Monday, January 02, 2012

The case for progressive taxation

I commonly hear people talk about how it's unfair when taxes are used to "redistribute" wealth.

I might agree with them, except, it's NOT redistribution. It's creating the infrastructure and resources that enable people to succeed, both modestly and wildly.

Say you have a great idea and some real business talent. You start a company. You get a bank loan; the bank can lend you that money because of the deposits of its other customers, many of whom are individuals saving for college, retirement, or a rainy day. They can save because they make more than they spend... they're middle class.

You hire people. The people you hire are literate and numerate. They know how to operate a computer and how to follow written and verbal instructions. They know how to communicate with their boss and their colleagues clearly and productively.

You buy equipment, much of it expensive. You get a fire/life/safety alarm system that automatically rings the police department or fire department if anything goes wrong.

You contact distributors via phone and email to get them to stock your products.

You manufacture your goods and ship them, via rail, roads, air, or sea. Shipping costs figure into your prices.

You are successful, and you become rich. But you ONLY were able to do it because of public services and infrastructure, including police, fire, schools, roads, rails, airports, sea ports, and everything that provides stability to the middle and working class so that money keeps flowing in the economy.

"Your fair share" of the costs of operating those things is GREATER, because you got MORE benefit out of them. Rather than benefiting just from sending your own kids to public school, you benefited from all the parents of all your employees being able to educate their children for free. You own more capital, so the expenses we have that ensure your capital is secure (fire and police) disproportionately benefit you. You're making heavier use of the transportation infrastructure, and most of that use doesn't include user fees intended to pay the full costs of building or maintaining that infrastructure.

Sad thing is... the elites who succeeded wildly in business used to understand this. When did we forget that stability, infrastructure, and education are requirements for a successful first-world economy?

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