Why should the rich pay more?

[one...two...tree 2,762]

Douglas Bashford

Some say, for the same reason reason John Dillinger robbed banks: because that's where the money is. There is some logic to that, the richest 2% control in the ballpark of 40% of the private wealth in the USA. Others say; "Because they can afford it." Others who complain about progressive taxes say it's because people want "revenge on the rich", or it's "class envy". Or they say, "Why should the successful people be penalized?" That is an interesting take on reality.

But there is one argument that is not often seen, the "follow the money", or follow the tax money argument. Simply put, it says you get what you pay for. It says that if you eat a gourmet meal, you have purchased an entire different meal (not just more of it) than for a McDonald's Happy Meal. We claim that progressive taxes buys Rich Boy toys, regressive taxes buy Poor Boy toys. We say fair is fair. To test this idea, we follow the tax money.

Progressive taxes (such as income taxes) pay mostly for Rich Boy toys: Desert Storm, Cold War, gunboat diplomacy, the Fed's infinite labor pool (WANTED: unemployment) and any related poverty, NAFTA, GAT, free trade agreements, interstate freeways, National Parks, FBI, CIA, a hot-shot standing military, etc. And regressive taxes: (mostly local sales taxes and fees) go for Poor Boy toys: local roads, hospitals, schools, local parks, libraries, cops, city/county councils, fire fighting, etc.

If "toys" sounds too flippant, feel free to swap with a term that rings true for you, such as "tools of the trade", or "economic infrastructures."

To oversimplify a bit, a carpenter does not require the Rich Boy toys, and the CEO of GM does not require the Poor Boy toys. And progressive (mostly federal income) taxes soak the rich, regressive (mostly local sales) taxes soak the poor.

So each Boy is largely paying for his own meal.

Libertarians often argue: TAX IS THEFT!

It's human nature to overestimate one's own powers and to undervalue the help we have received. The toys. Perhaps taxes are like any other transaction. A bundled transaction. When you buy a set of tires or a meal at a restaurant, you are paying for employee theft, drunk employees, security, air conditioning, accountants, and stupid business moves, etc. that you may disapprove of, bundled into the cost of doing business and it's not on your invoice. Bottom line: nobody is forcing you to buy the tires or the meal.

Your choice. You can live like a hermit in a shack, eating roots. If you do not consume the toys, likely you will be poor and owe no taxes. But once you have eaten and grown fat you are now in debt. There is no free lunch.

Some say that the American meal is the best meal in the world. If you have eaten of it, pay your debts, and don't try and sneak out the back door.

The tricky balance of money and power.

Taxes are also used to tune the economy.

One of the main functions of taxation is to balance the flow of money between the employer and the employee. This keeps the money from accumulating on one end or the other and crashing the economy or altering the basic structure of democratic capitalism as we know it.

For example, many people argue that in the late 1970's the employees had too much power and money. Their wages were outpacing inflation and they were paying off their debt with little dollars. And that now in the 1990's via the great redistribution of wealth caused by cutting taxes for the wealthiest in half, and "firing the unions", some argue that the employers have too much power and money. History will tell.

What is tricky in this balance is that the power follows the money and the money follows the power. So when the economic scale starts to tip, it tends to accelerate. It's very touchy.

Taxes are also used in other ways to direct the economy. For example, if the government feels that a certain direction is in the national interest, tax shelters may be opened in that direction. This could be of benefit to compensate for the market's well known shortsightedness and directionlessness caused by its preoccupation with short-term gains. (Ten years is not a long time.)

Beware of the so-called tax cut.

The tax cut is a funny way of managing a household. It's like deciding that you are spending too much money, so you ask your boss for a wage cut.

Perhaps the best way to stop spending too much money is to stop spending too much money. What an idea! Fix or cut the wasteful programs.

Sometimes a tax cut is not really a tax cut. That's because there is no free lunch. If a needed program is blindly defunded, then the money has to come from somewhere. Often if it's a federal program that is defunded, the slack is taken up by local (largely regressive) taxes. What we have is not a tax cut, but a tax shift, from the Rich Boys debt onto the Poor Boy's shoulders.

In 1996 a federal across-the-board "tax cut" was popular in certain circles. Here is how cutting progressive (income) taxes might have effected you:

If you made 36K, Dole's 15% "cut" takes $320/year less from you. But if local sales taxes edge up 1% to make up, you just lost money. Beware of the free lunch.

