Philosophy of Taxation

[tasty]

I was going to respond to Ace in the other topic but decided that I didn't want to contribute to another subject (AI) going horribly off topic so I'm starting a new one:

How could you ask such an obvious question ace? Obviously what you refer to as an "equal" tax rate would do nothing but increase inequality. It's not the policies that need to be equal, its the effects that they have. To create inequality you have to take from those who have advantages and give to those that have disadvantages. Its impossible to achieve it any other way.

The question I want proponents of regressive taxes to answer is their argument that anyone can succeed under capitalism, as if the only thing holding back common workers from being rich is their own laziness. Obviously, its impossible for everyone to be rich. There simply are not enough resources for everyone to subsist above poverty in a capitalist system. Even if everyone got an education, worked nights and weekends, and generally tried their asses off to become wealthy, there would still be poor people. Many sociological studies have discussed the presence of a "permanent underclass", one whose poverty is transferred from generation to generation (much like the permanent aristocracy whose wealth is transferred from generation to generation). Why do these people deserve to choke in poverty when others are living lavishly?

[0 Kilz:M:]

Uh, Im not sure there really is an answer to that. I myself and my wife included make about 65,000 a year. Now that puts us somewhere between lower and middle class, that may seem like a good amount of money, but in todays society it goes fast. I personally believe that we should all be taxed the same to stop the bs and complicated tax procedures, 15 cents on the dollar period. Thats easy enough, but the real reason we could'nt do that is because it would cause major job losses. I may not know wtf Im talking about, but it just seems it would make figuring taxes alot easier.

[tasty]

The average salary in the US is 36,000 just so you know Kilzo, so I'd say you are probably middle to upper middle class. Also if there was a flat tax it would have to be more than 15%. Figures I've seen are more like 25%, and thats with a massive government shrinkage.

[The Ghost of Bondo]

Tasty, I think Kilzo said family income was 65k between two, where as the average is per person, so they are below average in that regard...at least I think that is how that works.  Certainly 65k is a healthy life.

At 25% flat rate, the rich would be laughing all the way to the bank while the poor would be devestated.  Real equal *sarcasm*

Which I think is the point you try to make tasty.

[alaric]

To understand what the best system of taxes is, let's try to understand why there are taxes in the first place.

Taxes exist to pay for government services used by the people at large.

Now, what's the best way to pay for said services? A flat tax sounds like a good idea, nice and simple right?

Yeah, it's simple, but it just doesn't make sense. With a flat tax there is less tax revenue to be spent. This is because the marjority of the people could not afford to pay such high taxes. You simply can't take money from people who don't have it.

So, if there isn't as much money to go around, just slim down the government a bit eh? It has gotten a bit soft around the edges.

With the small budget provided by a flat tax there would be far fewer services provided by the government. Which, might seem fair and logical to some, "Why should I have to pay for someone else's expenses?" but I hardly think you'd be singing the same tune if your family fell on hard times. Government exists to serve the people. ALL the people, the majority of which are not financially well off in this country.

Therefore, to serve it's function, government must provide services to people that can't afford them. Which means a flat tax won't work.

Our current system of graduated tax schemes, though complicated, does at least allow the government to fulfill most (if not all) it's obligations to the citizens of the country. It is just as logical as the flat tax system: Tax the people who actually have money.

Revenue goes up, and essential government services are allowed to serve the people who need them. It's not the most fair system but hey, life isn't fair, and if you've got money to give, part of your citizenship in this country obliges you to help your lesser fortunate citizens. And if you do ever fall on hard times you can take comfort in knowing that these services will be there to help you when you need it.

The other tax scheme that was mentioned here was the national sales tax. This one probably interests me the most because I have no idea if it would actually work. It's never been tried in a country as large as ours before. It seems to be a nice compromise between the two above systems, though I fear it might have the same failings as the flat tax. (poor people couldn't afford to pay/not enough revenue)

Unless that is, it became a strait up Luxury tax, in which case it's doing essentially what the graduated tax bracket system is already doing, just with slightly better packaging.

It's all interesting nonetheless and I look forward to hearing more about the benefits and drawbacks of each system. I encourage all of you, that when you go to make a reply to this post, to think of this issue from all perspectives, rich and poor, and to think critically about each system before simply taking one side to be the "god's truth" come hell and high water.

[Ace]

Tasty, I don't advocate a regressive tax. I advocate a tax where you must pay the same percentage, regardless of your income bracket. Alaric brings up a good point about the reason for taxes being to provide money for a government that provides services for the population. Theoretically we should all pay the same actual amount of cash in taxes (if all citizens are truly equal), but as this is not feasible, paying the same percentage of income tax is the next best thing. Under this system, the rich pay many more actual dollars for the same services of the government. Effectively, this takes more from those who have advantages and gives more to those who have disadvantages, which is what you said was necessary to create equality.

