Goal vs Means

[rowyn]

[Poll #1763592][Poll #1763593]
If you answered 'no' to either question, I would be very happy to hear your reasons.

I know that these scenarios are ridiculous; I am not 100% convinced about pretty much anything in my life.  But I am curious if anyone finds the non-economic reasons for these things (and ones certainly exist!) to be compelling even in the absence of economic benefit.  I tend to look at reasons like "high taxes on the rich are akin to stealing and therefore wrong" or "the rich benefit most from social order and therefore should pay more" as less 'sufficient justification by themselves' than as an explanation of why one system or the other would be better from a total economic perspective. I am curious whether or not others feel the same way.

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Comments

[the-gneech.livejournal.com]

It's amazingly hard to separate my instinctive reaction to the idea, from the question. Most questions of morality in the real world are a matter of balancing one desired goal with another. "Equal treatment for all" is just as desirable as "a fair and prosperous society," and it's pretty hard to resolve the two when they're in conflict.

-The Gneech

[rowyn]

I know what you mean. I don't find it hard in *this* particular case, because I don't think either proposal is unjust if they create prosperity even for the people most affected. (Eg, the society where I take $17 from someone with only $100 is better for that person than the society where they have $0. Likewise, the society where I take $1,600,000 from the man with $2,000,000 is better for him than the one where he only has $300,000). But that's because I created these very artificial premises that let everyone win, and it didn't pit any of my more-cherished values against one another. If I hypothised that, say, we'd have much greater economic prosperity if we put in stringent limits on free speech ... urg. That'd be much harder for me to answer.

[tuftears.livejournal.com]

Well, if anything, this shows that your readers (to date) are willing to imagine that the conditions of your poll questions hold true, i.e. a progressive tax is in fact most optimal, or a flat tax is most optimal, even though those positions are polar opposites. In other words, we're open minded!

For what it's worth, I figure that progressive income tax should obey a logarithmic function: you should never actually make less money by having a larger base income, but as your income rises, you see a proportionally smaller increase. Tax brackets are kind of annoying because they create a staircase effect that may result in losing money as you cross a step.

[rowyn]

I don't think the tax brackets (in practice for the feds) do that -- they're all designed so that the top bracket only applies to that portion of income above the next-highest bracket. Eg, I might pay 0% on the first $8k, then 10% on the money from 8k to 20k, then 15% on the 20k to 25k. I forget where the breakpoints are. But it's definitely not "10% on all income if you make less than 20k and 15% on all income if you make 21K", which would be egregious.

[tuftears.livejournal.com]

Well, that's not so bad!... Complicated to calculate, but not so bad.

If I were doing that sort of thing, I might provide tax credits for sinking money back into job creation, so if you were a football player making like $2 millions a year, if you just deposited it to your bank account, you'd be taxed at a pretty high rate, but if you invested in, say, a sports bar, and hired 10 employees at $50k apiece, you'd get the payroll part, $500k taken off your effective income.

If you set up a shell corporation and made yourself or your family employees, I don't think it'd matter since you'd then have to pay income tax on the fictional payroll.

Maybe there is something like that already. I dunno, I don't make millions a year. x_x

[rowyn]

The existing tax code does work that way, more or less: a business can deduct expenses from its gross and only pay on the net. If you own a business, you can do the same thing, more or less. I think it depends how you structure your taxes.

I am not sure that any of it makes sense. If I buy a yacht, I am keeping the yacht-makers employed. I am not sure that putting the money into my own small business instead of buying from someone else's makes a lot of difference, barring a superiority in my personal business acumen, or other factors not easily measured by government taxing agencies.

[tuftears.livejournal.com]

I think the argument is a lot of people are just stashing their income in bank accounts etc. instead of buying things.

Of course banks invest money too, or else they couldn't pay interest, but with interest rates so low, evidently banks are terrible at investing.

[rowyn]

Interest rates are largely dictated by the Federal Reserve; they are low because the Federal Reserve's rate is almost zero.

For the most part, banks are in the business of lending money, not buying stocks. Since the Fed's rate is low, banks do not pay much interest on their deposits and don't charge a lot more interest to their borrowers.

Investing in the stock market is considerably more risky, and the stock market# returns have been wildly varied by period since 2008. The average return on stocks for the last few years has been unspectacular, too.

Or put another way: in a down economy, few people have a good formula for making money. This is tautological: if a lot of people knew how to get a consistent and good return on investment right now, we'd have an up economy. :D

[terrycloth.livejournal.com]

Personal deductions are supposed to be the equivalent of business costs, I think? They're supposed to cover what you need to live, with the rest of the money (that you're taxed on) being your 'profits'.

