[Dr. Ffreeze]

Hello All,

I have been perplexed about what some people is fair and right regarding different tax plans. I thought I would come here and ask those that supported such plans for some enlightenment. I would better like to understand the thought processes and reasoning's, because right now I am at a loss. Here is the scenario...

(please do not focus on the exact numbers, they are just used to illustrate a point)

Steve works 40 hours a week and makes $40,000. He pays 28% tax. Steve wants more money so he gets authorization to work overtime and now works 80 hours a week and now makes $100,000. He pays 28% tax on the first $50,000 and 38% tax on the next $50,000.

Why would the government have any more right to the 2nd $50,000 than the 1st $50,000? Steve is the one working harder, why does he not get taxed at the same rate? What is the reasoning?

Please enlighten me, =)
Dr. Ffreeze

[pax]

Ya those numbers do give an impression that in the US you pay a lot of income tax. Tax bracket in canada is 8g to 31 g income 26% (with quite a few deductions tho) 31-50 (33%) above that 39% and im including both fed and provincial tax. (cept you guys in alberta you pay no prov income tax thank the oil god).

Incomes taxes are a bell curve and middle class which does arc into the upper middle income earners are much too taxed. However past a certain level of income it drops dramatcially especially if you are in business.

[arjan de lumens]

A given amount of a person's income goes to subsistence costs, such as costs of food, electricity, housing, that sort of stuff. Beyond subsistence costs, the remainder of the income in general goes to either savings accounts or luxury items. High taxes on the part of the income that goes to subsistence costs tend to make life substantially harder for many people (especially for people with income only matching subsistence costs), whereas high taxes on the remainder of the income are merely an annoyance - for this reason, it is often perceived fair that the first $10K-$20K or so of your annual income are taxed lightly, whereas any further income is taxed harder.

At least, that is a common argument here in Norway, where people are *proud* to pay ~40% income tax.

[Dr. Ffreeze]

arjan de lumens,

for this reason, it is often perceived fair that the first $10K-$20K or so of your annual income are taxed lightly, whereas any further income is taxed harder.

Hmm, well I understood the reasoning for the 1st tax bracket as it takes so much just to live, so the taxes are lighter. I just didn't understand any tax rate increase after that.

Thankx,
Dr. Ffreeze

[Joe DeFuria]

Originally Posted by Dr. Ffreeze

Hmm, well I understood the reasoning for the 1st tax bracket as it takes so much just to live, so the taxes are lighter. I just didn't understand any tax rate increase after that.

Well, the "Progressive" tax system is basically an extension of that concept. There's a base standard of living, and as you make more and you can afford more things, the less and less of what you're buying, you "need" to buy (and so the more you can afford to give to the government.)

I don't think a progressive tax system is particularly fair...but on the other hand I don't have too much of a problem with the concept per se. The problems I have wrt taxation usually stem from the following:

1) We are taxed too much in an absolute sense...the government is too big.
2) I feel our current implementation is a bit too progressive.
3) When it comes time to consider raising or lowering taxes...people cry "FOUL" whenever those that have been disproportionally paying MORE the whole time, get a PROPORTIONAL treatment.

It's not that I mind so much paying a higher proportion of my salary. Though I certainly think a flat tax or nation sales tax is more fair.

It's the utter lack of gratitiude and respect toward those who ARE paying the tax bills, tend to get from those who aren't, that really bugs me.

[notAFanB]

At least, that is a common argument here in Norway, where people are *proud* to pay ~40% income tax.

ur kidding us?

[Dr. Ffreeze]

Joe DeFuria,

Very good summary Joe. I would agree with you.

There's a base standard of living, and as you make more and you can afford more things, the less and less of what you're buying, you "need" to buy (and so the more you can afford to give to the government.)

Hmmm. I guess I probably just draw the line differently than others. I would think that once you are not starving and have shelter you should basically be on equal tax paying terms. Or in other words, once you make it to middle class, you have just as much right to the money you make as someone in upper class.

Specifically, why does the government have a right to more upper classes money than middle classes? I see that you said Joe that less of what you are buying are things that you "need", but that really ends at middle class when you have food, shelter, water, and probably a few cars.

