I'm in favour of progressive taxation because not everyone enjoys making money, but everyone should have enough money to participate in most areas of life reasonably equitably.

I don't have data on this, but anecdotally it seems that people who make a lot of money do so not particularly because they want a lot of money, but because they enjoy the whole process of getting it, or they enjoy running a business and having lots of money is a consequence of that. Most of us, on the other hand, hate doing all the tedious things you have to do to make money. But we should be able to do the work that we do enjoy (e.g. caring for others, art, physical work) without the attached stigma, stress, ill-health and disadvantage of being crushingly poor. It doesn't have to be totally equal, just a heck of a lot more equal than it is now. And it's not that the poor have the option necessarily to just follow the example of rich people and get rich themselves if that's what we want. With wealth comes power, and with power comes the ability to restrict the opportunities of others, and keep them working at low wages. Wealth can also buy government policy. Most of us savages don't have the ability, energy, interest or will to fight against that as individuals, and need government to do it on our behalf. (We need a global tax system though so wealthy organisations can't take advantage of differing local tax systems.)

it seems grossly unfair because we are saying to some people: “you have to pay more to get the same service as other folks who are paying less than you — tinman917

Wealthy people should pay more because they are actually receiving more services and better than poor people. How can that be?

Government is, as Karl Marx noted, a committee to organize the affairs of the Bourgeoisie (aka, wealthy people). Government provides many services which help wealthy people do business around the world. Sometimes these services are as crude as gunboat diplomacy, but usually the services are subtler. If it had EDIT: not been for the US Government deciding in the 1930s that control over Arabian (and other) petroleum reserves was a critical requirement, a great many fortunes in petroleum would not have been possible. That's one example.

Another example of government assistance is the construction and maintenance of ports and transportation facilities (especially highways). Everyone benefits from these services which facilitate trade, but they are a huge help in accumulating fortunes through trade.

Government activity designed to facilitate business is everywhere. Take the last Great Recession. Had it not been for a huge government bailout of very big financial firms, a lot of very rich people would have ended up broke.

Regressive taxation has been extremely helpful in assisting wealthy people getting much wealthier.

Get the picture?

The question is: what exactly is the reasoning behind the principle of progressive taxation? — tinman917

The government needs money and the rich are better able to provide this money than the poor.

I highly encourage anyone considering posting here to first consider how ruinous increasing taxation on the rich will be. They will not be able to spend their hard earned money they achieved through exploitation on vital necessities such as a fifth home along the Mediterranean, building a spaceship so they can go to Mars, getting handjobs from high-end prostitutes, and donating to political candidates in order to reverse the progressive taxation. Shedding a tear thinking about it.

Or are we saying to wealthy people we think they should pay more because we think that their wealth has not been fairly acquired? If that is the case then why not just take steps to prevent this unfair acquisition. Rather than let it happen and then commit some other act of (apparent) unfairness in the form of progressive taxation. Two wrongs don’t make a right. Or do they? — tinman917

I think you are right in saying we are trying to fix the symptoms of a problem instead of the actual problem. There are people who have earned every dollar they have, and they certainly deserve more reward for more work, however, there are also people who have gotten their fortune in ways that don't justify their wealth.

I think a major problem with world economics is that value is tied to level in a hierarchy instead of the importance of work. How many dollars an hour is a teacher worth? What about a CEO? Importance to society should be considered when paying people, and importance doesn't always go up with position. For sure it does sometimes, but certainly not always.

In my humble (maybe wrong) opinion, people should be paid as much as they contribute to society. Of course, that is easier said than done. Wages would certainly fluctuate by year, depending on the need for certain jobs, new fields opening up, and resource production. This would also have to be a world without corruption, where people don't or can't use authority over others to expand their authority. I do think that it is fair for everyone to be owed the equivalent of their contribution, however. If you did work equivalent in difficulty and necessity to create a boat, you should be able to have a boat.

Something like this might also let us control inflation. Work that was valuable twenty years ago would be just as valuable now in monetary form. I think that if you are an award-winning scientist in 1980, you should be paid comparatively in 1980, and if you want to buy a new home in 2024, I would say that your significant contributions to your field should justify being able to buy that. Same with someone else who did something just as great in 2019 and wanted to buy a house in 2019.

The question is: what exactly is the reasoning behind the principle of progressive taxation? Are we saying to wealthy people that they have to pay more just because they can? — tinman917

Yes.

