Progressive Taxes

As I promised Alvin, here’s my explanation of what I don’t like about Ron Paul’s platform. As I have already explained, I believe that there are a large number of roles that government should serve, in aggregate requiring a much larger government than Ron Paul would like. I won’t bore everyone with another discussion of that.

In addition to the issue of the role of government, I also disagree with his position on how the costs of government should be apportioned—i.e. taxes. So, for the rest of this post, I’ll make the case for highly progressive taxes (not so much that there’s a complete redistribution of wealth, mind you).

1. The greater your wealth, the more you’ve benefitted from the American system

I believe people should be taxed in proportion to the benefit they’ve received from the American system. But wait, you may argue, don’t the poor receive more welfare services, and therefore don’t they benefit more? I disagree. This argument first of all characterizes benefits as zero-sum. But I believe that every American benefits from such services—e.g. businesses benefit by having healthy, effective workers who aren’t constantly worrying about paying doctors bills or having a roof over their heads, markets benefit consumers who can spend money buying goods instead of on basic necessities, motorists benefit from mass-transit programs by having less crowded roads, land values benefit because the homeless have somewhere to go so where they don’t create a public nuisance, and so on.

Or, put another way, to determine the benefit each American receives from the American system, one must ask how much of their wealth would exist but for the American system. Think about the impact of stable markets, police forces, protected property rights, intellectual property rights, military forces, freedom of choice (particularly from a consumption standpoint), freedom of speech, and so on in creating an environment in which Americans may accrue wealth. Clearly, all Americans benefit from this system, but a wealthy person has likely benefitted much more from the system than a homeless person.

2. Some wealth must be redistributed to correct deficiencies of free markets

Just a short point, but still important. Employers should have to pay for hidden costs, such as pollution, healthcare and other necessities that keep their workforce alive and so on. Yet, so few do. See my discussion of free markets.

3. Some wealth must be redistributed to overthrow the tyranny of wealth

Obviously, wealth confers great economic power. Nor would I doubt that anyone would argue that economic power translates into political power. Is there any difference between having that kind of power vested in a monarchy and having that kind of power vested in an upper class smaller than it has been in who knows how long? Or, perhaps even more applicable to today’s world, should we allow large global corporations to govern over us? Take, for example, the power of global oil corporations, which, in the interests of preserving their own wealth/power, have for decades now translated their wealth into a political force for unnaturally suppressing the demand for clean, renewable energy, even though clean, renewable energy clearly would bring great benefit to the American people.

4. Some wealth must be redistributed to ensure that America remains a land of opportunity

I believe that the highly progressive taxes present in the middle of the last century served a purpose that “free land” once served for America—giving people a chance to build wealth from scratch. But now, with the wealth increasingly concentrated in the hands of the few, it is becoming increasingly hard for certain segments of the population to create wealth.

Though America is still a system where those born into poverty can escape it, it is a system where increasingly few actually do escape it because escape is just so difficult. We watch movies like "The Pursuit of Happyness" and feel good inside that we live in a land where people can pull themselves up by the bootstrap, but we deceive ourselves into thinking that everyone can do what Will Smith (I mean the character played by Will Smith, of course) did. Personally, I don't know if I'd be able to do what he did, if I were in the same shoes.

Taxing the wealthy to provide services to make it easier to escape poverty would ensure that America does not cease to be a land of opportunity for those who are in poverty. And as I stated before, this is not a zero-sum proposition. When we increase the standard of living for the least of us, we benefit all Americans.