I realize that not everybody can be rich. I never said I wanted that. However, I do think it is possible for all those who have the desire to live a life without poverty. I don't think there is anything wrong with having poor people as long as they don't live in poverty. I personally believe that anyone with the desire could work up to at least the middle class, but even if they can only be "poor," I guess it's just a tough break for them. When I say without poverty, I mean enough to have a home/apartment (nothing spectacular), put food on the table, and afford basic necessities. I *highly* doubt that someone with any decent desire for success would fail at achieving a basic lifestyle such as this. I agree with you that in capitalism we will never see a situation such as this, but I think this is because some people are inherently lazy. These people don't want to work for it, they want it given to them. These are the kinda people that abuse our current welfare systems. Frankly, I could care less that they live in poverty. You should be entitled to the oppurtunity for a good lifestyle (ie good education), but you should not be given this lifestyle automatically.

[Mr. Lothario]

     One misconception that I'd like to address is the idea that one of the essential roles of gov't is to help the poor. It's not, it's not, it's not. The gov't, any gov't, has precisely four roles: First, provide infrastructure, such as schools, roads, sewage, electricity, etc. Second, provide and enforce the rule of law--a court system, police officers, a lawmaking process. Third, provide for the defense of the country by funding some form of armed forces. Fourth, collect taxes to pay for the aforementioned services. Welfare, Social Security, farm subsidies, public television, all of these are surplusage. Taking care of the poor is not a government's job. Just because the American government started a politically and socially wise program to help unemployed people during the Great Depression does not mean that that is some sort of natural function of all governments.

     As it happens, and as I've said elsewhere, I like the original idea of Welfare and would heartily support a return to that system. The current system, however, deserves nothing more than to be excised like a cancer.

     In summary, supporting the poor is a good, noble, and smart thing to do. However, supporting them to the extent that the American government does is pure stupidity, and I object to the persistent assumption that this is the natural state of things.

[The Ghost of Bondo]

Ace, your point that people could all be out of poverty if they tried (well this was the gist of it at least) doesn't seem to account for the many people in poverty who are mentally or phsyically handicapped.

As for the answer to your equality question (again)...You look for equality of percentage, having decided equality of actual payment isn't functional...well, I look for equality in ability to pay.  Why is your form of equality more equal than mine.  A graduated income tax focuses more on taking what a person of a certain income can pay (while not going all the way to make things truly equal e.g. socialism).  Like I said before, a flat tax at a high enough rate would allow the richer half to be very happy and have more money to spend while it would devestate the lower half.  That isn't equal in my mind.

As for us liberals wanting equality, equality in rights regardless of gender, race, or sexuality is hardly comparable with equality of tax rate.  And like I've said before, equality of tax rate really isn't any more equal than a graduated tax.  Just depends on the equality you are shooting for.

Loth, why shouldn't helping the poor be one of the essential roles of the government?  Sure, it may not be specifically stated anywhere that OUR government is to provide that, but why shouldn't it consider it a duty.

[alaric]

I think Ace, Loth and I are pretty much on the same page here as far as the poor go. If they are truely lazy bums, they deserve to be poor.

But Loth, I think that it's not only a function of government to provide aid to it's citizens, it's a duty of all men to look out for the fellow man (women too of course).

Maybe that's not the tradition definition of what government should be, but, if I'm not mistaken, governments (ours in particular) are designed to grow and change to meet the needs of the people.

Right now, a large portion of this government's citizens need assistance of some kind. So doesn't it make sense that the government should adapt to meet those needs?

Anyway, ulitimatley, the government's final responsibility is to do whatever the citizenry of the country want. I can't remember which founding father said that, but I know that was one of the reasons we fought British rule, the government wasn't meeting our needs. And when the government doesn't meet the needs of the people, those people have a right and a duty to overthrow that government.

The final ruler of a democracy is the people at large and they want services. So in order to remain a solvent entity, the government is actually required to provide those services, whether or not that fits the "old" definition of government or not is irrelevant.

[Ace]

Bondo, how is equality in "ability to pay" being determined? Like I said, some people just couldn't pay a flat sum of money because they make less wages that what this sum would need to be for a working government. However, everybody has the ability to pay $.25 (to pick an arbitrary number) out of every $1 that they make. It is simple math. However, under a graduated income tax, a rich guy will be paying $.50 out of every dollar he makes while a poor guy may only pay $.10 out of every buck he gets. Does that seem fair? No. That discourages people from working harder as there are reduced gains for the more money you make.