That doesn’t sound right. — tinman917

That's your problem.

And actually mine.

I personally remember paying in the early 1990's from an income less than 12 000$ a tax rate of 72,5%, which was the highest rate in the country. I asked why from a tax official and she didn't know the reason. The experience stuck with me: progressive taxation is against me personally. It is not only for the filthy rich or the multi-millionaires, but against me and the middle class.

Now the top tax rate is here 50%, but of course then you have the value added tax etc. And they are currently thinking of a wealth tax of 0,1% to be paid if your investments or money in your bank account is more than 100 000 euros, even if those investments don't produce any profits. The reason they give is to reduce wealth inequality.

(On a different thread somebody gave me some advice about what to do when respondents on a thread I have started fail to stay focussed on the content of the original post. The advice I got was: “Then you bite their head off for straying from the topic”. So here goes.)

You start off with “I'm in favour of progressive taxation because”. But I didn’t ask if you were in favour of it or not. I asked what the reasoning behind it was. I know I’m being a bit silly here and sure I understand that you probably just mean that you think that the reason why you are in favour of it is just the same as the reasoning behind it but still I want you to start your reply with something like “I think the reasoning behind progressive taxation is ...”. Can you do that for me? Of course I did still try to read the rest of your post but I found it really confusing. You say: “not everyone enjoys making money, but everyone should have enough money to participate in most areas of life reasonably equitably”. So is that two lines of reasoning then? First: wealthy people should pay more because they enjoy making money. (But then what about the ones that don’t?) And second: poorer people should pay less because they have a right to “participate in most areas of life reasonably equitably”. Can you re-write your post more clearly? If there are two reasons then can you set them out separately? And then later I think you present another different argument based on the idea that it’s not true “that the poor have the option necessarily to just follow the example of rich people and get rich themselves”. Sorry to be so picky but it’s just I’m having difficulty in parsing your response. (In the meantime I will try to read it again later and I expect it will become clearer then.)

You say “Wealthy people should pay more because they are actually receiving more services”. But my question was a general one. That’s why I deliberately gave the Jack and Mary example where the only difference is that Mary works double the hours of Jack. And there will be plenty of other cases like this. So your response kind of misses the point of what I was asking. ... Also when you say: “If it had been for the US Government deciding in the 1930s” do you mean “if it HADN’T been”.

You say: “The government needs money and the rich are better able to provide this money than the poor.” You have just stated a point to which I have already presented a counter-point, so that’s no good to me. I already said in my original post “Are we saying to wealthy people that they have to pay more just because they can?” and then responded to it.

Yeah, funny.

I will try to respond to subsequent replies later.

You say: “The government needs money and the rich are better able to provide this money than the poor.” You have just stated a point to which I have already presented a counter-point, so that’s no good to me. I already said in my original post “Are we saying to wealthy people that they have to pay more just because they can?” and then responded to it. — tinman917

Your “counter point” isn’t really a counter point. You asked for the reason and I gave it to you. You might think it unfair, but it is nonetheless the reason.

Correct: HAD NOT rather than HAD.

Your focus on the sad case of Jack and Mary is trivial. A very large number of workers could work twice as many hours as somebody else and their higher income wouldn't put them in a higher tax bracket. Besides, you didn't specify how many hours either of them worked, or what their wages were. If Jack worked 1 hour for $10, and Mary worked 2 hours for $20, they would be in the same tax bracket.

In general, the American tax system is regressive, because the effect of the tax burden is heavier on lower income workers than on high income workers, or people who live off rent and dividends. Taxing someone who earns $50k and supporting 3 other people at the rate of 30% is much more onerous than taxing someone who earns $1,000,000 a year at 30%, even if they support 6 people.

Also, the services individuals receive from governments varies over time and place. Children receive educational services that adults don't. Disabled people receive services that able-bodied people don't. People receiving dialysis receive financial assistance that 99% of the population don't receive. And so on.

Progressivity and regressivity of taxes also changes over time. It depends who controls the Senate and House with veto-proof majorities and which side of the bread the politicians think has the most butter.

My apologies, tinman917, I will write a better post when I have a moment, probably tomorrow.

That's OK. It's probably me who should apologise. For being such a giant fusspot.

