Friday, March 03, 2006

 

Income Taxes

The St. Louis Fed just released their March 2006 issue of National Economic Trends.

While these publications generally cover basic economic data from month to month, the first page usually deals with more timely topics. This month it was income taxes.

Federal Tax Burden By Income Group (2003)
Average tax rate (%)

Top 1% was 24.31%
Top 5% was 20.74%
Top 10% was 18.49%
Top 25% was 15.38%
Top 50% was 13.35%
Bottom 50% was 2.95%

Remember, this is just income tax. There is no payroll tax, excise tax, property tax, sales tax, or any of the other various taxes.


Question: How progressive does income tax need to be, to be "fair" or equitable? As a matter of social justice, what is the optimal amount of coercion via income tax?

Comments:
In order to be fair, it needs to be flat. Fair, last time I checked, means "equal treatment under the law." Don't let preogressives steal our language!
 
Well liberal was stolen a long time ago.
So was progressive, fair, equal, justice, and numerous others.

I know I am begging the question a bit with this post, but I figured someone would like to argue that a more progressive income tax "evens" things out between those who have and those who have not.
 
You've met all of us, right? Exactly whom do you expect to argue that position?
 
I was hoping someone would take a shot at the devils advocate. Also, look at my profile view -- somebody other than the four of us is looking at this blog.

Hey..what ever happened to Andrew?
 
I don't think talking about such topics without having some degree of background would be the smartest course of action. One of my peeves, actually, so I just tend to lerk a lot in fear of doing exactly that.

Enjoying the blog though. :)
 
I'll do it.

(step into progressive shoes)

Taxes should be progressive to equalize the "pain" from taxation, that is, the loss of utility from taxation. Since richer people must have lower marginal utilities of income, income taxes must be progressive to equalize the utility loss.

(out of shoes)

Ok guys, that really hurt. Don't make me do that again.
 
Quoting Travis: "rich people must have lower marginal utilities of income..."

Obviously not true. Utility is subjective, therefore, we can't possibly compare between individuals. Thus, we must rely on equality under the law rather than equality of outcome to ensure the greatest justice.
 
(Taking the shoes from Travis)
Rich people have so benefited from the institutional structure of America that it is time for them to give something back to the nation that gave so much to them. They, and the large corporations that they control, ought to give more because they have received more.
(I enjoy dressing like a clown now and then!)
 
There is the argument made by many stating that those who "have" should. Now I think most people can aree with that statement. The problem is that the government doesn't encourage those with more to give, they steal from those that have and give it away.

The State is Robin Hood. Give this a thought...

The idea of Robin Hood gave me such a warm feeling in my youth (and still does now on occassion). The idea of stealing from the greedy rich to give to the poor is so wonderous. And now, we as a culture, appreciate that archetype in the State. Perhaps it explains the love affair with Statism.
 
Now, if Robin Hood were only stealing from the State, from tyranny, would you feel the same?

What should motivate us to help the poor? Guilt or compassion?
 
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