1/31/2005

Lessons from the playground

In Steven Landsburg book Fair Play, he approaches the issue of taxing the rich to feed the poor. Landsburg likens this tax to his daughter on the playground. He said "...I have never, ever, heard a parent say to a child that it was okay to forcibly take toys away from other children who have more toys than you do" (landsburg 8). He goes on to say that he has never heard of children developing a government so that they could take toys from those that had many to give to those that had little (landsburg 8).

Being one of those that do not fit in the rich category I am grateful for the taxes on the rich. However, when I graduate and become one of the rich, I don't think that I will enjoy the tax as much as I do now.

I believe that if there were some benefit for the rich to give their money to the poorer class (such as myself) that there would be more of it. I also think that there are people who are comfortable just living off of the government and the rich citizens income tax. This creates a lazy, idle society. If we were to do away with the tax the rich heavily and give the poor freely method, and go with a flat tax rate method, it would create an incentive to be more productive, be involved with government procedures and expenditures, and overall create a more productive society


4 comments:

Eric said...

I agree a flat rate tax system would be a better way to tax. Why should we punish someone who goes out and gets things done. If one person makes more than another even with a flat rate tax system he will be required to pay more tax. The differnce is the percent will be the same!

Dr. Tufte said...

-1 for spelling and grammatical mistakes in Tom's comment (waived)

The post starts out with a discussion of a tax and transfer system, but then shifts to the different issue of a progressive versus a flat tax on income.

These two ideas are not tightly related. But the comments continue on with the latter, and I will too.

I think the question that needs to be addressed more widely is not whether or not a flat tax is acceptable on income, but why do we have flat taxes just about everywhere except on income in the first place? Alternatively, why do we have progressive taxes on just about nothing other than income? I would really like to see someone who is in favor of progressive income taxes defend a progressive sales tax - one that charges you a higher rate at Wal-Mart if your cart is more full. If that sounds like nonsense to you, then you probably ought to be more in favor of flat taxes on income.

A related issue that is tied up with all of this is that the flat tax is also about treating all forms of income in a uniform way. Currently, we divide income into many different categories that are taxed at different rates. This is why many people incorporate - to claim income as distributions of profit, and get taxed at a lower rate.

Jordan said...

Dr. Tufte said:

"I think the question that needs to be addressed more widely is not whether or not a flat tax is acceptable on income, but why do we have flat taxes just about everywhere except on income in the first place?"

For the last few years, I have been in favor of a flat tax system (even though I pay close to zero taxes because I make so little). I heard a statistic once (but I can't confirm it) that if we moved to a 19% flat tax system, our deficit would be drastically reduced in the first year. Besides this, I think it is fair that everyone who benefits from the services our government provides (protection, etc.) should have to support it proportionately to the income they earn.

Dr. Tufte said...

The 19% is wildly low, but all too common.

I still think this is a good idea, but we are looking at more like 30-35% tax on consumption to eliminate our income, FICA, and corporate taxes.

Of course, part of the reason they get away with taxing so much is that no one sees all those cobbled together and points out that they are already taking 1/3.