Still pondering, =)
Dr. Ffreeze

[Joe DeFuria]

Originally Posted by Dr. Ffreeze

Or in other words, once you make it to middle class, you have just as much right to the money you make as someone in upper class.

Oh, I agree with you. The question is, where specifically do you draw the line between "not enough money to get the things you need", and "enough money?"

The progressive system is one way to prevent having such a hard line. A comprimise if you will between "$5,000" is enough, and "$100,000" is enough.

I basically "accept" a progressive system on that premise: as a comprimise between where people would draw the line at "enough" income.

And again, I think our current system is indeed overly progressive.

[Dr. Ffreeze]

Joe DeFuria,

The question is, where specifically do you draw the line between "not enough money to get the things you need", and "enough money?"

The progressive system is one way to prevent having such a hard line. A comprimise if you will between "$5,000" is enough, and "$100,000" is enough.

Hmm, that makes sense.

I basically "accept" a progressive system on that premise: as a comprimise between where people would draw the line at "enough" income.

Ahhhh, again interesting. I can understand that.

And again, I think our current system is indeed overly progressive.

I agree.

Thanks for all the comments guys,
Dr. Ffreeze

[zidane1strife]

It's the utter lack of gratitiude and respect toward those who ARE paying the tax bills, tend to get from those who aren't, that really bugs me.

Those at the top of the pyramid already enjoy the prestige, and financial independce that the rest of the 'slaves' give them. They don't have to worry as much, if they get sick/don't/can't work for 6-12months+ many of those with the most wealth have nothing to worry about... those at the bottom, the working 'brain washed' consumer force are the ones maintaining the system.

Luck/Circumstances/etc(genes/intelligence/family/corporate success/ being there at the right time and the right moment, etc), has placed them above the rest of the pop. who are in effect sustaining the system not with status or money, but with sweat(cleaning your toilet/serving your food/helping manufacture your car/house, etc)

Specifically, why does the government have a right to more upper classes money than middle classes?

Because like it or not, they are the ones at the top, when you're at the top you shouldn't complain.

If I own dozens of corporations and have billions in the bank, something HAS TO BE DONE. Or else my descendants("and I during my lifetime"), will accumulate ever more wealth at the expense of the lower classes.

It's like a monopoly, the richest are the ones with the most $$$, we need to some times split/weaken their wallets for others to be able to rise to the top.

Look if I'm smart, I have the resources, and I know how to invest.... What's to stop me? I'll just amass more and more, and at the cost of whom? At the cost of my fellow humans' well being, everytime I get richer they'll get poorer.

In a perfect world all would be on top...

[Legion]

Well i think Zidane is trying to incite some one's wrath. Perhaps Vince, Democoder, or Joe ought to draw straws as to whom gets to dispatch you.

[Joe DeFuria]

Originally Posted by zidane1strife

Those at the top of the pyramid already enjoy the prestige, and financial independce that the rest of the 'slaves' give them.

I disagree. No one GIVES me anything. I have financial independence because I am earning it.

I'm not looking for prestige. I'm looking for respect, or at least a lack of contempt.

They don't have to worry as much,

Because I work and educate myself to a degree where I lessen the chance of my earning power diminishing...

if they get sick/don't/can't work for 6-12months+ many of those with the most wealth have nothing to worry about... those at the bottom, the working 'brain washed' consumer force are the ones maintaining the system.

Yes, because the "brain washed" force are the ones supplying the jobs?

Luck/Circumstances/etc(genes/intelligence/family/corporate success/ being there at the right time and the right moment, etc), has placed them above the rest of the pop.

Interesting how you lumped "intelligence" and "corporate success" with things like "luck, being at the right moment", etc. I guess things like hard work, eductaion, re-education, have no bearing?

...who are in effect sustaining the system not with status or money, but with sweat(cleaning your toilet/serving your food/helping manufacture your car/house, etc)

All services and products that I pay for. I don't pay them with sweat. I pay them with money.

Because like it or not, they are the ones at the top, when you're at the top you shouldn't complain.

Please....define for me "the top." Where is this magic point where one makes enough money that he should't complain about others stealing it from him?

If I own dozens of corporations and have billions in the bank, something HAS TO BE DONE.

Why?

Or else my descendants("and I during my lifetime"), will accumulate ever more wealth at the expense of the lower classes.

