Is The Income Tax Unfair To Rich People?
One of the hallmarks of the ideological Left since the late nineteenth century is the shared belief that it is more than fair to tax the incomes of rich people at much higher rates than wage earners are asked to pay.
Generally speaking, Leftists believe that a country's tax code should be based on the principle of 'equality of sacrifice.' As guiding principles go, I have long believed that this one is intellectually unassailable.
But in spite of the virtue that I and others have seen in it, the bottom-line political reality we are dealing with is that most rich people believe that the Income Tax is unfair to people like them.
I have recently published an article on my website which directly addresses this head-scratching phenomenon of self-pity among the ranks of the privileged elite: "Is The Income Tax Unfair To Rich People?"
Here is a rather informative excerpt:
We begin by looking back at the last time Congress decided to dramatically increase the top marginal rates that the richest Americans were required to pay on their incomes..
The year was 1932, in the depths of the Great Depression. At that time Congress increased the Income Tax's top marginal rate from 25% to 63%. Fours years later, it was raised again to 79%.Just how bad did it get for the country’s millionaires, once the government started to take huge amounts of money away from them? Answer: they got along just fine.
When we look at what actually happened to rich people at the time, it becomes clear that dramatically increasing the tax obligations of these people did not actually inflict any kind of real suffering on them at all.
In the years that followed the 1932 tax hike, none of the mansions, or the yachts, or the beachfront property disappeared. Throughout the Great Depression, rich people still owned all of the economy’s luxuries and they continued to enjoy them fully.
They may have had fewer disposable dollars to throw around than they used to, but that just meant that they were able to get all the luxuries that the economy produced at lower prices.
You see, in spite of the much larger tax bills they were paying, rich people still had the highest disposable incomes in the land, and in a market economy, that’s all the money you need to claim the scarcest luxury goods & services that the economy brings to market.
Why this is true is something that becomes apparent once you’ve learned a thing or two about how market economies determine prices...
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At this point I present a short tutorial on the dynamic process through which markets set prices, which is actually quite crucial to understanding why some gains in income will actually provide a household with improved purchasing power while others will not.
The balance of the essay presents a completely new perspective on the subject of tax fairness, providing the reader with an expanded understanding of how tax hikes and tax cuts ultimately impact the purchasing power of households.
With an improved understanding of the determinants of purchasing power, we are able to establish with absolute certainty that imposing steeply progressive marginal tax rates on the 1%-5% income earners will not 1) deprive them of any of their material possessions, and it will not 2) deprive them of any of their purchasing power in the marketplace.
So even the 'Equality of Sacrifice' argument falls to the wayside at this point, since it is revealed that even steeply progressive income tax rates will actually impose no material sacrifice whatsoever on the richest of taxpayers.
One never knows, of course, but I suspect this is one approach which has the potential to eventually turn millions of rich people into de facto Leftists who have come to understand that the Income Tax is actually their friend, and not their enemy.
We shall see...
Comments
I have long believed...
...that the the only chance the Left really has of actually getting a pro-worker economic agenda passed by Congress is if a significant minority of rich people can be persuaded to take up our cause.
In other words, we need to divide our monolithic foe into two opposing camps: the Good (=Smart) Rich vs. the Bad (=Stupid) Rich.
We don't actually need an absolute majority of rich people taking up our cause, but only a loud and confident minority that will openly ridicule the Bad Rich for their stupidity in opposing the Income Tax.
We do already have a smattering of rich people speaking up for us every once in a while, but I have a feeling that, with a compelling economic argument that defines the Income Tax as a supremely fair method of taxation, those numbers will begin to grow significantly.
James Kroeger
@James Kroeger
So the rich must always run policy and must be appealed to, so that they ideally agree to abide by the laws and requirements of a democratic society? Too bad there's no actual democratic government to ensure that everyone - themselves included - is equally subject to a just law. And less indoctrination, making the wealthy appear to many Americans, as well as their politicians, as some form of extra-exceptional power beyond human or legal control...