While most Rich Boys don't want the Poor Boys to shoulder their debts, keep in mind that for many of the very Rich Boys, that's part of their job. That's just simple economics.

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[Ban Hammer 13,360]

the big question is, will steven still like high taxes on the rich once he wins the powerball?

[evli1966 88]

the big question is, will steven still like high taxes on the rich once he wins the powerball?

I would question whether he would have to pay those taxes becasue his principles would demand an equal share to everyone.

[sly_wolf 199]

the big question is, will steven still like high taxes on the rich once he wins the powerball?

Would'nt bother me .... hell I would still be rich!

[DEDixon 39]

they should pay more.

what i hate though is the above or below a certain amount. tax at 20% up to 200k and 25% for 200,001 really sucks.

i also think megamansions should be taxed more than the normal property tax rate for the natural resources it wastes. make em pay!

[Obama 2012 1,714]

the amusing part is, is that a rich person is more likely to use less Government services, yet they have to pay the most.... it's hilarious really when you stop and think about it....

[Gary and Alla 3,694]

Fair Tax! The rich WILL pay more.

[mawilson 2,133]

what i hate though is the above or below a certain amount. tax at 20% up to 200k and 25% for 200,001 really sucks.

What do you mean?

[DEDixon 39]

what i hate though is the above or below a certain amount. tax at 20% up to 200k and 25% for 200,001 really sucks.

What do you mean?

20 percent of 200000 = 40000 tax bill

25 percent of 200001 = 50000 tax bill

when they draw a hard line.

[mawilson 2,133]

20 percent of 200000 = 40000 tax bill

25 percent of 200001 = 50000 tax bill

It doesn't work like that.

[rika60607 215]

This is not how it works for the income tax.

In your example, the tax for $200001 would be 0.2*200000 + 0.25*(200001-200000) = $40,000 + $.25 = 40,000.25.

20 percent of 200000 = 40000 tax bill

25 percent of 200001 = 50000 tax bill

when they draw a hard line.

[evli1966 88]

This is not how it works for the income tax.

In your example, the tax for $200001 would be 0.2*200000 + 0.25*(200001-200000) = $40,000 + $.25 = 40,000.25.

ok I am confused.

I agree it doesnt jump that much as ded suggested.

[Jenn! 918]

Fair Tax! The rich WILL pay more.

[Nina~ 431]

the amusing part is, is that a rich person is more likely to use less Government services, yet they have to pay the most.... it's hilarious really when you stop and think about it....

I don't know where you get the idea that the rich don't use government services. They do rely on infrastructure (provided by the government) to make a living. There is a large trucking company that regularly run 18-wheelers down the back roads I use to get home. so why shouldn't the owner pay more taxes especially when they use the road way more than I and their trucks tear up the roads and create more pot holes?

[SMR 368]

Progressive taxes (such as income taxes) pay mostly for Rich Boy toys: Desert Storm, Cold War, gunboat diplomacy, the Fed's infinite labor pool (WANTED: unemployment) and any related poverty, NAFTA, GAT, free trade agreements, interstate freeways, National Parks, FBI, CIA, a hot-shot standing military, etc.

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Why are these "Rich Boy Toys"? Do poor people not want national security or good trade relations? The argument about whether we are spending too much on national security is complicated but I don't understand how it's a rich vs. poor argument. Poor people need protection, too.

And could someone fill me in on what he's referring to with the "Fed's infinite labor pool (WANTED: unemployment) and any related poverty?" I suppose that if the rich are getting richer and you see the economy as 0 sum you could blame poverty on that. But how do you reasonably argue that rich people are paying taxes with the intention of making other people poorer?

I do realize that welfare makes people dependent and contributes to poverty. But I think you would be hard pressed to find a taxpayer (rich or otherwise) who thinks it's a good idea to keep paying taxes in order to keep people in poverty. I'd take the tax break. It's better for everyone.

The other problem is that the author seems to ignore the fact that rich people also pay sales tax. Since they have more money and spend more money, they pay more sales tax. Sales tax is not regressive. In fact, since poor people likely spend a much larger percentage of their income on items that are sales tax free (like non-prepared food and medicine) the poor are likely paying a much smaller percentage of their income in sales tax. The exception is if the rich man is not spending his money but either donating it or investing it. I don't see a reasonable argument for why we would want to penalize either of those activities.

Insofar as the author's "Rich Boy Toys" are equally used by the poor and the authors "regressive" poor people taxes are equally paid by the rich, this article is a worthless pile of horse dung.