The assumption is that a business is only going to buy necessities and distribute the rest to its owners or shareholders, while an individual is going to spend lots of stuff on things to make themselves happy.

Of course, they don't really cover it at all. If they did then a progressive taxation system would be less necessary (although probably still a good idea from what I've read on the subject).

[djinni.livejournal.com]

I am not very rich, but want to contribute a fair amount, and I'm all for whatever actually is a fair amount, as long as it benefits everyone. My state doesn't have an income tax, but collects sales taxes which act like a flat tax, so that percentage of my income isn't lowered for me because of my lower income, but on the other hand, my state also has some programs that have helped me to afford medical care.

I don't believe that hard work is the only factor in becoming extremely wealthy. Many people work very hard their whole lives and never break out of poverty. It has a huge element of luck, and a huge element of the right opportunities and connections, and does involve reaping a benefit from society, including from many people who aren't as rich and won't get to be. So, I feel that it's fair for everyone to pay taxes and that those taxes benefit the rich and poor, both. My brother feels like it's robbing the rich to ask them to pay taxes for social programs they don't need. I'm not an economist, so I don't really feel qualified to talk about it beyond my own opinion on the matter. It's a tough issue, because when you're poor, you're looking at "will I have enough money to survive, and will there be programs that can help me to afford to go to a doctor", and emotionally, it feels like the rich are saying they're harmed by having to pay taxes instead of buying luxury items, when other people are struggling to have enough to eat. But, I buy luxury items, too, and I'm far from fantastically wealthy, and everyone should be able to spend money on things they want, if they've earned that money. I don't know. The whole issue is pretty upsetting to me, to be honest. I wish I knew the fair answers.

[velvetpage.livejournal.com]

Reliance on sales tax means than the people who pay the highest percentage of their money in taxes are those whose money gets spent - all or almost all of it, no savings - and those who do not have enough money to spend it or save it outside of that jurisdiction. So sales taxes disproportionately hurt the poor.

As for robbing the rich to pay for social programs: if those social programs aren't there, the poor still need to eat, so they generally turn to crime, and guess who they're stealing from? It's cheaper to pay for subsidized housing, food stamps, and welfare, than it is to cut that person off and make them live on charity or have them turn to crime.

[rowyn]

My state has both income and sales taxes. *sigh* I wish the government would pick ONE THING -- sales, income, real estate, WHATEVER -- and tax that, instead of taxing a bazillion different things in a bazillion different ways each with their own accompanying forms and exceptions and requirements. It's hard to believe this is the best way to do it. x.x

I do feel that the "taxes are a form of robbery" is essentially true, and it's true regardless of whether or not you directly benefit from government. OTOH, not having a government is much worse, so I don't see any rational alternative. But I am not so much concerned with whether taxes are 'fair' than whether they work -- whether they produce a system that provides the maximum benefit to the people. And by "system", I don't just mean the services that government provides directly, but the services and wealth that the private sector generates. I want the balance point to be the point where we're making the absolute most of both sectors.

[jurann.livejournal.com]

While I believe a flat tax rate is fair from an idealistic sense, I have to disagree with a flat tax in practice, esp in the United States. Already we have a somewhat progressive tax rate that inflates with the more income you make, however the more income you make also the more creative ways you can WRITE OFF taxes and thus cheat the system. As it stands, the top marginal rate on average for the wealthiest 1% are FAR below the top marginal average of "the common man". Also, historical evidence shows that the times of greatest national wealth, prosperity and productivity were during times when the tax rate on the top tier of earners was RIDICULOUSLY high - between 55 and 70%! The ultra-wealthy are not going to go away no matter how hard they are taxed, and taking a good share of their income helps to ensure that a strong government infrastructure stays in place and creates public works jobs and pays for things like socialized health care since marginalization of "the common man" and his benefits has been how the filthy rich have been getting filthier lately.

Trillions of dollars of fertile green funds are locked-up in the Swiss accounts of the most ludicrously wealthy American shadow-players and they're intentionally not spending and keeping lubricating liquid assets moving in order to artificially crash the market and increase their personal gains. The government is THERE and EMPOWERED by "the people" to protect them and break-up such robber-baron tyranny, and frankly it's about time we had another Teddy Roosevelt come into office and kick-ass while taking names... Just IMHO, YMMV.

[rowyn]

While I believe a flat tax rate is fair from an idealistic sense, I have to disagree with a flat tax in practice.

That's fair enough, but my entry wasn't about what was practical. It was about two "what if?" scenarios with no claim that either of them had any basis in reality.