On the other hand, income tax applying to virtually all (one way or another) is about the only progressive tax, (bad word!) one which is relatively fair and was not intended to cast the larger burden on those least able to afford it.
So of course it's 'unfair' to those having the most (that of the wealthiest being too-often gained because drained from others or from natural resources belonging to the people, in which I include the burden of 'cost-cutting' and health-destroying industrial pollution) and therefore intended to pay the most, albeit in a smaller percentage of their disposable income, of which the poors and many middles typically have none...
Edited for a lack of equilibrium in punctuation...
Psychopathy is not a political position, whether labeled 'conservatism', 'centrism' or 'left'.
A tin labeled 'coffee' may be a can of worms or pathology identified by a lack of empathy/willingness to harm others to achieve personal desires.
Uhh....
I guess my reply went down below...sorry...
James Kroeger
It's a belief among many
that the rich will make it possible to survive the coming global catastrophe that is called Mother Nature.
Oops. There are an equal amount that believe it will be the aliens that save us. So don't worry.
Even if the rich bleed all they have, it's all but guaranteed that the money they have, based on little to nothing materially, wouldn't do any good.
Welcome to the shell game.
Regardless of the path in life I chose, I realize it's always forward, never straight.
Wow...
Did you mean that the money that the rich could theoretically give up to the government would not be enough to prevent an environmental catastrophe? Perhaps not.
But then again, maybe so. At least there would be a chance that something approaching a political consensus could be achieved. With some of the political obstacles removed, it might be possible to pursue some really helpful initiatives.
You've got to understand: the only reason why the wealthy have opposed 'Big Government' is because they have wanted to minimize the amount of dollars that Congress will ask them to contribute in taxes. If they weren't bothered by that, they wouldn't care at all about the size of the government.
With no sound reason to avoid higher tax rates, it seems reasonable to expect that Congress would be willing to spend more money on wind and solar, our ultimate salvation, yes?
James Kroeger
Maybe I wasn't clear enough.
Show me the money. There is none. It's all speculation on what may happen.
When all bets are called in, as will happen when the proverbial squat hits the fan, there will be nothing but speculation to show for it. It's a game. There is no there there.
Should I have called it musical chairs? Nope.
There will be none to sit in the last chair.
Regardless of the path in life I chose, I realize it's always forward, never straight.
@Pricknick
Lots and lots
Of data dots,
But nothing real
to fill the pot.
Paper and electrons
In a real catastrophe -
Electrons vanish with the lights
And bills - mere toiletry.
So when the power fails us
And technology kerputts,
The rich can use their dollar bills
To wipe their own damn butts.
They sneer at social turmoil
And the dying of the Earth
But when the food supply runs out
It's by the pound, their worth.
Someday we're gonna eat the rich
Because they're nice and fat
There'll be enough to go around
And share them with our cats.
Damn it, Siouxsie has to finish and sing this... like an eerie Banshee, of course.
Edit: missed a comma...
Psychopathy is not a political position, whether labeled 'conservatism', 'centrism' or 'left'.
A tin labeled 'coffee' may be a can of worms or pathology identified by a lack of empathy/willingness to harm others to achieve personal desires.
Well, strictly speaking....
...all of the money that is collected for taxes was money that was actually earned by the household that year. If the government gets that money, it will be spent (and it could be spent on worthwhile projects that create real wealth for society).
Now if you're talking about calculated net worth, based on market prices of assets, then you are quite correct to say that much of that calculated asset wealth would disappear if/when most of the owners of those assets try to sell them at the same time. The could/would lose zillions of dollars of 'wealth' overnight, but the assets themselves would still exist and they would still possess their own 'inherent worth.'
Still don't feel that I'm fully grasping your initial point, but I think I'm getting closer.
James Kroeger
The debate about how much taxes the rich should pay
misses the real point imo. Taxing the rich seems like such an avoidance tactic, a way of putting off what should have been done long ago, stopping how they get so fucking rich. It's like, "ok, we'll let you stay supremely rich, be able to buy all your yachts, mansion and islands, but you have to contribute a little more to us serfs".
