Depressing Feature of Progressive Taxation
by rrusczyk, Dec 3, 2009, 7:46 PM
Here's a view of progressive taxation that I don't think had occurred to me before.
One might argue that if we moved to a world with more "income equality" in which the government brought in less revenue, then the government wouldn't need as much revenue, since then one of the purposes ("income equality") of getting this revenue would have been achieved. Somehow, I doubt it would work that way in practice -- I've seen very few instances of a government deciding, "X is achieved, so we don't need as much money now," rather than "X is achieved, so we can spend money on Y now."
I think that Salmon's comments may go some way to describing why government protects some industries and some large companies -- it's not simply that established interests have influenced this or that politician, but it may also be the case that the government has already worked out its financial relationship with the established interest or company. When a usurper comes along, it's not uncommon that the usurper means less revenue for government, in addition to competition for the established entity, since often the usurper is producing something better for cheaper (or in a way that doesn't generate tax revenue, such as internet sales).
As depressing as Salmon's suggestion is the commentary given on the blog where I found the above excerpt:
Replace "economics" with "science", and I feel it's likely pretty much the same. (Also, isn't "political science" an oxymoron?)
Felix Salmon wrote:
Remember too that when you have a progressive tax system, especially when there are surcharges on people making seven-figure incomes, you also have a system where for any given level of national income, the greater the inequality, the greater the government’s tax revenues. And indeed federal revenues have been rising faster than median wages for decades now, thanks to the rich getting ever richer.
Given the government’s insatiable appetite for cash, it’s only natural that it would prefer to tax plutocrats, spending some of that money on poorer Americans, rather than move to a world where poorer Americans earn more (but still don’t pay that much in taxes), and the plutocrats earn less, depriving the national fisc of untold billions in revenue.
The government’s interests, then, are naturally aligned with those of the plutocrats - and when that happens, the chances of change naturally drop to zero.
Given the government’s insatiable appetite for cash, it’s only natural that it would prefer to tax plutocrats, spending some of that money on poorer Americans, rather than move to a world where poorer Americans earn more (but still don’t pay that much in taxes), and the plutocrats earn less, depriving the national fisc of untold billions in revenue.
The government’s interests, then, are naturally aligned with those of the plutocrats - and when that happens, the chances of change naturally drop to zero.
One might argue that if we moved to a world with more "income equality" in which the government brought in less revenue, then the government wouldn't need as much revenue, since then one of the purposes ("income equality") of getting this revenue would have been achieved. Somehow, I doubt it would work that way in practice -- I've seen very few instances of a government deciding, "X is achieved, so we don't need as much money now," rather than "X is achieved, so we can spend money on Y now."
I think that Salmon's comments may go some way to describing why government protects some industries and some large companies -- it's not simply that established interests have influenced this or that politician, but it may also be the case that the government has already worked out its financial relationship with the established interest or company. When a usurper comes along, it's not uncommon that the usurper means less revenue for government, in addition to competition for the established entity, since often the usurper is producing something better for cheaper (or in a way that doesn't generate tax revenue, such as internet sales).
As depressing as Salmon's suggestion is the commentary given on the blog where I found the above excerpt:
Tyler Cowen wrote:
Whenever there's an MR post categorized under both "economics" and "political science," it's usually pretty brutal.
Replace "economics" with "science", and I feel it's likely pretty much the same. (Also, isn't "political science" an oxymoron?)
February 2012
January 2012