From: pauld@cs.washington.edu (Paul Barton-Davis)
Subject: Re: NO! Re: flat taxes - yes!!!
Summary: WAY TOO LONG
Keywords: flat tax
Organization: Precipitating Pendulums Postal Party Poopers
Date: Thu, 12 Nov 92 21:17:56 GMT

In article <1992Nov11.224507.3505@ee.ubc.ca> jmorriso@ee.ubc.ca (John Paul Morrison) writes:
>A flat % tax is like saying: for you, this candy bar costs $0.50, but
>for you sir, only $1.00, since you earn twice as much. Is that fair?
>Same candy bar isn't it?

No. This is a weak analogy. I prefer to think of taxes in the
following manner, which someone could probably tell me is known by a
long name in the halls of academic economics :-)

Everyone member of a society, almost by definition, uses objects &
facilities, oppurtunities created or offered by people other than
themselves.  In some cases, this use starts with an exchange between
two identifiable entities - this is what happens when we agree
(generally) on where we should locate responsibility for some object
or facility, and on who is going to use it. The exchange occurs
between the creator/provider, and the user, and its called "buying".

There are things, however, where the user and/or the creator/provider
are rather more ambiguous. This is partly a function of the object or
facility in question and partly a function of technology. For
instance, its not clear who the "user" or "creator" of the atmosphere
is, so in general, we don't engage in exchanges in order to use it.
Instead, we have a legal system which include constructs designed to
regulate objects currently deemed to be "commons". For a different
example, take the case of roads. Its always clear who builds any given
road, and one can imagine two ways of getting only users to pay for them:
one is by ignoring the *identity* of the user, and simply charging the
generic *class of users* via devices like toll gates. The other is to
try to *identify actual users* by means other than their simply
passing through a toll gate (for instance, using electronic
surveillance technology) and billing them accordingly.

However, there is also a third option in this case, widely used in
most countries. That is to not bother to single out users at all
because it is believed that a sufficiently high percentage of the
population will be users so as to justify a blanket charge.

By original intent at least, this was the case in the USA for all
taxes. They collection was justified by their use in providing things
for which, for whatever reason, it was deemed impractical, unnecessary
or undesirable to try to identify actual users. Having decided to levy
taxes however, it then becomes necessary to decide how much they
should be. There are two basic ways to tackle this, with myriad
combinations thereof.

The first is to define a set of services, establish their cost and
then tax based on this amount. There is lots of room for democracy
here as well as economic competition, not to mention graft,
pork-barrels and corruption. This is a practical method, and its the
one we use in the US today (except that we actually tax for less than
the amount the services will actually cost to provide in the current
year). 

Another method, which has no practical application, is to ask: what
amount of each person's wealth relies on the things we spend taxes on ?
Its useless, practically speaking, because we can never establish
an answer to this question. However, that doesn't mean that we might
not each, individually, try to come up with an estimate.  We can
consider the whole variety of tax-provided or tax-subsidized services
from education to transportation to defence to basic research to city
planning and so on. Notice that we don't have to worry about claims
that having these things done by private enterprise would be cheaper,
because we want to arrive at a *percentage of our own wealth*, not at
absolute figures. In other words, we care only about how much they
benefit us, not how much they cost.

Obviously this is not an easy thing to do, but I've tried and a rough
back-of-the-envelope calculation suggests around about 30%. Your
mileage *will* vary.

Combining these two together, we can ask two questions then: 
	"how much do the things we spend taxes on cost ? "
	"how much should we be spending on these things based on 
			what they do for us ?"

The answer to the first question is a function of:

	- what we decide, through political process (corrupt,
		unrepresentative or whatever), to put taxes towards
	- how well we spend the money
	- other normal market details (supply, demand, etc.)

The answer to the second question is what relates this long monologue
to the excerpted post above. What does the curve of
"tax-supported-wealth" as a percentage of "total wealth" vary from the
poor to the very rich ? 

I have no idea. My guess is that:

	- its not flat. The poor have less wealth, and most studies
		show that they actually use tax-supported facilities
		less than the middle-class. These studies are mostly
		of explicit use (e.g. libraries, mortgage tax allowance)
		but I'll guess it covers implicit things too (roads,
		schools, basic research, industrial policy etc.)

	- it slopes upward (see above)

	- it might peak and then decline. Its not clear how the very rich
		use tax-supported facilities. Someone's probably
		studied it,and details are welcome.

So, should a rich person be charged more than a poor person ? A
middle-income person, I claim, is relying on tax-supported things to
support their own personal wealth to a far greater extent than the
poor. On this basis, I believe that they should pay more in taxes. The
very rich (say, >$200,000/annum) - I don't know. Until I see numbers
to show otherwise, I'll guess that the curve slopes upward without a
peak.

However, I don't want to be too confident of all this stuff, so I'll
conclude by noting that a changing the amount of tax but not the
percentage taxation as one moves along the curve from poor to rich
seems to me to be enough to fairly represent the application of these
kinds of curves to all income classes.

Which is to say: I support a flat tax of X% on all cash income over $Y
dollars/yr. If someone can convince me that 13 is a good X and that
15,000 is a good Y, there you have it.

-- paul

-- 
There is hardly anything in the world that some man cannot make a
little worse and sell a little cheaper, and the people who consider
price only are this man's lawful prey.
						John Ruskin
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