You mean, by making investments, buying products, and employing others such that they can make a living, and give themselves a chance to achieve whatever it is they want?

It's like a monopoly, the richest are the ones with the most $$$, we need to some times split/weaken their wallets for others to be able to rise to the top.

Yes, this is the true socialist mentality. "Don't encouage others to achieve success...punish those who do. We don't want a society of heightened achievement...we want a bunch of mediocrity. We don't want equal opportunity...we want equal results."

Look if I'm smart, I have the resources, and I know how to invest.... What's to stop me?

Stop you from what? Investing in companies (which are made up of people, btw, who are achieving and given the opportunity to make money through your investments) that you see as a good idea?

I'll just amass more and more, and at the cost of whom?

You mean, to the benefit of whom.

At the cost of my fellow human's well being, everytime I get richer they'll get poorer.

And here I was thinking that we were living in an economy that had a potential for growth...

In a perfect world all would be on top...

That's not the perfect world you ascribe to. In your perfect world, everyone is in the middle.

In my perfect world, those that achieve and take personal responsibility and take risks that pay-off are at the top. Those that aspire to achieve less are in the middle, and those that aspire to not much at all are at the bottom.

There's nothing wrong with differnt levels of aspiration. That's the natural order. There's a LOT wrong with expecting to have the same results.

[Joe DeFuria]

Originally Posted by Legion

Well i think Zidane is trying to incite some one's wrath. Perhaps Vince, Democoder, or Joe ought to draw straws as to whom gets to dispatch you.

Don't forget Sabastian.

Others are much more well versed in the specifics of ecomonics and economic theory than I am...

[DemoCoder]

Originally Posted by zidane1strife

Those at the top of the pyramid already enjoy the prestige, and financial independce that the rest of the 'slaves' give them.

There is no "giving", workers and consumers are receiving something for their work.

Luck/Circumstances/etc(genes/intelligence/family/corporate success/ being there at the right time and the right moment, etc), has placed them above the rest of the pop. who are in effect sustaining the system not with status or money, but with sweat(cleaning your toilet/serving your food/helping manufacture your car/house, etc)

How about the entrepreneurs and inventors who are sustaining the lower classes by creating new industries on new ideas and organizing the capital together to make them succeed, which ultimately results in the creation of jobs that would not have otherwise existed, and, which results in new products and services which raise the standard of living/quality of life for everyone?

If I own dozens of corporations and have billions in the bank, something HAS TO BE DONE. Or else my descendants("and I during my lifetime"), will accumulate ever more wealth at the expense of the lower classes.

#1 having wealth doesn't stop stupid rich kids from squandering it and ending up in the poorhouse

#2 accumulation of wealth is NOT at the "expense" of other people. The economy is not zero sum. If I gain a dollar it is not neccessary for you to lose a dollar.

Look if I'm smart, I have the resources, and I know how to invest.... What's to stop me? I'll just amass more and more, and at the cost of whom? At the cost of my fellow humans' well being, everytime I get richer they'll get poorer.

Because investment isn't deterministic. There are millionaires going bankrupt on bad business ideas and investments everyday. Long Term Capital Management thought they were smart too, and had some of the smartest economists ever (nobel prize winners), but ultimately ended up losing big time. No one can predict the markets, so there is no way anyone can be guaranteed to "amass wealth forever"

Secondly, the amassing of wealth isn't at the expense of the poor. If my beachfront home suddenly doubles in value, you have lost nothing of your income or savings. Paper wealth can increase quite easily. Moreover, if I invest in say, nanotechnology, and become a trillionaire, in return, the cost of manufactured goods for everyone probably dropped through the floor.

In a perfect world all would be on top...

In a perfect world, we could all be perfect investors to amass wealth perpetually. Unfortunately, no one has discovered how to do this yet.
Why aren't the Rockefeller, Cargenie, Morgan, Ford, or Hughes children richer than Bill Gates or the Walmart children? Why are the majority of millionaires first generation non-inherited?

Time to put down your copy of Marx.

[Silent_One]

Joe wrote:

Legion wrote:

Don't forget Sabastian.

Me feels left out...