Yeah, you're right. It is a trivial case. But you try telling that to Mary and see what you get! I can flesh out the example if you like. Say Jack is under the threshold and pays zero tax. And Mary is in the first bracket and so pays, let's say, $1,000 dollars a year. Other than that their situation is perfectly identical. (So there is no difference in their level of government service use.) Mary asks me: "hey, why am I paying and Jack pays nothing?". What do I say to her? The only answer I can think of is: "sorry Mary but the tax system is a blunt instrument and we can't fine tune it to cover your circumstances."

Wealthy people should pay more because they are actually receiving more services and better than poor people. — Bitter Crank

Maybe, but I doubt that's the real basis for the progressive tax system. I think the real reason is simply that the wealthy can afford to pay more taxes without much personal suffering.

There are no doubt wealthy people as you describe: industrious and who use more than their fair share of government resources. There are other old money folks though who just sit atop their money and use limited resources. You wouldn't suggest those folks be given a tax break?

You wouldn't suggest those folks be given a tax break? — Hanover

They already have received a tax break. Low inheritance taxes (or quasi legal dodges) is one of the reasons they have a pile to sit on in the first place.

But yes, the reason we tax rich people more than poor people is because that is where the money is. We just don't tax them enough.

Never mind about examples. I know ALL ABOUT IT from personal experience. I've never made much money, but on quite a few occasions a slight hike in income has put me in a slightly higher tax bracket. How about this for unfairness: my property tax (a hefty chunk which goes to support city and county services--it's as much as health insurance and co-pays) goes up because my assessed value goes up, even though I haven't done any value-raising maintenance to the house in 25 years.

Still I don't complain too much about taxes. The local government operations provide a lot of the services that make a difference to the quality of life here (like transit, police, fire, welfare, libraries, schools (not sure if the schools are helping very many) street cleaning and repair, health services, and so on. So do the feds: ss, medicare, medicaid, disability, defending America from Iranians who would otherwise force us to buy their entire pistachio crop a high prices, and so on.

I'm retired, so I'm not paying federal taxes--finally. Yes, the tax system is a blunt instrument, and those can be very painful.

What’s the reasoning behind progressive taxation? — tinman917

I don't know. This is less ignorance on my part, and more a reflection of that fact that reasons vary depending on who you ask.

On the face of it, it seems to be obviously a good thing. It assists the most vulnerable in our society and that kind of thing.

That's one reason, and I agree with it.

But then, on the other hand, it seems grossly unfair because we are saying to some people: “you have to pay more to get the same service as other folks who are paying less than you”. (It’s like going to buy food at the store and the prices depend on how wealthy you are.)

Yes, it is unfair in one sense. But it is fair in another, because one could argue that a cabbage should cost 3% of your daily income. That way everyone would have equal access to cabbages, regardless of income.

Or are we saying to wealthy people we think they should pay more because we think that their wealth has not been fairly acquired?

I don't think so, for the reasons you give. I suspect most people in favour of progressive taxation would think the correct remedy for this would be stronger regulation and enforcement, and progressive inheritance tax, rather than progressive income and corporation tax.

You say: “not everyone enjoys making money, but everyone should have enough money to participate in most areas of life reasonably equitably”. So is that two lines of reasoning then? First: wealthy people should pay more because they enjoy making money. (But then what about the ones that don’t?) And second: poorer people should pay less because they have a right to “participate in most areas of life reasonably equitably”. Can you re-write your post more clearly? — tinman917

What I'm getting at is that what we enjoy doing is not wholly in our control. Imagine two people are born in roughly equal material circumstances, and due to genetics and environment, one of them grows up with a passion to act in the theatre, and the other a passion for manufacturing cars and managing a large workforce. They both follow their passion, the actor is extremely poor and suffers a lot, and the wealthy car manufacturer has a great time. It's not realistic for people to say "But that's fine, they both had equal opportunities. If the actor wanted more money he should have chosen to be a car manufacturer." I don't think the actor realistically had that choice. Lets say he did somehow decide to manufacture cars. First, he'd hate every minute of it. Second, he'd likely be shit at it and fuck it up. He doesn't really have the choice to be the car manufacturer, because it's just not his thing. Progressive taxation solves this problem because the car manufacturer will effectively be subsidising the actor. That's fair in one sense but not in another. However, I don't think we should get too hung up on fairness as the highest value (although it may still be somewhat important). I think the highest value here is allowing and supporting people to flourish, and to do their thing, whatever that turns out to be. That way we get good cars and good theatre productions, and no one is made miserable or thwarted in the process.

