you for. Clearly this man has benefited from this education.

Now imagine Adam, a millionaire who owns a company. At first it may appear that Adam has benefited no more from public education than Bob has. Maybe even less, if his parents paid out of pocket for him to go to a private school.

But that would be a short-sighted view. Consider the people that Adam employs. His company probably employs a lot of people just like Bob. People who do jobs that require the basic language, literacy, and math skills that a high-school education provides, but not much more. People who he can pay very low salaries to, because there are so many people with high-school educations available and willing to work for those low salaries.

Now imagine there is no public education. Suddenly the ubiquitous high-school education that employers like Adam take for granted is a rare commodity, found only among those whose parents well-off enough to buy them an education, but for whatever reason did not then go on to get a higher education. No way is Adam going to be able to get any of those people to do those jobs for the crappy salaries he offers. For him to run that same business he would need to train employees to give them the basic required skills. That costs him money.

Alternatively, in such a situation you would likely find programs where people can borrow money for a basic education, and pay it back later. But then those educated people are going to require higher salaries, to pay back those loans.

So no more cheap high-school educated labor. Not to mention less demand for your products, since the uneducated and impoverished masses won't be buying much of anything.

Making sure that everybody gets a basic education is not just a matter of "doing the right thing", or of society "taking care of the poor people". It's not even really re-distribution of wealth, as so many right-wingers like to put it. On the contrary, it is simple pragmatism. The fact is that the people who benefit most (monetarily speaking) from universal public education aren't the ones who depend on it to get an education. Its the business owners and the highly paid employees whose jobs would not exist without their fellow low-income employees and their low-income customers.

And that's just education. The same goes for most social programs that, superficially, only seem to directly benefit lower income people who pay a disproportionally low percentage of the tax money those programs cost.

 

[Last of the Fraggles]

Is this true, though?

This is what I meant when I referred to part 2) of my equation -- if you are a millionaire, even if you yourself don't rely on social services, you certainly have a vested interest in society remaining stable enough to where you don't get your millions taken from you by the restless masses, and stable enough to where you can buy something with those millions rather than need to barter like the cave men did.

Meaning, the wealthy rely on social services even more than the poor.

But if you are talking about progressive taxation then you are saying the marginal benefit increases as I get more money?

In other words, if I have $1,000,000 then the 1,000,000th dollar I earned benefited more from the stable society that the 999,999th?

I'm just trying to understand the logic of your argument rather than argue for or against the conclusion.

 

[Last of the Fraggles]

It's an argument that is based on not thinking things through very well.

Consider the education example you mentioned.

Imagine Bob, a man who received a public high-school education, and now works the sort of basic low-income job that a basic high-school education qualifies you for. Clearly this man has benefited from this education.

Now imagine Adam, a millionaire who owns a company. At first it may appear that Adam has benefited no more from public education than Bob has. Maybe even less, if his parents paid out of pocket for him to go to a private school.

But that would be a short-sighted view. Consider the people that Adam employs. His company probably employs a lot of people just like Bob. People who do jobs that require the basic language, literacy, and math skills that a high-school education provides, but not much more. People who he can pay very low salaries to, because there are so many people with high-school educations available and willing to work for those low salaries.

Now imagine there is no public education. Suddenly the ubiquitous high-school education that employers like Adam take for granted is a rare commodity, found only among those whose parents well-off enough to buy them an education, but for whatever reason did not then go on to get a higher education. No way is Adam going to be able to get any of those people to do those jobs for the crappy salaries he offers. For him to run that same business he would need to train employees to give them the basic required skills. That costs him money.

Alternatively, in such a situation you would likely find programs where people can borrow money for a basic education, and pay it back later. But then those educated people are going to require higher salaries, to pay back those loans.

So no more cheap high-school educated labor. Not to mention less demand for your products, since the uneducated and impoverished masses won't be buying much of anything.

Making sure that everybody gets a basic education is not just a matter of "doing the right thing", or of society "taking care of the poor people". It's not even really re-distribution of wealth, as so many right-wingers like to put it. On the contrary, it is simple pragmatism. The fact is that the people who benefit most (monetarily speaking) from universal public education aren't the ones who depend on it to get an education. Its the business owners and the highly paid employees whose jobs would not exist without their fellow low-income employees and their low-income customers.