[Silent_One]

#1 having wealth doesn't stop stupid rich kids from squandering it and ending up in the poorhouse

Iron Mike anyone? ($300 million+ gone! WOW )

[Joe DeFuria]

Originally Posted by Silent_One

[Me feels left out...

/Consoles Silent_One....

[covermye]

Those at the top of the pyramid already enjoy the prestige, and financial independce that the rest of the 'slaves' give them. They don't have to worry as much, if they get sick/don't/can't work for 6-12months+ many of those with the most wealth have nothing to worry about... those at the bottom, the working 'brain washed' consumer force are the ones maintaining the system.

Oh my gosh. The above statements couldn't be more wrong, man. Those at the top enjoy prestige? Yes. Financial Independence? Yes. Don't have to worry as much? LOL! Hardly. This is what breaks your whole arguement down: The fallacy that those with "more money" don't worry as much because they have money. You'll disagree, but the VAST MAJORITY of the wealthy in this country busted their asses to get themselves to that point, and continue to do so because it's what they do. They worry about how to sustain their success. They worry about how to keep their workforce happy. Not that the "little guy" who couldn't afford to be unemployed for 6-12 months doesn't have a legit thing to worry about there, but it's PEANUTS compared to the amount of stress that success carries with it.

Whoever told you that "rich" people don't worry because they're the ones that have it made is a jealous little man. The fact is, stress and "worry" don't exclude anybody, regardless of economics or race. Just because they worry about two different things doesn't mean they don't both have problems.

And "those at the bottom, 'brainwashed' consumers" drive the economy for the benefit of the "rich" that don't have anything to worry about? Do you see how silly that sounds? Here's a tip: Stop buying things. Sell your computer that you typed this message with right now. You were a brainwashed consumer for buying it. LOL!

Luck/Circumstances/etc(genes/intelligence/family/corporate success/ being there at the right time and the right moment, etc), has placed them above the rest of the pop. who are in effect sustaining the system not with status or money, but with sweat(cleaning your toilet/serving your food/helping manufacture your car/house, etc)

I'm obviously not going to change your mind when you're so deeply rooted in class envy, but your jealousy problem is just plain out of control. Luck/Circumstances are responsible for very little success as a percentage of successful people in the United States. Look around. It's true.

Because like it or not, they are the ones at the top, when you're at the top you shouldn't complain.

It's like a monopoly, the richest are the ones with the most $$$, we need to some times split/weaken their wallets for others to be able to rise to the top.

Look if I'm smart, I have the resources, and I know how to invest.... What's to stop me? I'll just amass more and more, and at the cost of whom? At the cost of my fellow humans' well being, everytime I get richer they'll get poorer.

Failed logic again. It's not a "zero sum" game, man.

In a perfect world all would be on top...

Wrong. It wouldn't be the top if everyone were there. Some people will always want more than others and (here's the catch) be willing to work for it rather than wait for the government to hand it to them. Those are the people that make it to the top.

[zidane1strife]

I disagree. No one GIVES me anything. I have financial independence because I am earning it.

I'm not looking for prestige. I'm looking for respect, or at least a lack of contempt.

If you lacked the intelligence, common sense, education, youth, etc... and you were working at a local wal-mart, or as a janitor... you're A.)contributing to the system, B.) You can't get out of your predicament unless you're really lucky...

Whatever you do, If there were no one to work at all those low-level jobs, you wouldn't be able to do it... An executive, ceo, etc... needs everyone(yes, even the janitor & the plumber, and the secretary, etc.)

Once there were nobles... although not as unattainable, now there are billionaires...

Because I work and educate myself to a degree where I lessen the chance of my earning power diminishing...

if lots of your fellow men got their education and Ph'ds... you'd be screwed... luckily they can't.

Interesting how you lumped "intelligence" and "corporate success" with things like "luck, being at the right moment", etc. I guess things like hard work, eductaion, re-education, have no bearing?

Look, those at the bottom are not there willingly(at least most of them.), some of em might try to start their own business(and see it go BR), others might not be as lucky as you're.

Those people serving you at your favorite rest.(waiters., janitors, etc.) are probably there because they're unnable to do something else for the time being, and need the cash.

Interesting how you lumped "intelligence" and "corporate success" with things like "luck, being at the right moment", etc. I guess things like hard work, eductaion, re-education, have no bearing?

