Taxes are much in the news here in Chicago and the state of Illinois, generally. I’ve posted on the reasons recently.
In the last week or so I’ve seen some comments on various blogs about government and taxes that I’ve found rather remarkable and I’d like to make a few quick observations on the subject.
- All government revenue is derived either from taxes or user fees. Or borrowing, which is another way of saying “future taxes or user fees”. There is no room full of money.
- Taxes, simply stated, are taken out of the pockets of people or companies at the point of a gun. The people or companies have earned the money in one way or another. The money belongs to them. It’s not theirs on sufferance.
- We tax rich people (and companies) for the same reason that Willie Sutton robbed banks: because that’s where the money is. Some form of progressive taxation is inevitable in a modern society.
- The more wealth is concentrated in the hands of a relatively small number of people the truer the statement above will be.
- When people are taxed, they don’t spend the money that was taxed on things they want.
- That has economic consequences.
- Not all reasons for redistributing income are legitimate or just.
- It’s just to tax people for benefits that accrue to everybody.
- It’s just to tax people to prevent extreme want.
- It’s not unjust that poverty is less pleasant than prosperity.
- If poverty were as pleasant as prosperity, a significant proportion of the populace wouldn’t work.
- It’s not just to tax people simply to redistribute the income.
But it’s politically very expedient. As George Bernard Shaw put it “When you rob Peter to pay Paul you can always depend on the support of Paul.”
Is it true some form of ‘progressive’ taxation is inevitable in modern society, or only some form of taxation? Don’t some nations have non-progressive taxes? Estonia maintains a flat tax, and while it’s hardly a cutting-edge nation, I think it qualifies under most definitions of modern society, does it not?
Other than that quibble, however, great observations. If only more people understood them.
Yes, it’s true. Anything other than a head tax, the constitutional proscription on taxation in the United States for its first century, is progressive in that some people pay more than others. That a flat tax is not progressive while different people paying different marginal rates is progressive is marketing rather than reality. It assumes something about individual utility functions which it is not proper to assume.
Further, every flat tax proposal I’ve ever seen has elements of progressivity whether it’s in how income covered on the tax is defined or in what deductions are allowed.
Ah, I see your point. I was using progressive in the sense of graduated. Thanks for clarifying.
Taxes, simply stated, are taken out of the pockets of people or companies at the point of a gun.
I disagree. Many if not most peaceful transactions would not be possible without a mediating entity – the government – to make them possible. It is fair and necessary that to make transactions possible, the government receive a portion of each transaction.