People, please stop calling a progressive tax structure a "fair" tax...

Hear me out on this.

There are two pragmatic justifications as to why the wealthy should pay more.

1) people at the lower end of the income ladder tend to spend most if not all that they make. This means they are injecting money into the system. Money injected into the system circulates around and around and around creating more money as each dollar is spent and spent again. This increases the value of companies and so the wealthy make a profit from people spending. It is in the wealthy peoples self interest to have a progressive tax system. Why? Because they own the means of production and distribution.

2) this is the one no one really wants to talk about. But if truth be told, the wealthy have a much larger stake in a stable economy and a stable social system. To put it bluntly, they have much more to lose if the shit hits the fan.

Fair is the wrong way to look at a Progressive Tax System. Say it's in your best interests for the tax system to be progressive.

have more vehicles and do more independent driving causing more environmental issues, they are more likely to take more plane trips with ditto results, it's their companies (I'm thinking of S-corps here where company profit becomes personal income) whose need for goods put semi-trucks on our roads and wear them out sooner, they are more likely to scarf up environmentally sensitive land for their homes, they get better and faster enforcement and fire services... They cost us more in taxes, it's a fair tax.

worked all that well.

I think your post would fit nicely as number three in my list of justifications for a progressive tax system period.

Democrats saying that the wealthy should pay their fair share isn't working because they leave it at that. The need for more explanation to show true justification for a progressive tax was really the gist of this thread...

Gettin' wonky and class-struggly. When you're talking about the velocity of money and who's controlling the apparatus of production, you know you're connecting with the average voter.

I agree with you that taxes should be progressive for purely pragmatic reasons. I don't think pragmatics sells well. Remember, we had every pragmatic argument on our side this past election, just as we have in every election in my lifetime. Being right isn't the same as being convincing.

"Things should be fair" is drilled into our heads since preschool. I think "the wealthy control the instruments of production" sounds a little more abrasive and intellectual, neither of which are that appealing on a gut level.

Americans as a whole don't do well with equations that require more than rudimentary algebra. Fair in regards to progressive taxes, is an AlgII level issue, and so it isn't that they see "fair" as class warfare, they just see it as inaccurate. To them the simplicity of "everyone pays the same %" seems mathematically fair, the complexities of progressive tax seems mathematically unnecessary when compared to the simplicity of that "fair" flat tax idea.

But then that was the purpose of this thread to get people talking about defending a progressive tax system...

then there it's a bad idea, which of course it isn't because there are many reasons progressive taxes are fair. As I always told my kids... If there's only one "why," then it isn't "whys". (whys = wise)

and make sense.

The purpose of my post was to engage people and to get some more response so that we may develop a way to present the efficacy of a progressive tax system.

To simply say it is fair ain't working.

Fair is a wishy washy word.

current citizenry, as mentioned above. But that doesn't mean it isn't a fair tax, which is what your OP is premised on. If you simply wanted to nudge for an idea of how to find a different word, that's not the same as claiming progressive tax isn't fair.

And perhaps instead of dumbing down, we simply need to bullet point why it is a fair tax with reasons such as the ones listed above in my post and many more I have no doubt I'm not thinking of at the moment.

That's what we have to do...

think about the fairness and repackage it so that it will be more palatable to the people out there in the middle and lower tax brackets that think a progressive tax system is evil...

the advantage of treating folks a bit more like adults.

On the other hand, we need to be sure that any progressive tax we put up, doesn't include so many loopholes that the rich pay less than the middle class as happens now. I think that adds to the disillusionment of the idea that progressive taxes work, we're told we have progressive taxes now, but in fact we don't when the entire 1600+ page tax code is taken as a whole and not just the tax tables.

"The wealthy have more to lose?" The only way that'll resonate is if the argument is something like "The wealthy benefit more from government than the poor do, so they should pay more." And that is, more or less, a "fairness" argument.

with derision.

My point is to make the argument just as you did, by simply stating that the wealthy benefit more from government do, so they should pay more.

We need to simplify and explain and your statement is far more palatable than mine. But I was speaking in extremes.

Number 4...

we need to refer to it as a safety valve or circuit breaker. Without it, too much money accumulates in too few hands and the economy blows apart!

this is what I wanted to do with this thread, create some discussion about how to present the idea of a fair tax in a way people will embrace instead of calling it wealth redistribution.