I said, etc... If you have ADD, low IQ, problems socializing, or really bad teachers, parents. etc... or your view was skewed cause you were young and immature, or accidentally had a baby(boyfriend pressure, etc.) a little to early... etc... You're in trouble... If you're hit with a bullet /depression/bump in the head / go into a coma/ etc you're likely to have probs.

All services and products that I pay for. I don't pay them with sweat. I pay them with money.

Once there were nobles, royalty, etc... Some were able to take advantage of the societal system of the time and passed it on, now it's money... I have it, I pay for my child's education, and I've got the free time to raise'em(so they're not raised by complete strangers, cause I require 3jobs to be able to sustain my fam.)... They're likely not to be as easily influenced by their friends, my guidance is likely to give them a reason to overcome all odds, and persevere in their quest to attain their goal, etc.

You mean, by making investments, buying products, and employing others such that they can make a living, and give themselves a chance to achieve whatever it is they want?

They'd obviously like to go on vacation when ever they want, work at their own pace, study whenever they want, and own all those nice cars/houses/stuff they can't have, and they'd likely want to retire in style and not end up in an asylum...
Many will be stuck doing the same menial/repetitive/pointless tasks for the rest of their lives, and end up without their indepence, confined to a small pathetic room in the middle of nowhere.

Yes, this is the true socialist mentality. "Don't encouage others to achieve success...punish those who do. We don't want a society of heightened achievement...we want a bunch of mediocrity. We don't want equal opportunity...we want equal results."

EQUAL OPORTUNITY... does the guy who inherit 20Billion, and has two parents two care for him, and has the best of the best in education(whose parent's likely have friends in the best institutions like harvard, MIT, etc).... have the same opportunity as the son of a single mother of 2, who has three jobs, and leaves them in day-care(etc).... NO...
Do I as a business man have the ability to enter the s/w o/s business and hope to have any decent success? NO...

What happens to small companies starting up, when there's a company with a monopoly in that particular market?

Same happens to all those who try to start something up, say I have a nice company, it certainly can't compete on equal terms with say MR.$$$$'s company if he enters the market.

My ability to get to the top, goes lower and lower, as those in the top establish themselves, and get stronger and stronger...

I'm not saying let's all become socialist state(all that does is divert all resources to those at the top, in the real world.). Just to tax those with more wealth a little more.

In my perfect world, those that achieve and take personal responsibility and take risks that pay-off are at the top. Those that aspire to achieve less are in the middle, and those that aspire to not much at all are at the bottom.
There's nothing wrong with differnt levels of aspiration. That's the natural order. There's a LOT wrong with expecting to have the same results.

The prob. is that's is not the way the world works, many at the bottom aspire for more, but are unnable to attain more, as those at the top keep burying those at the bottom with more and more efficiency.

That's not the perfect world you ascribe to. In your perfect world, everyone is in the middle.

NO, some can clearly posses more, and achieve more, but those at their side are given equal oportunity.

A world where everyone can dedicate to the arts/research/leisure etc.

There is no "giving", workers and consumers are receiving something for their work.

Yes, that's what a pharaoh/ or a noble/ or royalty/ or a slave owner/or a billionaire would say... True unlike those other examples we are not expressively prohibited from joining their ranks... neither are we prohibited to be a MJ in basketball, or to win the lottery, or to be a famous actor/singer... but sadly the ODDs are significantly against you(see how many companies/people go bankrupt for example.), if you're at the bottom.

#2 accumulation of wealth is NOT at the "expense" of other people. The economy is not zero sum. If I gain a dollar it is not neccessary for you to lose a dollar.

Let's take it to the extreme...(don't laugh.) Back to the future 2....

Why aren't the Rockefeller, Cargenie, Morgan, Ford, or Hughes children richer than Bill Gates or the Walmart children? Why are the majority of millionaires first generation non-inherited?

The gov. is behaving slightly different now... oh look it appears mickey(which could have made many writers rich) is staying with disney for a while longer... look that monopoly over there.... IT's INTACT... look that inheritance... you get the point...

PS I didn't say it's impossible to go down/up a class, I said it's rather difficult for that 35+yr old mother, with no decent ed. and sev. kids, working at a cafeteria to end up the CEO of multi-national corp.... Same goes for that poor orphan, that child with aids, that guy with bad parents, friends... etc just examples...

