From: dolan@nrlmry.navy.mil (Kent Paul Dolan)
Newsgroups: talk.politics.misc
Subject: Flat Tax Defended
Date: 10 Sep 92 16:50:14 GMT

David,

There will always be someone below the poverty line; right now it is 31
million or so "somebodies", a national disgrace attributable in large
part to spending for military and income transfer rather than for the
development of profit making enterprises such as exploitation of space,
so there is no magic "just enough income" that needs respecting by a
"progressive" income tax to the detriment of the country. I'm not
proposing that the "safety net" stuff be removed, just that it be taxed
the same as the rich person's income, so that the poor have as much
(you would say "more") reason than the rich to vote for fiscal
responsibility in their politicians, rather than pork barrelers.

As to your "marginal value of money" example, your math is wrong. Just
such a case as you describe used to exist, where some states based
their state taxes on a percentage of the federal taxes. When the tax
rate on the rich was high enough, this resulted in the ridiculous
situation that there were incomes for which the combination of state
and federal tax, had tax shelters not been employed, was more than 100%
of the income. Put the California state tax of 10.5% on top of the
British former highest tax rate of 95%, even as a percentage of just the
tax, and you begin to see the problem. For a short time, it even
existed in this country, until courts overturned it.

Try your scheme, of progressive rates but equal percentage increases
when taxes go up, this way. A person taxed at 10% who sees taxes rise
20% loses 2/90ths of his remaining income. A person taxed at 33 1/3%
who sees taxes rise 20% loses 9/90ths of his remaining income. Again,
the successful are punished for being successful, exactly the wrong
social message to send to make a society want to work for success.

If the marginal value of a dollar were like the marginal value of an
ice cream cone, the practical effect of your analogy, the rich wouldn't
work any harder to earn more dollars than a tyke would beg to eat a
tenth ice cream cone. To the contrary, the rich work harder for that
increment of dollars than do the poor, which is part of the reason they
are rich. The average millionaire, according to a US News and World
Report snippet several years ago, put in a 60 hour work week, while the
average burger flipper was probably putting in a 20-40 hour work week.

Money is a promoter of self esteem and a way to keep score in life, not
just a consumable good.

Thus, money, as a measure of value, is not subject to the same marginal
value analysis as goods.

The "progressive" income tax, a seductive political idea because the
rich are always unpopular (the main Nazi complaint against the Jews
was that they were too financially successful), is a destroyer of
progress, a simply terrible idea, and one it is time to end.  The rich
lead enviable life styles, but they also fuel the growth of economies.
Depriving them of the wealth that makes that possible, out of envy at
their success, hurts everyone, not just the rich.

Putting, as we do, the bulk of the tax burden on the middle class just
stifles savings and initiative to risk new business, the main force for
high employment and a growing economy, so the econometricists tell us.

By the way, I also think capital gains should be taxed just like other
income, but only real capital gains, with inflation removed before the
gain is calculated.

It is an obscenity that government is permitted to tax the "gain in
value" of an item sold when all that has really happened is that
government policy has decreased the value of the dollars in which that
(quite possibly non-existant) gain in value is measured. This rewards
government for inflation (as does allowing government to be in debt),
and so promotes inflationary legislative and administrative policies,
the end result of which is to punish the frugal, the old, and others on
fixed incomes, and to reward the profligate, the debt ridden, and the
overspending Congress.

No wonder the US has the lowest private savings rate, and thus the
least money to fuel growth, of any industrialized country; our tax
system demands just that.

Kent, the man from xanth.
"The Birthright of humankind is the stars!"
--
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