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landmark
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I thought this would make an interesting to discuss as it impacts all of us, and so many of our political assumptions depend on the assumptions we make about taxation, and what is fair or not fair. I think if we can clarify our thoughts and positions on taxation we might all understand each other better and then Santa and I can wrap our arms around each other and sing Kumbaya together. So with apologies for the crudeness of the wikipedia source, this might be a helpful start:
Quote:
Arguments for implementation

* A progressive tax maximizes the amount of tax that can be collected, with the minimum number of protests, thereby presenting an easy political solution for governments with budgeting problems.[citation needed]

* In a market economy, the larger an investment is, the higher its rate of return. This is due to both economies of scale and the increased range of investment opportunities. In addition to these economic forces, those who control greater amounts of capital within a society are able to participate more directly in shaping government policy, often in ways that further maximize their wealth. Thus, due to both economic and political realities within a market economy, it is a natural process for the wealthiest individuals and firms in a society to become disproportionately wealthier over time. In order to prevent the political instability resulting from the natural stratification of the populace into an ever smaller and wealthier aristocracy or moneyed class, and an ever larger working class, all free market democracies engage in progressive taxation and programs to enhance economic opportunity for the lower and middle classes.[citation needed]

* In response to the concern that progressive taxation creates an unfair psychological burden on the wealthy, it is argued[citation needed] that if the utility gained from income exhibits diminishing marginal returns, as many psychologists assert (see Weber-Fechner law), then for the tax burden to be shared in a utilitarian way the tax-bill must increase non-linearly with income.

* As income levels rise, marginal propensity to consume tend to drop. Thus it is often argued that economic demand can be stimulated by reducing the tax burden on lower incomes while raising the burden on higher incomes[19]

* It is also argued[citation needed] that people with higher income tend to have a higher percentage of that in discretionary income, and can thus afford a greater tax burden (this is the “vertical equity” argument). Some would claim that a person earning exactly enough money to pay for food and housing cannot afford to pay any taxes without its causing material damage, while someone earning twice as much can afford to pay up to half their income in taxes.

* Some believe that the wealthy have a disproportionately greater interest in maintaining societal goods typically supported by taxation such as security of property rights[citation needed], defense and infrastructure, as they have much more to lose if these fail than do the poor. Public investments in defense and foreign aid often support assets abroad whose expropriation is a far greater risk than is the risk involving domestic investments.

* It is inherent in tax policy that it implements economic and social policy. People who are concerned about a runaway, cancerous[weasel words] character in the global economy, greenhouse gases, etc., see benefits in progressive taxation, both in its braking effect on the economy and in helping shape economic activities towards necessities more effectively than purely monetary or fiscal policies.[citation needed]

* As long as after-tax income is a strictly increasing function of gross income, there is a monetary incentive to increase compensation received. Indeed, for any particular income goal, the higher the tax rate, the more compensation one must receive to reach that income goal. For this reason, progressive income tax may increase the incentive to produce among the largest producers (if higher production is truly associated with higher compensation).

* A progressive tax reduces income inequality, which has been reported to have a number of societal benefits, such as lower homicide rates at all income levels.[20] Richard G. Wilkinson argues that in a more unequal society, even middle class people on good incomes are likely to be less healthy, less likely to be involved in community life, more likely to be obese, and more likely to be victims of violence.[21] Amongst the wealthiest quarter of countries, there is no relation between a country's wealth and general population health, but within a country, relative levels can have an effect.[22]

[edit] Arguments against implementation

* It has been argued that progressive taxation violates the principle of equality under the law.[23]
* Progressive taxes lower savings rates. High-earners have a lower average propensity to consume, so shifting the tax-burden away from them will increase the aggregate savings rate, which should increase steady state growth (if the savings rate is initially below the Golden Rule savings rate).
o The classical argument against progressive taxation runs as follows:

The diminishing returns argument applies to the fraction of income used for present consumption. As income rises, diminishing returns implies that a smaller and smaller fraction of income will be spent on consumption goods. The remaining income will (of necessity) be used to purchase capital goods. This acts as a form of positive feedback that in turn yields more income for capital spending. Meanwhile (and because) these capital goods induce a decline in the costs of production which has the effect of raising real wages generally and implicitly raising the general standard of living. The income paid back on the capital helps create the disincentive to consume that creates capital spending. Thus, those capitalists who effectively manage their property are rewarded and given control of more (newly created) property, of which they are increasingly less inclined to consume and increasingly more inclined to purchase capital goods and thus further elevate the general standard of living by driving down the costs of production. As they acquire more capital goods, eventually their ownership outstrips their ability to manage and oversee what they own; however, they control only as many capital goods as can be attributed to the income of their prior capital---which previously did not exist. Therefore, their ownership does not negatively contribute to the general standard-of-living relative to counterfactual state of them not purchasing those goods. It would thus be misleading to argue that redistributing their capital may yield further increases in the standard-of-living. Doing so may well cause that effect, but doing so neglects that it was the assumption that redistribution would not happen that induced the accumulation of capital. — Eugen von Böhm-Bawerk, Karl Marx and the Close of his System, 1896

