Thursday, September 29, 2011

Taxes and Income

Here's an interesting opinion that I generally agree with. What's your opinion?
There are a few concerns I have that I don't generally see addressed in tax and revenue discussions. I'm going to address one of those concerns here.

One is that not all income is the same. I'm not referring to source, but to amount. IMHO there are three categories.

Category 1 is a minimum figure for an economic unit (household typically) at which all money, used as efficiently as possible, will be completely used up for necessities. I mean real necessities, e.g. - bulk rice for food and the cheapest apartment available. If there is less income than this amount, then the required sustenance has to be obtained through government or charitable intervention. Such intervention always costs more money overall than if the individual(s) had simply been paid enough in the first place. This income should never be taxed, because ultimately it is more expensive to reduce it than otherwise.

Category 2 income is discretionary in that it exceeds the minimum and may be used for whatever purpose the individual conceives of, including better housing or food, education, savings for retirement, health care, travel, etc. A great deal of American income fits into this second category, but the margins have been getting slimmer for most of us. Such income might be reasonably taxed at a flat or a progressive rate, although our current straits suggest at least a short-term progressive structure to pay off the debt.

Category 3 income is income of such magnitude that it exerts significant political and economic influence on other people's lives and upon our political processes. Such income confers control over the lives of thousands of employees, may own and tie up vast resources, buy 24/7 lobbying efforts in its own furtherance, fund campaigns and candidacies, and purchase media companies with a view to controlling the political message. Such fortunes and the incomes they generate can be passed on from generation to generation without being earned (a significant percentage of American billionaires inherited it), and were nearly inconceivable in the US of 1788. I do believe that in fact many people who did not partake of its benefit had to labor to enable the ultimate possessor to acquire a fortune of that size. In addition to their labor, the system of government, national infrastructure, and abundance of resources of the USA made it possible for such an accumulation. A tax code that slows such accumulation at the upper end and mitigates the continuance of such a vast concentration of wealth through multiple generations doesn't need to impose genuine economic hardship on the possessor. There is a natural human acquisitiveness however that does not like being thwarted, even when it is not in the interest of the nation and society at large.

I maintain here that it makes as much sense to use the 2nd Amendment to justify private ownership of WMDs as it does to allow the abuse of our nations's enormous economic freedom to concentrate the economic power of the entire nation into the hands of a tiny fraction of its citizens. This is the road to enslavement.

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