For Progressive Taxation

I was pressed several months ago to give arguments for progressive taxation, the idea that the rich should be taxed at a higher percentage of their income than the poor. I have supported progressive taxation almost dogmatically for so long that it was hard, initially, to come up with defenses for the practice. (Isn't it intuitive that all should give the same? Even if we have a 19% tax, doesn't the rich individual give substantially more than his poor or middle class counterpart?) After a long rumination, here are the best arguments for progressive taxation, as I see them.

I. We Must Tax Those with the Ability to Pay.

The idea is that government performs certain essential functions. Paying for these government functions is a simple necessity, and we must find the money where we can. Asking those near the poverty line to support government welfare programs makes little sense, asking those near the poverty line to pitch in an equal share to support the enormous expenditures of government would require very harsh taxes on those just getting by.

The difficulty with this argument is that it becomes an argument about government spending. Those that view progressive taxation as placing an unfair burden on the rich likely also see government as wasteful. If the spending were reduced, the need to tax the rich more heavily would be eliminated.

II. Progressive Taxation Combats the Inherently Pro-Rich Bias of the Tax System.

Warren Buffett tends to highlight the disparities in the tax system, claiming that he pays incredibly low taxes while his secretaries and cleaning people pay much higher rates. Buffett insists that this is not because he has found loopholes in the code or tax shelters, but others have cited those examples to further strengthen his arguments.

The problem with this argument is that it does not tell us what to do after we address these oddities in the tax code. Suppose we normalized the tax rates of capital gains and income, and suppose we shut down the majority of obscure deductions and credits, and suppose we aggressively policed offshoring income (perhaps through strong international treaties). Is progressive taxation still a good idea? Buffett's argument doesn't necessarily get you there.

It is consistent with his concerns to fix these issues through some sort of flat tax.

III. Taxes are Primarily Used to Protect the Rich

This argument may initially seem counter-intuitive, given the typically conservative tenor of political discourse. It is apparently easy to paint the government as a welfare state primarily devoted to producing handouts for the lazy poor. But the government ensures rights for many of us in a lot of subtle ways.

Imagine all you have to your name is a bicycle, or it is your most cherished possession. If I set my mind on stealing your bicycle, while the law might attempt to help you retrieve your possession (if you live in Mayberry), thieves like me stand a fair chance of making off with the goods.

Now suppose all you have is a large factory that produces a steady stream of goods and income. Suppose I set my mind on stealing your factory, something which seems far more useful than a lousy bicycle. As much as I attempt to make off with the means of production, I do not stand a very good chance. (Question 1: Where would I hide it? Question 2: Once hidden, how do I tell my/your workers where to show up for duty?)

The larger your investments, the easier it is for the law to protect them. In fact, it might appear to someone living in a crime ridden area that the law is only focused on protecting large investments, and does not care at all about the rights of the poor.

I think this is a worthwhile argument, but not one without difficulties. One difficulty is how hard it is to sell. A die-hard conservative will insist that government is in business to give handouts to the poor, and does little for the rich man. Citing Marx won't endear your cause to his ears. A more systemic difficulty arises from the fact that it makes presumptions about how to weigh many incalculables. How many impoverished individuals are afforded jobs because we guarantee protection for capital in this country? How many individuals are given good infrastructure because it is so helpful for business to quickly and efficiently move goods, labor, energy and consumers? It is likely impossible to cipher out exactly what benefits of government go to the poor, and which to the rich, because so many benefits have an endless series of effects.

IV. Progressive Taxation Arises Naturally from a Reflection on How to Create the Best Society

John Rawls is often regarded as the most influential moral and political theorist of the last century. Acclaim does not come without criticism, however. He is often chided by the right for coming to conclusions that are too progressive, and assaulted by the left for coming to conclusions that are not progressive enough.

While there is no shortage of attacks on his conclusions, there is widespread regard for his methods. Because of this, I see Rawls's chief contribution in how he suggested we evaluate the very maxims we might employ to organize a just society.

Rawls suggested that we should not imagine the just society as one that primarily beneifts our own interests. (Ok, duh.) To this end, imagine yourself behind a "veil of ignorance," where you do not know whether your parents are rich or poor, your gender or race, where you are born or under what circumstances.

(From this "original position," he comes to three maxims that should guide the policies of a just society. I am going to tap dance past those three controversial conclusions as fast as possible, but if you want to learn more, request A Theory of Justice from your local library.)

If you imagine yourself leaving the veil of ignorance to realize that your life is one where you are quite wealthy, do you imagine yourself balking, saying, "Wait, this is unfair, I'd rather be poor and taxed less!"

The attack on this argument is often one of "dessert," (not the candy coated kind). The idea is that individuals who do well or worse in society are responsible for their situation, they only get what they "deserve," so we need not create institutions to help those that could very well have helped themselves.

This does not strike me as very persuasive, though I agree with the premise. I suppose it is likely that in attending to those who have fared worse in life, we will abandon a few of those members of our society who are taking care of themselves and strictly deserve far greater rewards than they receive. However, the rich can console themselves at this injustice with the realization that they are rich, and the alternative is not preferable.