Don't have to worry as much? LOL! Hardly.

NO... I said if you have twelve billion $$$, and are out of work for whatever reason you likely ain't as worried as if you were broke/poor/ with no ed. and lots of debts.

They don't have to worry as much, if they get sick/don't/can't work for 6-12months+ many of those with the most wealth have nothing to worry about...

Again it's right if you take it in context... IOW if 'many'(aka not all) were to lose their job I don't think they'd be worried about it.
That is logical, if I had 40B$$$ in the bank do you think I'd be worried for being unemp/jobless...

Obviously I know there are things to worry about, I could have all the money and all the power and all thr fame, and I'd still have worries.

'm obviously not going to change your mind when you're so deeply rooted in class envy, but your jealousy problem is just plain out of control. Luck/Circumstances are responsible for very little success as a percentage of successful people in the United States. Look around. It's true.

They're lucky for not being born with aids, deformities, etc... for not being born in a third world country... for not being in a country with(as much.) prejudices for their race/gender etc

[Fred]

I dont agree, I think its the people at the middle and top brackets that do the line share of the work. The scientists, farmers, doctors, lawyers, judges, police, inventors blah blah blah.

The argument against too much progressive tax is essentially the essence of capitalism 'when does taxation detriment the drive to work more'.

I am inventor A, and I want to make an invention. Do to so, would place me in a higher tax bracket. In the patholigical case I realize that working the huge extra hours necessary to make my invention is only going to net me a small pittance of returns. I am greedy person, why should I work more since im more or less perfectly comfortable.

Now look at welfare states across Europe. You have many people like that who are perfectly content to not work at all. Thats a case where the progressive tax is set so low, coupled with the safety net, that all incentive is cut out an extremely low level. Hence the huge unemployment, immigration problems, deficit levels etc etc.

Work ultimately drives economic potential, thats why capitalism is the only realistic system, and why extreme progressive tax systems is both unfair and ultimately self defeating.

[zidane1strife]

Work ultimately drives economic potential, thats why capitalism is the only realistic system, and why extreme progressive tax systems is both unfair and ultimately self defeating.

Well I certainly don't mean EXTREME, but I think slightly more taxes(particularly for inheritance.) would be good.

The gov. used to deal with mon., with intellectual prop., etc in other ways... Corruption is affecting the system, and now that info.spreads like wild(web), brands and IP of char.s, books, etc... are becoming all the more important...

....Brand ??? will have more trouble succeding then Brand X...

[Sabastian]

Originally Posted by Fred

I dont agree, I think its the people at the middle and top brackets that do the line share of the work. The scientists, farmers, doctors, lawyers, judges, police, inventors blah blah blah.

The argument against too much progressive tax is essentially the essence of capitalism 'when does taxation detriment the drive to work more'.

I am inventor A, and I want to make an invention. Do to so, would place me in a higher tax bracket. In the patholigical case I realize that working the huge extra hours necessary to make my invention is only going to net me a small pittance of returns. I am greedy person, why should I work more since im more or less perfectly comfortable.

Now look at welfare states across Europe. You have many people like that who are perfectly content to not work at all. Thats a case where the progressive tax is set so low, coupled with the safety net, that all incentive is cut out an extremely low level. Hence the huge unemployment, immigration problems, deficit levels etc etc.

Work ultimately drives economic potential, thats why capitalism is the only realistic system, and why extreme progressive tax systems is both unfair and ultimately self defeating.

Freds got it. I refer to the capitalist type system as a bonus system(Individualist) and the egalitarian welfare state (collectivist) the handicapped system. In the bonus system there is more incentive to do more. In the handicapped system there is less incentive. It really couldn't be more simple.

EDIT: I added the philosophical references to individualism and collectivism, just for fun.

[Sabastian]

Originally Posted by zidane1strife

Well I certainly don't mean EXTREME, but I think slightly more taxes(particularly for inheritance.) would be good.

If someone works all their life and amasses a fair amount of wealth the state ought not to have a hand in how it is disbursed. They should be able to pass it along to their children. The state has no right to my father or mothers wealth (not that they have any.) or for that matter what I might pass on to my family.