And that's just education. The same goes for most social programs that, superficially, only seem to directly benefit lower income people who pay a disproportionally low percentage of the tax money those programs cost.

Again, I don't think this is necessarily an argument for progressive taxation or the logic of the OP though. It's an argument for having a taxation system that funds things like education properly.

Actually, if anything it seems more like an argument for paying people 'fairer' wages than progressive taxation. Or maybe an argument that the US should be partly funding the Chinese education system

 

[Stimpson J. Cat]

Again, I don't think this is necessarily an argument for progressive taxation or the logic of the OP though.

It's not supposed to be. It is a counter to the argument you presented in post #3.

It's an argument for having a taxation system that funds things like education properly.

No, it's more than that. Because it not only illustrates how having a tax-funded education system benefits all of society, rather than just the poor, but also puts to rest the misconception that having wealthy people pay more for the public education system than poor people is not, in fact, unfair, because those wealthy people actually benefit financially a lot more from having such a system than the poor people do, even if that benefit is indirect.

Which brings us back to the issue of progressive taxation. As you pointed out in post #3, a common argument against progressive taxation is the misconception that it is somehow unfair to the wealthy, since they benefit less from the tax-funded programs than the poor people do, but have to pay more for it. The argument is clearly a flawed one.

Granted, refuting an argument against progressive taxation does not constitute an argument for progressive taxation. But again, I neither presented nor intended it as such.

Actually, if anything it seems more like an argument for paying people 'fairer' wages than progressive taxation. Or maybe an argument that the US should be partly funding the Chinese education system

Well, it certainly qualifies as an example of why having a reasonable minimum wage benefits not only low-income workers, but also the wealthy business owners who are complaining about having to pay for it.

I'm not sure what you're getting at with the Chinese education angle.

 

[rocketdodger]

But if you are talking about progressive taxation then you are saying the marginal benefit increases as I get more money?

In other words, if I have $1,000,000 then the 1,000,000th dollar I earned benefited more from the stable society that the 999,999th?

I'm just trying to understand the logic of your argument rather than argue for or against the conclusion.

Yes, that is exactly what I am saying. But it isn't the dollar benefiting -- it is you.

As the number of dollars you earn/own climbs higher and higher relative to the mean of society, the stability of society required to support such a difference goes up and up. Without law and order there is no way groups or individuals could maintain wealth inequality.

Consider a state of total anarchy -- wouldn't a rich individual need to invest disproportionately more and more money in private security compared to a poor individual? The wealthiest would need entire armies of their own in order to protect their wealth from the private armies of the other wealthy, etc.

 

[rocketdodger]

Another way to think about it is simply "how much is it worth to you, for things to remain the way they are?"

Clearly a beggar in India will answer "very little."

I would answer "alot."

Someone like Trump would have to answer "almost everything."

 

[Last of the Fraggles]

I'm not sure what you're getting at with the Chinese education angle.

It was just a consideration that a growing % of US wealth is being generated thanks to labour outside of the US and is less reliant on there being an educated or skilled domestic workforce.

Surely your argument would hold for those too?

Not every wealthy individual gets there by relying on a mass of workers in any case.

 

[Stimpson J. Cat]

It was just a consideration that a growing % of US wealth is being generated thanks to labour outside of the US and is less reliant on there being an educated or skilled domestic workforce.

Surely your argument would hold for those too?

In what way? What exactly do you think the argument would be then?

Not every wealthy individual gets there by relying on a mass of workers in any case.

Maybe not as directly as the example of the business owner who employs a lot of them. Everybody's income is dependant on the economy, and on the ability of other people to be able to both provide and purchase goods and services. So government programs that facilitate the ability of people to provide and/or purchase goods and services not only benefit everybody in the society, but monetarily speaking benefit those with higher incomes more than those with lower incomes. Like I said before, public education is just one example of such a program.

It also doesn't really matter if that income largely derives from another country. In fact, it is hard to imagine a business model that is more dependant on tax-funded government services than international commerce. And once again those with very high incomes will benefit more from the services and programs that facilitate international commerce than those with low incomes.