Similar to the proposals to tax wall street gambling transactions at .01% per transaction or something like that. It permits them to continue their illegal and immoral gambling scams in exchange for a little cut.
I think it's settling and we shouldn't settle any longer.
@Big Al
If they weren't allowed to enrich themselves by depredation upon other people, society and the environment, leaving the public to pay health and other costs, almost nobody would be insanely, billionaire wealthy, and we wouldn't be facing the end of life on the planet.
That, along with fair taxation and keeping self-interests out of public policy, would have pretty much covered the basics and allowed for not only our survival but probably a decent life for all.
Psychopathy is not a political position, whether labeled 'conservatism', 'centrism' or 'left'.
A tin labeled 'coffee' may be a can of worms or pathology identified by a lack of empathy/willingness to harm others to achieve personal desires.
I'm all for fair taxation, progressive taxation,
but the way our financial system works now, the Wall street hedge funds, derivatives, the corrupt stock market, etc., the rich are getting supremely rich through smoke and mirrors, on paper. That has to be stopped before anything. I don't think we should support higher tax rates without first demanding an end to the Ponzi schemes and scams and Wall street corruption first.
Or maybe we could do it at the same time, like with everything else, a revolution. Take it all down.
Don't know...
...what exactly you mean by this:
"
"
Avoidance tactic? Actually Al, it's a corrective action to fix imbalances that occur 'quite naturally' in market economies.
In market economies, money tends to collect on the 'Supply Side' of the economy. Why? Because sellers always charge whatever price the market will bear, and most people on the bottom half of the ladder will spend what they have to get the things that they want.
Economies of scale and other 'tricks' of market players in hot competition make it possible for huge profits to be made. What the rich do with all their extra dollars is save it, i.e., remove it from the economy and that gradually deprives the Demand Side of the economy of cash that it would otherwise use to sustain demand, if it had all been returned to the DS in the form of wages + compensation.
Taxing the rich is absolutely necessary in order to make a free market economy function in a healthy manner over time.
James Kroeger
@Big Al
I couldn't agree more! And fair taxation would involve such as that suggested tax on such high-speed transactions...
Psychopathy is not a political position, whether labeled 'conservatism', 'centrism' or 'left'.
A tin labeled 'coffee' may be a can of worms or pathology identified by a lack of empathy/willingness to harm others to achieve personal desires.
Well....
If opportunities do not exist for us to win over some of the wealthy to our cause, then perhaps things really are as bad a some say they are, and the only alternative left is torches and pitchforks and brute force.
As utterly cold-hearted as many rich Republicans are, I am convinced that a good half of the super-rich would like to see themselves in positive, moral terms, even though they are prone to hypocrisy and an exaggerated sense of their worth to society.
It's like when the most vocal critics of white racists are white moralists. Like when actual 'liberal' Jews criticize the Zionist agenda in Palestine. The most effective voices we will be able to muster to convict the Bad Rich for their Sins (= Stupidity) are those of rich moralists.
I'm hoping for possibilities in this direction. Civil wars are the most costly wars to a civilian population. I entertain a lot of revolutionary ideals and advocate some very revolutionary directions, but I'm no street-fighting revolutionary who wants to engage in pure class warfare. The working class always pays the highest price for any war.
James Kroeger
@James Kroeger
If a democracy has a government so corrupt that it will not enact fair tax law, so that - the public being denied any chance of electing actual democratic government officials - the suggestion must be made that some of those capable of bribing the corrupt government to shift their tax burden to the poorer must be convinced to voluntarily pay tax... what more can I say without vomiting?
Psychopathy is not a political position, whether labeled 'conservatism', 'centrism' or 'left'.
A tin labeled 'coffee' may be a can of worms or pathology identified by a lack of empathy/willingness to harm others to achieve personal desires.