You ask Loth why helping the poor shouldn't be one of the essential roles of the government. Why don't you turn it around and ask why helping the rich shouldn't be one of the essential roles of the government? After all, they are citizens just like poor people. For better or for worse, our society has decreed that social welfare for the poor is important, and these services have been offered for a long time. However, this still does not make it an essential service; it is only essential in the fact that the voting public in our democracy has more or less asked for it.

As for mentally and physically handicapped people, I think that they should be able to turn to the Church for welfare. I am all in favor of privately sponsored welfare services, and I in fact give money to my church. I know that some people will have no luck in life and need some help, however I don't think that aiding them should be mandated by the government. the government should stay the fuck out of my life as much as possible and let me run it how I deem fit.

[The Ghost of Bondo]

Ace, I thought the point was to not have people in poverty.  Ability to pay is a function of how much money they can pay in taxes and still afford to have the basics of shelter, food, clothes, health care, education, etc.

As for the graduated tax system discouraging people from working harder, that is bullshit.  If you make more money, you get more money.  True, you get a lower percentage of your earned wealth, but you still get more.  I'd take 50% of 200k rather than 70% of 100k.

Why shouldn't we be helping the rich?  Because they don't need help, they have the money to pay for all their necessities.  We aren't helping people have Porshes, we are trying to help make sure people have a roof over their head and three meals a day and proper health care.  It may not technically be essential, but our relatively poor social services are what keeps the US low on the HDI rankings.  If the goal is to do the bare minimum then sure, we don't need to, but if the goal, as it is a proper government's goal to be, is to have the highest quality of life for its citizens as is possible.  That comes through social programs.

Church charity is well and all, but it isn't public and it isn't free of religious ties.  There needs to be a secular, undiscriminating source of welfare for people who need it.  The problem of leaving it up to private organizations is that it isn't a sure thing.  We can't hope for the best and let people fall through the cracks, we need a service that is designed to cover everyone in need.

[tasty]

Ace, the tax you just suggested would be the definition of a regressive tax. As I said in the previous thread for those that didn't know, a progressive tax is defined as one that causes the percentage paid to "progress" as one goes higher on the income scale. Any tax system which would go against such a system would therefore be defined as regressive.

I see the same tendency coming up in most of your posts, and that is the assumption that if a person is poor it is because they are lazy. There are lazy people, but this assumption is by and large not true. Our current government provides some level of help for those who cannot help themselves; however, many people would like this increased or at the very least not attacked as it has been for the past twenty years.

I also don't see how the role of government can be defined so narrowly. The role of government has varied wildly for all countries over the past 500 years. Who are you to define what the role of it can be? Like alaric said, in a democracy the role of the government should be whatever the people want it to be. There are many countries that provide more social services than America, and many countries that provide fewer. There can be no single prescribed government.

I think most poor people would rather have government in their lives than the church. Even though I am religious myself, I have worked at a religious mission before and many of the homeless people who hung around downtown resented its religious side. We need to trust government to administer welfare because it is the least biased source.

[Mr. Lothario]

     The essential functions of government are those functions which a government is better-suited to provide than is any other entity. Thus, infrastructure, law, military, tax. Private charities are better at helping poor people. Also, keep in mind that this is America. The truly poor, those people with not even enough money for a crust of bread to eat, are almost nonexistent here. A typical "poor" person in America is vastly richer than most of the population of some other countries. If a "poor" person has a home, has food, has cable TV... do they need to cost taxpayers many millions in Welfare funds? Help the truly poor, absolutely. Help the "American poor," no.

     Alaric, I agree with you. It is the duty of men to look out for their fellow man. Keep the government out of it. Anything handled by a government immediately starts costing at least 50% more than it needs to, for at least 25% less efficiency. Let private organizations handle charity.

     Bondo, 70% of 100k is $70,000. 50% of 200k is $100,000. So you're saying you'd be perfectly accepting of working twice as hard, losing that many more hours out of your life, and receiving a less than 50% increase in your pay? I know I wouldn't be happy with that. Progressive tax, especially one as unfair to the upper-middle class as ours, hurts the economy in terms of labor put into the system. Money equates to work and time. The more work and time are put into the economy, the more valuable the economy will be. Therefore, it is detrimental to the value of our economy for people to choose to work less to keep themselves under a given tax bracket.
     A tax system must do only one thing: pay for the government. Period. That is its only goal, that is the only reason tax exists. It would be wise to have a system which paid for the government in such a way that it did not discourage the adding of work to the economy. A consumption tax (federal sales tax) is one system which proposes to do just that. A progressive tax system inherently discourages working hard enough to rise through the tax brackets, and that is only made worse when, as in our system, the truly rich can pay relatively less than some of the lower tax brackets, while the section of the populace who is working hard, adding important (well-educated and/or essential) labor to the economy, and who are in a position to rise through the ranks of the tax system decide to stop trying to work harder in order to rise because a rise would equate to a drop in income or living style (working ten hours more a week or taking on more responsibility in exchange for a relative pittance is a drop in living style).