The gov. used to deal with mon., with intellectual prop., etc in other ways... Corruption is affecting the system, and now that info.spreads like wild(web), brands and IP of char.s, books, etc... are becoming all the more important...

....Brand ??? will have more trouble succeding then Brand X...

What ??? My sakes man you should try to be a little more articulate.

[MfA]

Just saying it doesnt make it so :)

If you believe in personal rights uber alles then sure ... but the collectivist does not recognise that and can justify it from the viewpoint of a social contract (which the individualists in turn dont recognise).

The reality of the situation is that all property is state owned, ie. reality is collectivist rather than individualist, and thereby communal in a democracy. You have no real property, whatever that bill of yours says your rights are merely privileges ... constitutions can be rewritten. If it makes you feel better pretend the state owns all the land and you have signed a contract allowing you to live there which sacrificed your rights ... pure laissez faire capitalism is not incompatible with that situation after all.

[Dave H]

I'm going to ignore the silly pro/anti capitalism debate this thread has devolved into and steer it back to the fundamental flaw with the premise:

The American tax system, as a whole is NOT particularly progressive. One particular portion of it--the federal income tax--is progressive. But most of the rest of it ends up being regressive in effect, with the overall result that the average total tax burden as a fraction of total yearly income is very nearly flat (it is slightly higher on the poor and the rich, with the middle class, as one would expect, getting the best deal).

How on earth can this possibly be? For one thing, the poorer you are, the larger the fraction of your income that goes toward immediate consumption; thus the poor pay a whole lot more sales tax as a fraction of their income than the rich.

Moreover, the poor are more likely than the rich to consume items subject to special "sin" excise taxes (primarily cigarettes, but also liquor etc.). The poor pay a hugely higher proportion of their total income in sin taxes than do the rich.

Then there's Social Security withholdings, which are a flat tax up to a certain level of income, beyond which no more is withheld for Social Security. This winds up being a hugely regressive tax in favor of those with very high incomes. Moreover, those who pay higher SS taxes are scheduled to get more back in return, although not quite to the degree that they put more in. Still, this makes Social Security a regressive tax even for that part of the income scale where it is ostensibly flat.

(Of course there would be those that consider Social Security a private retirement fund that just happens to be run by the government--thus, those who contribute more would be entitled to more in return, as in some way they're just "getting their money back". Unfortunately, this view is sharply divorced from reality, where the Social Security Trust Fund is de facto not at all kept seperate from the overall federal budget, and where the money we put in today is not saved to pay for our own retirements but rather immediately paid out (almost all of it) to old folks in the here and now.)

Of course all of this is acting as if one's only source of income is one's job. This is, of course, generally true for the poor, but not for the middle-class--much of whose wealth is tied in to their (tax-exempt) home mortgage--and certainly not for the rich, whose wealth exists primarily in the form of various investments, income on most of which is taxed at the rather low capital gains rate (now including dividends).

Moreover, it ignores the numerous opportunities for deductions in the tax system, most of which target the middle class and the rich rather than the poor. I've already mentioned the mortgage deduction. Then there's the deduction on charitable donations; the deduction on college tuition, and many other deductions which are generally more applicable to the wealthy.

Of course many of those deductions go towards encouraging socially desirable things (home ownership, charitable donations, etc.). Capital gains on investments are taxed at a lower rate because investment is the primary driver of a capitalist economy, and thus ought to be encouraged in the tax code. And so on.

Moreover, the statement that overall tax rates as a fraction of income are essentially flat, while technically true, is true only technically. Here's the data, from the NYT (unfortunately, the article to which this chart was attached is long since gone into the pay archives):



The problem is that wealthy retirees--low income, high taxes as they sell off their investments--are included with the poor on that chart. If you chart things longitudinally, the rich do indeed pay more in taxes over the course of their lifetimes than do the poor. But there is still a lot of mitigating factors that make the gap much much much lower than one would assume just from looking at income tax alone.

As for supposedly more-progressive Europe, I haven't seen the figures, but considering the ridiculagnormous VATs levelled on everything over there, I would be shocked if the overall tax system in most EU countries weren't rather regressive. The difference is not that they tax the rich more; it's that they tax everyone more (and that, in most of Europe, everyone makes less than Americans to begin with).