1. What alternatives are available to the tax structure of my current or perspective home country? Which sandboxes do I want to play in? How much will it cost me to get my capital out of my current country to one with a better tax structure? What do I give up by adopting residence (and in the case of U.S. citizens citizenship) in another country? We think we are easy on our rich, but why is the U.S. one of only two countries that actually goes after the income of expat U.S. citizens living and working in other countries?

2. What avoidance strategies are avalable and how much do they cost in relation to the tax structure? For example muni bonds to avoid federal taxes, and federal bonds to avoid state taxes. Dividends and deferred capital gains instead of income. Aggressive/illegal accounting gimics etc.

3. What if I decide to play less? If marginal tax structure is too high, then take on less work, refuse to invest more (take risks), do work "off the books" either legally or illegally.

4. The rich are no more rational economic animals than any other person. If they feel like are getting screwed, they are going to behave in ways that are not necessarily in their economic best interest.

Taxes should be viewed as an optimization function first. 100% marginal tax rate will not yield the largest tax revenue. I would argue anything north of about 60% (including payroll taxes and state taxes) is moving towards the other side of the Laffer Curve. This is from a microecon perspective (individual tax payers). From a macro perspective taxes are a redistribution of current (and in the case of borrowing future) tax revenues towards current government spending. Depending on the "investment" this is either helpful or hurtful for the overall economy. In those areas in which public spending is more efficient, then it helps the economy (education, public works, military and civilian security). In those areas in which a societal need/obligation is satisfied, it might not be the most helpful to the economic system, but it is the right thing to do.

I am not entirely sure that more money in the pockets of poor people can necessarily be argued as benefiting the economy. Is having more money to buy beer better than buying tooling so workers can produce a product? This is an extreme example to show the point.

The rich can live with a tremendous amount of civil disruption before they would come to the conclusion that this is a bad thing. They have the ultimate ability to leave any situation and go somewhere else. Maybe the mob with torches and pitchforks will catch up to them eventually, but it rarely happens.

In effect what you are dealing with a societal tragedy of the commons. Each individual rich person does not view sending off additional bucks as benefitting himself/herself - if they did then they would already be reaching into their pocket. Most (even so called liberal champions) are finding every technique they can to avoid taxes.

Also you actually have two different types. The first are the high paid wage slaves - they may or may not be rich, but they are a much more tempting target (it is easier to get taxes from them) than the second type -

The rich who hold assets. Except for property taxes or real estate, these individuals have little or no tax exposure unless an economic event occurs (such as a dividend, capital gain, or death/inheritance). They can avoid the capital gain and death/inheritance taxes through charitable foundations which give lifetime jobs to generations of progeny.

"The rich who hold assets. Except for property taxes or real estate, these individuals have little or no tax exposure unless an economic event occurs (such as a dividend, capital gain, or death/inheritance). They can avoid the capital gain and death/inheritance taxes through charitable foundations which give lifetime jobs to generations of progeny."


That these people keep that money in a vault or under their mattress. They oly take it out when they want to spend some of it.

The reality is that they have that money invested in stocks of companies, in the bonded indebtedness of companies, in the bonded indebtedness of government entities, and in interest bearing deposits in banks.

All of this activity generates a mass of 1099 forms each year reporting income on which taxes must be paid.

Most wealthy people are active investors. Though their investments, they seek:

1. To grow their fortunes still further generating capital gains to be taxed.

2. To generate income so that living expenses do not come out of the principal of their fortune.

3. To stay ahead of inflation so that their fortune does not lose value.


Depending on the tax climate and the economic climate, they may become more adventurous or more conservative with their assets. When there is a favorable tax climate and a good economy, they deploy more of their fortunes in support of the economy causing it to grow further. When there is an economic headwind, they retrench and go to safer investments further accelerating the downturn.

coupled with a charitable foundation at the end. They may see little or no tax liability. Hard assets like gold may also have the same effect. Classic examples are Gates and Buffett. Both plan to give a considerable part of their fortune to charity. In Buffett's case, he will pay little in individual taxes (Berkshire does not pay a dividend).