In defense of progressive tax rates

In my humble opinion, progressive taxation is much more fair for a couple of reasons.

First, the use of funds progressively changes from meeting basic needs, to meeting basic wants, then exotic wants, then merely controlling the lives of others with no real gain in personal comfort.

Second, the ease of getting the funds progressively changes. A worker will labor like crazy to meet basic needs, but work that pays more starts involving the powers of privelaged positions, the leveraged resources of others, and the scalable gains from the same work re-sold, none of which should pay as much as the initial hard work.


About johnonstocks

I've been trading stocks since 2003, active on Motley Fool's discussion boards and using first Hidden Gems, then Global Gains. I no longer have the newsletters, but I keep up on the WSJ and read David Rosenberg everyday at Education: CFA level 2 candidate MBA-focus in Finance, Marshall, University of Southern California - expected Dec 2010. BS Mechanical Engineering, UC San Diego, June 2002
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4 Responses to In defense of progressive tax rates

  1. Jared Bockoff says:

    Are you formulating an argument in favor of progressive taxation? If so, is part of your premise that the leveraged, etc. resources “should” pay more than the initial labor? If I’m understanding this it sounds like you’re entertaining a circular argument.

    How do *you* determine what’s appropriate? What you’re proposing is the argument of Marx. Which has repeatedly lead to coercion, misallocation, and ultimately failure.

  2. Jared Bockoff says:

    I have found that an argument *for* some “progressive taxation” is that the percentage taxed on greater incomes are less burdensome than those on smaller incomes because both incomes need to meet basic standards of living (housing, food, water, etc). Hence the justification for “standard deductions”.

    • johnonstocks says:

      That’s true. I wrote the above in response to a post on a blog where someone advocated a deduction of around $30k with a flat tax on the rest, saying he found progressive taxation morally problematic.
      To me, a wealth divide where 0.1% of the population owns more than the bottom 90% poses a lot more problems in both ethical and practical terms than progressive taxes (chart from mauldin economics, I can post it if you’d like).
      It may seem funny after just writing about defending Trump, but I actually do believe in highly progressive tax rates and more government intervention – particularly in promoting productive capitalistic competition and reducing economic externalities (such as environmental) both through direct roles (NASA, superfund sites, heavily subsidized mass transit systems, and other such job creation)and through regulations to help set the rules of the competition.
      As such, I find the Obama/Clinton system of free trade (bypassing environmental and labor regulations they create), quasi-open borders (further weakening labor), partnering with Wall Street for solutions (using investment funds to pump up housing prices staring in 2014), quantitative easing for the wealthy, and encouraging industry consolidation as major problems.

    • johnonstocks says:

      My point was that
      1. if you consider the economic ulitity of money it is not linear but logarithmic – your trade offs have increasingly less effect on your personal life, so you will miss the extra percentage less at the higher end.
      2.Money gets progressively easier to make the more you make. Increasing your income from 30,000/year to 50,000 a year is a lot harder than increasing it from 530,000 per year to 550,000/year.
      Because the above is not linear, it makes sense that tax rates don’t have to be linear (aka flat) throughout the earning range. Note that I’m not arguing how steep tax rates should be, I’m just suggesting that progressive rates are not inherently unfair.

      My previous comment was more explaining how I can have views that are traditionally considered democratic and currently support a republican alternative without being inconsistent – I just didn’t realize my initial post needed more explaining.

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