- 06 Aug 2009 03:35
#13119385
I think that the idea of a flat tax scheme is ridiculous. I used to share the opinion that tax should be a consistent, flat rate regardless of income, so as not to punish those who chose to work hard. Then I realized that this assumes people can make (and earn) an infinite amount of money without consequence to others, which simply isn't true given our economic system. This can be illustrated by imagining the CEO and the laborer (guy making minimum wage.) When the CEO gets paid a half million dollars a year that is (supposed to be) a reflection of his time and effort, thus when he goes to the store to buy milk he is willing to pay much more (as a reflection of time/$) than the day laborer who makes $20,000 a year for the same product thereby driving cost of living out of the range of the day laborer.
Not only is the pay disparity effecting the supply demand curve unfavorably for most Americans, who I am sure make less than a $100,000 a year, it also illustrates the pure ridiculousness of the assumption that people can justifiably earn that much money, as it is essentially saying that the time of the day laborer is not only worth less (justifiable) but exponentially less than that of the CEO. If someone can defend their efforts being 100x or even 1000x that of another person I'd love to hear it. You just can't work that hard. People take far too much credit for what they "earn" in this country. This is where tax comes in. When a CEO or investor or whatever makes a decision which leads a company to make millions of dollars they feel they deserve a piece proportional to that sum, regardless of actual work put in or the fact that many other people could have made the same decision, when really that money is owed to sustaining the system (i.e. taxes) which made that possible. You pay taxes to the country you live in because a considerable amount of upkeep is necessary to make it possible for you to make an income. This should be true for both the rich and the poor.
I propose that tax should be entirely progressive and determined as a function of pay disparity, thereby decreasing the tax on the rich when pay disparity approaches a given distribution. Such a system would inherently prevents people from making infinite money (i don't mean that literally.) Pay should be a reflection of work and investment and the current tax structure hardly facilitates that. On the contrary it actually exacerbates the pay disparity (you can see this in action by simply looking at how the gap between rich and poor has only increased over the last 60 years - as long as such stats have been taken) due to the fact that once a person reaches the flat portion of the tax (i.e. over $250,000 a year) they can simply start reinvesting these sums as they are being asked to pay less tax as a function of their income. Hence, by flattening out at that point the dwork/dincentive ratio (d's denoting delta or change) becomes more favorable than for those of us at the lower end of the bracket. That is, it is easier for a millionaire to increase their fortune relative to the amount of work put in than it is for the vegetable farmer. This is totally backwards. Rich people can put in small amounts of work for huge amounts of gain whereas poor people have to put in a huge amount of work for a small improvement in lifestyle. The reason for a progressive tax structure, which for some reason stops at around $250,000, is that as I mentioned earlier everyone's income/spending is intertwined and I have no doubt that our forefather's understood this when the progressive tax scheme was instated. With the growth our economy has had over the last hundred years I guarantee that this phenomenon has not gone away. Thus to account for this entanglement it has to become increasingly difficult to increase ones net income because infinite money simply does not exist, as money is a reflection of work and completely relative. Now, I know there are a lot of people who freak out at the idea of a progressive tax scheme because they are afraid of not having enough incentive to work harder when the reality is they are already trapped in one. Unfortunately it is one that keeps everyone in check except for the rich. If the progressive nature of our current tax scheme were extended to the rich 90% of the country would inherently pay less taxes as total tax revenue is essentially obtained by integrating the tax curve. Also, the work/incentive ratio will become more evenly distributed rather than favoring the rich, allowing lower and middle income workers to advance more easily. Now, a flat tax scheme as I have explained is simply out of the question due to the dynamics of an economy and the fact that infinite money/work simply doesn't exist and economists have understood this for over a hundred years. The real question is simply whether or not the rich should have to play by the same game as the rest of us. Those of you who think tax reform as I have described is bad idea need to consider how your situation would actually be better off (assuming you're not making over a quarter million dollars a year) if our progressive taxing scheme were extended to the super rich.
Thank you.
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