Reply #26: Progressive tax mobility enhances social mobility [View All]

[seasat]

You can plot the increasing gap in growth in income of the bottom 80% of the population vs the decline in taxation on the top. A strong middle clase, IMHO, is neccessary for an inovative business community. If a given person knows that he can come up a new idea, bring it to market, and create the next Intel Corporation, then the whole business community is much stronger and stable. A progressive tax structure allows this to happen by lowering the burden on the middle class relative to the wealthy.

The larger tax burden on the wealthy, especially inheritance taxes, aids in keeping a "Corporate Royalty" from being established. They preserve the status quo since it is in their best interests. Innovation is risky so they don't try to develop significantly new products or new businesses. With our tax structure nowdays, we are returning to an economy of the the early 1900s.

Finally, progressive taxes tax the income not needed for basic needs. If we had a flat tax, then folks who spend everything on food, medicine, and housing would be hit the most. Even a flat tax with a large personal deduction would still hit those at the lowest levels. The authors of the original book on the flat tax admit that this is a mathematical rule of their proposal.

added on edit:

Finally, progressive taxes are needed because the real world is imperfect. If markets and businesses functioned perfectly and rationally, then we could have a true democracy (one vote by each person on everything) and we could have a libertarian society (minimal laws). The problem is that people are lazy, dishonest, and irrational some of the time. This applies equally to both the wealthy and the poor. A progressive tax provides money to a social saftey net that protects people when affected by this market. It provides money for education, food, shelter, and medicine. If we relied on an anything goes Darwinistic view, then we lose our humanity. By helping the least of us we help us all.