(I hope that's clearer, but it may not be. I welcome your criticism as it has made me thing a bit harder. I find philosophy about practical matters like this much harder than very abstract metaphysical stuff.)

The question is: what exactly is the reasoning behind the principle of progressive taxation? — tinman917

The answer is that without a society there can be no accumulation of wealth. Those who benefit the most have the greatest debt to pay. It is that simple.

I highly encourage anyone considering posting here to first consider how ruinous increasing taxation on the rich will be. They will not be able to spend their hard earned money they achieved through exploitation on vital necessities such as a fifth home along the Mediterranean, building a spaceship so they can go to Mars, getting handjobs from high-end prostitutes, and donating to political candidates in order to reverse the progressive taxation. Shedding a tear thinking about it. — Maw

Whew, thanks for the reminder. I get so caught up thinking of how to reduce the suffering of the poorest individuals in our society that I often forget what must be sacrificed.

Yes, somewhat clearer thanks!

You say: "Never mind about examples. I know ALL ABOUT IT from personal experience." Which means: "I don't want to talk about what you're talking about, I want to talk about what I want to talk about, so shut up and listen".

You say the reasoning is "Those who benefit the most have the greatest debt to pay." But that doesn't apply to why Mary has to pay more does it?

You say the reasoning is "Those who benefit the most have the greatest debt to pay." But that doesn't apply to why Mary has to pay more does it? — tinman917

Certainly applies. It's a standard. Individual situations inform the judgment. Mary's is an unknown one.

what exactly is the reasoning behind the principle of progressive taxation? — tinman917

Basically, it's From each according to their means; to each according to their needs. It's a communal insurance policy. Some of us are better able to take care of ourselves than others. So those who can - and have - help out those who can't - and haven't. Love thy neighbour, if you like? It's not that the poor are scroungers, or that the wealth of the rich has "not been fairly acquired", but only that some of us will always succeed more than others. It simply comes down to whether you are willing to go with the team, and support our weaker members, or whether you don't care about anyone but yourself.... :chin:

You say: "Never mind about examples. I know ALL ABOUT IT from personal experience." Which means: "I don't want to talk about what you're talking about, I want to talk about what I want to talk about, so shut up and listen". — tinman917

Sorry. Quite often text comes across as harsher than verbal communication in person does. One would soften the effect of the same words with expression. What I meant to say, softly, is that after paying taxes for 5 decades and seeing how it works on a person to person basis, I understand what you mean.

Is a progressive tax system better for a government than a fixed rate system?

When asking the question if progressive taxation is better than fixed rate taxation to gained tax revenue, one should remember that there are many other very important variables that have a major impact just how much tax revenue is gained. First of course is the economic cycle, the whole competitiveness of the actual economy and so on. The idea of Laffer curve is also a bit dubious, because these things simply aren't at all so simple. The idea that lowering taxes would increase economic activity and in the end get more is quite of a stretch. Yet also to raise dramatically the tax rate doesn't get you a 1-to-1 ratio increase in tax revenue.

What progressive taxation does do is dent a little bit wealth inequality. Yet the real thing that decreases wealth inequality has historically been a severe economic depression. So strange and complex is the economy.

What’s the reasoning behind progressive taxation? — tinman917

Perhaps the reasoning includes some measure of recognition that higher incomes are at least partially dependent on the efforts of others. No one is wealthy from their own effort alone.

If by virtue of experience and success, I advance up the economic chain, am I more valuable? Perhaps. Am I indispensable to the process? Unlikely. My value derives from the informed leadership I provide others. Does my value then depend on the productivity of others? Of course. In their absence, would I be valuable? No, of course not, nor does the financial benefit follow the value of each individual.

Unlike those at the bottom half of the economy, the upper quintiles benefit from investments that grow without any effort by the investor but completely dependent on the labor of others. That's not the same as working more hours.

Tax laws and industry regulation seek to fan the flame of corporate growth (favoring the wealthy more than others) with the national debt growing at about the same rate. The deficit and indebtedness burden the lower half of households disproportionately by limiting services, benefits, etc..

Resource extraction provides an interesting contest between landowners and product producers (corporations bigger than countries), and subsequent generations are left with the fallout.

Is progressive taxation, then, perhaps just one of many attempts to balance our economic process?