o A belief that progressive taxation shifts the total economic production of society away from capital investments (tools, infrastructure, training, research) and toward present consumption goods. This could happen because high-income earners tend to pay for capital goods (through investment activities) and low-income earners tend to purchase consumables. Smithian and neo-classical growth theory says that spending more on consumption goods and less on capital goods will slow the rise of the standard of living, and possibly even reduce it since capital goods increase future production possibilities.
* Brain drain and tax avoidance. High progressive taxes may encourage emigration because taxes are not internationally harmonized, so very high earners are sometimes able to relocate in order to pay less tax, or find tax havens for their income. Unlike the opposing income effect and substitution effect of leisure which may make tax progressivity neutral in terms of working hours, the emigration rate must increase with the top rates of tax.[citation needed]
o The differential in the higher rates of tax between the United States and Europe are cited as a factor in the "brain drain" of high-earners to America in the 1960s, and is considered an important influence on modern "economic migration."[citation needed]
* Increase in tax loopholes such as income splitting techniques.[citation needed] This creates an incentive for business owners to split their business into smaller, less efficient ones for a lower tax bracket. It also encourages production from less efficient smaller businesses than larger ones.
* The increasing energy expended on tax avoidances which occur with greater progressivity produces an increase in the work of accountants and lawyers. Because tax avoidance creates no net wealth this work is unproductive, and can make taxes on the rich less efficient than on the middle class, who have less motivation to exploit tax loopholes.[citation needed]
* Progressive taxes are argued to create work disincentive. Consider again someone who makes twice the minimum required to live on but pays all income above the minimum living threshold in taxes. Such a person had no monetary incentive at all to try to increase his or her income above the base level.[24]
* Justice in representation: economic equity is sometimes used to argue against progressive taxation, on the grounds of representation being out-of-proportion to taxation: While the top 5% in income in most countries pay over half the taxes[25] they have only 5% of the voting weight. This argument can be reversed into the plutocratic case that if tax is to be progressive it should be accompanied by greater say in elections for those who contribute most.
* Policymakers are argued to be under a pressure from lower and middle income voters to limit higher incomes by the means of progressive taxation. A few economists argue against inequity aversion: "If policy makers' primary goal is … economic prosperity for all, they should avoid focusing on the politics of envy." (Gregory Mankiw)[26]
* A study from the libertarian Institute for Policy Innovation, which aims to reduce government intervention in the economy, has concluded that progressive taxes fail to decrease real income inequality.[27]
* Some[who?] libertarians, especially anarcho-capitalists, argue that only poll taxes can be economically efficient[28] in the fullest sense (the utilitarian view), and/or that equity requires each citizen to pay the full exchange value in trade for governance services such as the guarantee of property rights (the natural rights viewpoint).
http://en.wikipedia.org/wiki/Progressive_tax
Tom Jorgenson
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I'm for it.
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gdw
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"In a market economy, the larger an investment is, the higher its rate of return. This is due to both economies of scale and the increased range of investment opportunities. In addition to these economic forces, [u]those who control greater amounts of capital within a society are able to participate more directly in shaping government policy, often in ways that further maximize their wealth.[/u]Thus, due to both economic and political realities within a market economy, it is a natural process for the wealthiest individuals and firms in a society to become disproportionately wealthier over time. In order to prevent the political instability resulting from the natural stratification of the populace into an ever smaller and wealthier aristocracy or moneyed class, and an ever larger working class, all free market democracies engage in progressive taxation and programs to enhance economic opportunity for the lower and middle classes.[citation needed]"

So what would happen if we removed this step?
Also, considering the "market realities" are also expanded by government involvement, and corporate lobbying, it would mean BOTH the factors that cause the so-called "natural process for the wealthiest individuals and firms in a society to become disproportionately wealthier over time" would be eliminated, or extremely diminished.

Would it diminish this despairity MORE that things like progressive taxation?
Well, how's the growth of the wealthy, relative to the rest, doing today? How about their political influence?
It's amazing, people will criticize you for "biting the hand that feeds you," while they're busy praising the hand that beats them.

"You may say I'm a dreamer, but I'm not the only one."

I won't forget you Robert.
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