Proper Rationale for Progressive Taxation

Proper Rationale for Progressive Taxation

By TruthMerchant  

Wednesday May 11, 2011 · 3:44 PM EDT

The lefties here at Kos are overly compassionate concerning the poor and angered by the lack of such compassion from those they would call "the rich".  It seems that everything continues to be wrapped in this "help the poor" covering of "Goody Two Shoes".  And it is this wrapper that continues to offend the struggling lower middle class that forms the plurality of the electorate (most certainly the Bubbas).  The plurality do not find taxation of the rich to be offensive so long as it doesn't harm their economic interests. But there IS a rejection of too much "welfare" being handed out to low life bums.  And all the explanations and arm waving in the world will not change these perceptions.  Continuing down the same path of "compassion"; demonizing the rich while protecting the "welfare queen" (a myth that will not die) is fruitless. So it is time to focus the pubic regarding progressive taxation and why it works to the benefit of all segments of the producer class (including the working poor AND the Bubbas).

To claim that "the rich" should be taxed more heavily than the middle or the poor simply because they can afford it is a loser. To claim that "the poor" should receive more aid is also a loser.  But when it can be shown that a progressive income tax actually improves the economy and provides more job opportunities, then we have a winner (which also helps the poor).  The theory of "trickle down" or "supply side" economics has been pursued since the 1980's.  The results are massive debt and indentured servitude of the producer class to those of the owner class.  Highly progressive income taxation and estate taxation functions to prevent "to big to fail" in the corporate arena and "class nobility" in the family world.  And such prevention is the only way to assure a competitive capitalism that delivers what "capitalism" is claimed to deliver. The idea behind "capitalism" is one of competition and earned privilege.  And it is the lack of progressive taxation that promotes the "too big to fail" monopoly power that drains the life's blood of the producer class.  Flat transaction taxes (income and sales taxes) allow too much "ownership" to accumulate in too few hands.

The real justification for progressive taxation has nothing to do with compassion or fairness or funding the welfare roles. The rationale for progressive is the preservation of competitive markets in which people are not prevented from entering into a business and/or employment because of monopoly or oligarchical control by a few large "owners" of the productive means.  Nowhere is this more evident than in the "financial" sector.  It should be obvious that if corporate income in the billions is taxed much more heavily than corporate income in the millions then earnings per share will be better in smaller corporate entities. And if that is the case then we have a very elegant control on the size of corporations.

If competing enterprises in an open "market" is the soul of capitalism then why is progressive taxation not seen as the elegant tool that it is? The simple answer is that advocates of "returns to scale" claim that larger entities are much more effective and efficient in that duplicated efforts are eliminated.  But past a certain point that return is offset by the lack of competition. When entities become so large that they spend more on lobbying the congress than they do on advertising and actual production, the return to scale argument no longer wins the day. It should be noted that this "return to scale" argument is the same for a national health care system or a national insurance system run by government when such a system is compared to competing private corporations bound by state laws.  In either case returns to scale or competition is being chosen because the "return" (the effectiveness) of the operation is greater than it would otherwise be.  In the final analysis it seems to the more alert that "too big to fail" is "too big to be private".  And instead of invoking the heavy hand of government in sectors other than insurance (because insurance is a natural role of government), it is more rational to employ more indirect and elegant solutions to limit the size and power of private institutions and to promote competition as opposed to monopoly.

This is the proper rationale for supporting progressive taxation because it wins the plurality.