Economics @ ITT

Tax the Rich?

Posted in economics, Policy Issues, progressive taxation by ittecon on April 20, 2011

This article suggests a replacement to our current already (somewhat) progressive  federal income tax system. Hint: It’s not a flat tax or a sales tax. What do you think?


4 Responses

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  1. Alex Zorach said, on June 6, 2011 at 10:58 am

    That article dismisses Warren Buffet’s commentary on the tax inequity between him and his secretary (the fact that he pays a lower tax rate than his secretary) as “whining”.

    That would make me skeptical of believing the overall perspective there. Warren Buffet is someone I respect a great deal, and I think his views are deserving of more consideration, whether or not one agrees with them. Personally, I do agree with them.

    I’m a firm believer in progressive tax, but like all things, I think it is something that needs to be done well. I support a simple tax code, low overall taxes, and minimal government. But I do not think that small government and flat tax need to go hand-in-hand. Rather, I support small government and strongly progressive tax.

    Why? I believe very firmly that if a person, business, or family is earning so little money that they are struggling to make ends meet, under an ideal tax system these vulnerable people and businesses would pay no tax. Taxing the vulnerable will tax them into ruin. Part of the reason that our society needs so many social welfare programs and low-income tax credits is that we tax the poor…no matter how poor a person is, they and their employer pay the payroll tax in full, that’s about a flat 15% on about the first $100K of income. Pretty regressive if you ask me.

    My proposal is to eliminate all regressive taxation. Protect the vulnerable, so they pay no tax. Then we won’t need social welfare, we can let businesses and charity fill that role, there will be much less of a need for it anyway because it’ll be much easier for people to work to earn a living once we remove that big barrier to employment and to the poor making ends meet.

    I’d be curious what you think. I have a page on sustainable taxation which explains these arguments….the basic idea is, if you tax the vulnerable, you destroy your revenue stream because you create economic ruin. Instead, I believe it is better and more stable to tax only those who have a bit extra.

  2. ittecon said, on June 7, 2011 at 7:52 am

    I’ll have to read the article on sustainable taxation later, but a tax system where the tax burden is zero until some point when it becomes positive is by definition progressive.

    • Alex Zorach said, on June 7, 2011 at 9:03 am

      Yes, it is. And I think sustainability of revenue, and not subjective notions of fairness, is a better argument for sustainable taxation. Personally I support a certain form of progressive taxation (not what we have, I also would make payroll tax progressive, by eliminating it entirely and just raising the same revenue through normal income tax), and then eliminate most social welfare programs, as I think most of them would be unnecessary under this plan.

      In the end though, I’d rather eliminate income tax entirely and raise tax revenue through other means, which I explain there.

      • ittecon said, on June 8, 2011 at 2:56 pm

        Hi Alex, I took time to read your position and have taken even more to write a response. It is rather stream of consciousness, but I feel it makes my points. Thanks!

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