It did strike me as funny to be proposing a "flat tax" as the opposite of "progressive taxation", when the percentage rate on income taxes paid in the US is actually regressive for some income ranges. A 17% flat tax with no exemptions would be a much higher rate than most people with incomes in the tens of millions or more pay.

[jurann.livejournal.com]

Okay, so assuming that there's no such thing as "special deductions" and "write-offs" and "charitable donations that pay back triple as a write-off" or any OTHER flubber that allows one income class to "lose more burden" than any other, I think a 17% flat tax is a GREAT notion. But the trouble, again, is with the fact that the American tax system has been riddled with bulletholes from the machinegun of greedy robber baron lobbyists who get their wealthy high-hog pals on Capitol Hill to do their every bit of bidding.

American government needs to be cleaned up (NEEDS, all caps!) and we need genuine, modern, progressive reform to every branch of US government to keep the checks checking and the balances balancing. We've gone nearly two and a half centuries with no major reform, while we've seen the coming and going of the age of Enlightenment, the Great Frontier, the Industrial Revolution, the Cold War, and coming out of the other side now of the Information Age. It's time for revisions that make sense NOW and that apply to the current era and simplify life, living, pursuit of happiness and of justice.

[terrycloth.livejournal.com]

I probably should vote 'no' to both just based on the premise that I'm 100% sure of something. The only way that could happen is EVIL MIND CONTROL.

[rowyn]

That is, I will admit, a fair point. =D

[argonel.livejournal.com]

Given the stated outcome that would be economic prosperity both options are in fairytale land and equally acceptable. I do note that either proposal would make filing my taxes much simpler even in a moderately complex progressive income tax system, which makes me look on them more favorably. It would make it much easier to make rational economic choices if the government was not trying to shape society by rewarding specific behaviors with tax breaks.

[rowyn]

I was wondering if I ought to offer something more remotely like our current mishmash of exemptions and deductions and AMT and whatnot. But I don't think anyone actually favors the current system. There's just not enough agreement on what would be better to get it changed. x.x

[bradhicks.livejournal.com]

Yes on 1, no on 2: because there are solid political and practical reasons to want to cap accumulated wealth that have nothing to do with economics. As you have perhaps noticed, wealth is fungible into power; a severely progressive income tax is the only reliable way to keep a lucky few from ending up accumulating enough power to own the rest of us outright.

[rowyn]

I can see that rationale, even if I don't have quite the worldview to agree with it. I am glad you commented -- I really wanted to know more about the non-economic motives favoring one tax system over another.

[quarrel.livejournal.com]

I brought up the “rich people have more power” claim with a — well, not “friend”. More like “avid political activist”. I was in the middle of a thought experiment myself. I’d proposed a hard limit on personal wealth, akin to how no particular branch of government is supposed to have too much power.

He adamantly disagreed that wealth equaled power. To him, “power” meant only “legitimate power,” and, in his mind, everyone has an identical amount. People with more money do get away with more illegal activity, but that is only indirectly because they have more money. The direct cause is that uncorrupt people let them. Thus the proper fix to evil flourishing is for good people to stop doing nothing. He was dead-set against laws that restrict or prohibit enabling-but-not-inherently-immoral activities, such as owning a gun or lots of money, and instead favored more reliable prosecution of people who do actual immoral things. It would mean more freedom overall, and it wouldn’t have the endemic weakness of trying to prevent known law-breakers from breaking laws by writing more laws.

He didn’t say how he’d get society more vigilant against illegal activity, though. I don’t imagine he had a simple plan; it’s not a simple problem.

[rowyn]

I think the theory that wealth != power in a free and just society is correct. I am not sure such a society is achievable in practice, at least with present technology.

I do think that the pursuit of wealth by individuals has positive benefits for society, by motivating individuals to take risks/work hard/come up with new ideas/etc., and I think that putting an artificial constraint on the upper limit has a negative impact on this. Some, may be even many, are motivated by the lottery /game aspect to do things they wouldn't do if there wasn't an unlimited upside, and some of those things are very valuable. (Some of them, very bad, but some of the very bad ones will only get worse if you make it criminal to pursue wealth past a certain point.)

[(Anonymous)]

One downside of a progressive tax system is that it is more difficult to administer in ways that make it inherently more intrusive. To get around that issue, we would need to define "better off" in a way that gives each person subjectively sufficient compensation for the additional paperwork and loss of privacy that come with a more complex tax system (compared to, say, a flat sales tax on all final purchases combined with an annual payment to each citizen to set a minimum income level, eliminating individual tax returns).