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Reading through the comments on this post and this post by David Henderson I noticed several comments, including from David Cay Johnston, that assert that folks at the top of the socio-economic latter get the largest benefits from being part of an orderly civil society, while those at the bottom get the smallest benefit. This is, it is argued, sufficient information to defend progressive taxation.

Irrespective of what I actually think of this, such inquiry raises two questions. One more interesting than the other.

  1. How do we know that people with higher monetary incomes, or more monetary wealth get the largest benefits from being part of a civil society? Merely saying it does not make it so. It might seem apparent that someone with $1 million in cash in his cookie jar has a lot more to lose from a lawless bandit plundering him than a guy with $10 sitting in a jar, but we need more than intuition here to guide us. But this is, I believe, a narrow view. And it is just as plausible to argue that the lesser monied among us actually benefit more by being part of a civil society (ignore the big question of how the social contract gets executed). I’d encourage your ideas here as to why … I’ll post in the future on some more.
  2. The proposition itself is somewhat of an intellectual swindle. Much like the supporters of a strong state make the unwarranted starting assertion that, “in a world with no government, lives would be dangerous, short, risky, unpleasant.”  But government itself cannot exist without a reasonably vibrant private sector. A simplified view is that the state itself cannot produce anything of value on its own — anything it does is first extracted from the private sector. We could not support a ruling class unless we had a surplus of production outside of the ruling class. If we understand this point, then I can just as well offer the same kind of assertion that the statists do, “in a world ONLY with government, with all of us spending time debating and discussing and analyzing policy choices, life would also be nastly, risky, brutish and short – probably worse than in the “anarchic” world asserted above. And this is no doubt true because if ALL we did was discuss politics we would not be able to grow food or make clothes or shelter. So, who owes whom for their existence? If one views the government as essential to civil society’s existence, is it not the case that good government owes itself to the productive class? And ought not that view imply that it owes itself MORE to the wealthy than the non-wealthy?

I haven’t thought deeply enough through each of these, but at least they are possibilities. And you can bet a dollar to a donut that if you dared express either publicly you’d be leveled with all kinds of unpleasant terms. Or, you’d likely hear something like, “SURELY you don’t BELIEVE that, do you?”

6 Responses to “Defend a Defense of Progressive Taxation”

  1. David Cay Johnston says:

    You describe my points in overly narrow terms, then bring up a silly and irrlevant litigation as a straw man.

    Every classic worldly philosopher has embraced progressive taxation and Gerge W. Bush’s administration trumpeted that as he measured it he had increased it (though on June 5, 2005, they acknowledged this was true only if you ignore the top tenth of one percent, who now earn about a tenth of all reported income).

    The moral basis of progressive taxation was worked out by the ancient Athenians and was intertwined with the birth of democracy. Read FREE LUNCH at Page 279 for a brief explanation. It is arguably the most conservative principle in Western civilization, having endured for 2,500 years.

    My points were about the principle of progressive taxation, not our current incoherent mess of tax law.

  2. Rod says:

    One of the axioms here is that there is a portion of what one earns that is not due because of hard work, initiative, intelligence or risk-taking — and that the more one earns, a larger percentage of those earnings are owed to the government. Actually, that’s a whole bunch of axioms, but who’s counting?

    I don’t know how one could actually calculate all that, especially the part where the percentages go up with more success. Does the government spend more resources (and at a higher percentage rate) to protect Donald Trump from thieves than someone living in a row house on Osage Avenue in Philadelphia? Does it cost more, on a percentage basis, to pick up the trash at The Plaza than at the corner of Amsterdam Avenue and 125th street? I bet that The Plaza has to pay for its own trash removal, and that dose guys up town witout fi dollar in dere pockets just put the trash out and da city picks it up.

    No, I think the reason why every classic philosopher except for John Locke, John Stuart Mill and others in the logical positivist frame of mind has embraced progressive taxation is that they are filled with envy and greed and that they want to redistribute wealth to those who have not worked for it. Willie Sutton comes to mind, in his explanation of why he robbed banks. And also John Gotti comes to mind: whenever somebuddy makes some dough, the Mob gets a cut. Am I missing something here?

    By the way, while we’re talking about straw men and other logical fallacies, the appeal to authority is one of them. What the Athenians did is kid stuff compared to what collectivists have attempted ever since Marx.

  3. Rod says:

    Also, I think the clearest and most convincing thought on progressive tax rates comes from Art Laffer, the inventor of the Laffer Curve. As John Galt knows, there is a point where someone who’s carrying the rest of society on his back says to hell with it and stops producing, period. Even if it’s government’s mission to extract a maximum amount of money from the taxpayers so it can be redistributed to selected classes of individuals (the poor, climate researchers, university professors, etc.) progressive tax rates are not the way to do it. Instead, you have to provide incentives for people to produce wealth, or at least you have to stand out of the way of their pursuit of their rational self-interest and happiness.

    The reason why communism failed in the Soviet Union and in every place else where it’s been tried is that it denies a basic fact of human nature: that people pursue their own rational self interest, and that they don’t willingly submit to be slaves. One can dance around this subject with all kinds of philosophy, but if you assign a flock of workers to reap the wheat in the Ukraine, they will not go at it with the same enthusiasm as an American farmer, whose own money is tied up in seed and fertilizer. When the Russian combine breaks, the combine worker hops off the copy of a John Deere and Allis-Chalmers combine and waits for the combine-fixer to arrive while rainstorms knock the wheat to the ground. The American farmer, on the other hand, knows that if he does not fix the combine himself, he might not get the wheat harvested at all, making it very difficult or expensive to honor his futures contract. This explains why we produce so much wheat in the United States and why the Russians missed their five-year plan objectives all the time.

    Most of us live our lives looking after ourselves and our families first, and then, to a lesser degree, we look after the interests and welfare of others. I think Ayn Rand is wrong to spurn altruism as she does because I think most people who have extra resources beyond what they need to take care of their families also have genuine concern for the poor and for people who could use a hand up. There was a time when private charities and churches took care of the needy, but ever since FDR, there’s been a shift away from support of private charities because many assume they’ve already given at the office in the taxes they pay. And now we run $1.5 trillion deficits annually because the government spends too much taking care of everyone. The solution to these deficits is certainly not to tax the bejeesus out of the 85 percent of us that still have full-time jobs. Any western philosopher, university perfesser or person who fancies himself as a member of the intellectual elite can just write a big check to his church (if he has one) or to a worthy charity, but keep your grubby hands off a higher percentage of the money my boss makes.

  4. Michael says:

    I think it was Milton Friedman or Hernando de Soto (economist, not conquistador) who stated that you want capitalism for the sake of the poor, not the rich; the rich do just fine in any system, but capitalism is the only one that allows the poor to be social mobile. So I guess if a person started out poor and became rich, there is some merit in the arguement for that person, but capitalism also has the tendency to make the rich poor. Those people might be better off under crony capitalism.

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