Collective Conscious

When we set out to tax, what is the best way to go about it? Clas­sic ‘pro­gres­sive tax­a­tion’ advo­cates argue that, in order for a tax sys­tem to be fair, it has to charge pro­gres­sively higher tax rates as a person’s income increases. The rea­son­ing is sim­ple: you obvi­ously have a boat­load of money, and it’s society’s job to use all that money to help pro­vide for the poor­est among us. Down­ward redis­tri­b­u­tion, in other words, is not just nice, it’s the right thing to do, and the gov­ern­ment is one of the most effi­cient providers of things like food stamps, unem­ploy­ment assis­tance, sub­si­dized hous­ing, Med­ic­aid.… etc. What’s not to love?

The answer is: a lot. Con­ser­v­a­tive thought makes the argu­ment that pro­gres­sive tax­a­tion is inher­ently unfair exactly because of the tax-​​rate dis­par­i­ties between high earn­ers and low earn­ers. It’s under­stand­able that the rich pay more, they say, but unfair to ask them to pay a greater pro­por­tion of their income into the system.

How do we resolve that issue? For one, we can take a look at another met­ric, which I would argue is at least impor­tant as using income: wealth. Whereas con­ser­v­a­tives argue that the income redis­tri­b­u­tion effect of pro­gres­sive tax­a­tion is inher­ently unfair, for exam­ple by claim­ing that “the top 1% of house­holds earned 19% of income, but paid over 28% of the nation’s taxes.” When we look at the wealth met­ric, how­ever, the rea­son it’s fair is much more obvious:

Yeah, that’s right, those same top 1% we are sup­posed to feel oh-​​so-​​sorry-​​for pos­sess more than one-​​third of all America’s wealth. And there is no tax on that. (This data is from 2004, so as you can see it has become even more skewed toward the top thanks mainly to the Bush-​​era tax cuts, which by the way added a tril­lion dol­lars to the US debt.) Now we see why ask­ing the nation’s top earn­ers to pay a bit more is com­pletely fair, and, in fact, a bit skewed in their favor.

(Photo: Jeff Sandquist)