[Mr. Lothario]

Ace, the tax you just suggested would be the definition of a regressive tax. As I said in the previous thread for those that didn't know, a progressive tax is defined as one that causes the percentage paid to "progress" as one goes higher on the income scale. Any tax system which would go against such a system would therefore be defined as regressive.

     To add some definitive (heh) clarity to this discussion, here are definitions from investorwords.com.

     Progressive tax: "A tax system in which those who earn higher incomes pay a higher percentage of their income than those with lower incomes. A graduated tax is one example."

     Regressive tax: "A tax that takes a larger percentage of the income of low-income people than of high-income people."

     Flat tax, proportional tax: "A system in which all levels of income are taxed at the same rate."


     Tasty, according to these definitions, a consumption tax would not be regressive. First, its tax rate (the sales tax percent) is the same for all income levels, which makes it akin to a flat tax. Second, IT IS NOT AN INCOME TAX, which pulls it out of these definitions entirely. Please stop damning tax reform because you are assuming that our present system of taxation is the only possible "progressive" tax system, and is therefore the only "fair" tax system.

     By the way, Tasty, I love your avatar (a student facing down a tank in Tienamen Square) and the former text (RESIST). Man, that's good stuff. : )

[The Ghost of Bondo]

Loth, who says you must work twice as hard to make twice as much?  Salary in a white collar job that would be paying that much isn't dependant on hours worked so much as where you are on the corporate ladder.  You can double your income by climbing one rung up while doing the same work.  The motivation is to not be lazy and to move up and get that increase in salary.

[Ace]

Maybe for suits, a greater amount of work isn't needed for greater productivity. It could just be climbing the ladder as Bondo suggested. However, for the people (engineers, scientists, etc.) who drive the innovation that has made us such a powerful economy, there is a definite relation between how much you work and how much you get done. If (err, when) I'm an engineer making $100k/year, why should I work my ass off and try to get a raise when most of that raise is just going to get eaten up by taxes? It comes down to money earned in relation to work put out. If this ratio dips too much, people will not have enough incentive to keep working hard.

Thank you Loth for pointing out that I'm not advocating a regressive tax. Tasty, just because something isn't increasing does not mean it is decreasing. It could just be staying the same. Therefore, you can't just characterize all non-progressive taxes as regressive.

Bondo, when you look at services of the government, they are all services that the entire citizenry can directly benefit from. All citizens are protected by the military, regardless of wealth. All citizens can use government infrastructure, such as roads and schools, regardless of wealth. All citizens are protected and subject to laws, regardless of wealth. By making welfare a service of the government, you are saying that some people should have access to free money while others should not. This is discrimination.

[tasty]

    By the way, Tasty, I love your avatar (a student facing down a tank in Tienamen Square) and the former text (RESIST). Man, that's good stuff. : )

Are you making fun of me loth?   even if you are I love the imagery of Tienamen square regardless of whatever silly circumstances I use it in

The essential functions of government are those functions which a government is better-suited to provide than is any other entity

Just playing devil's advocate here, but wouldn't the government be better-suited to provide income redistribution than any other entity? I think it would, but obviously that doesn't make it an essential function of government.

Just so you know where I'm coming from, I plan on going to graduate school after I get my BA. And I hope to use my education to earn a salary that is in the upper crust of salaries. But I still want to get the shit taxed out of me, because quite frankly I would feel guilty if it were any other way.

[Mr. Lothario]

     I'm not making fun of you at all. I was totally serious. First time I saw that avatar & text, I said, "Wow."

     The government is not best-suited to perform income redistribution. I think that that is true for two reasons: because of personal bias, first off, because I don't think that the government should be doing that. Second and more concretely, as I said before, the government adds cost and reduces efficiency in any process it is involved in. Let charities and other non-profit organizations handle it, because they can get the money where it needs to be more efficiently and with a smaller percent taken out as overhead.

[The Ghost of Bondo]

They had an article in Newsweek either this week or last about it and there was recently a zmag article talking about how the US needs to adopt the Canadian system that both speak to governmental medical programs being MORE efficient than private insurance.  I don't think it is a given that the government is relatively inefficient compared to private means.

[Mr. Lothario]

     Now that I think on it, I've heard that too, Bondo. Perhaps medical care falls into that category of things that the government is better-suited to provide than any other entity. In general, however, other than a few functions, anything handled by a government will be less efficient and more expensive than the same thing handled by a private entity.