I’m mostly ignorant about tax policy but it seems to me that unlike dinner among friends, citizens don't voluntarily opt into their society and its associated costs.
You suggest that the tax system is super unfair to the rich without even mentioning corporate tax loopholes, deductions, etc. Federal income tax is progressive but the tax burden across all levels of government isn’t so simple.
Your argument about "costs incurred" focuses on direct government services but doesn't really talk about the less direct ones like social stability and infrastructure that help make rich people rich.
You talk about how much the poor pick on the rich for being rich and how unfair that is. It sounds like you’re trying to get a rise out of people who are sympathetic to people who don’t have much, but if you actually want to make the country safer for rich people, and increase sympathy towards the maltreated wealthy minority, this doesn’t seem like a sensible approach.
Correction: I received the following message from an anonymous reader, which helpfully clarifies how progressive the total tax burden is:
which looks at the 2019 total tax burden, including transfers, not limited to income tax and finds the bottom household quartile pays -127%, the second quartile pays -31%, the third pays 2%, the fourth pays 16% and the fifth pays 31%.
I felt like he glossed over the utility part. Clearly taking a dollar away from a poor person does way more damage than taking a dollar away from a rich person. He acknowledges this but only briefly, treating it as a minor consideration. I think this is by far the most important reason for progressive taxation and he needs to provide a convincing rebuttal for this argument.
In the case of tax policy, taking a marginal dollar from the rich does not result in the poor receiving an additional dollar. So even if we could make reasonable interpersonal comparisons of utility, the calculation would be rather complicated.
Huemer may be saying that the negative marginal effect of taxes on consumption due to reduction of investment swamps the positive(?) marginal effect of a government revenue increase on consumption for the poor. This would be true if growth provides more jobs for the unemployed and hence both more income and a larger tax base. The harm that government does to the poor is not restricted to the possibility of lowering the food stamp budget. The food stamp budget is just more obviously related.
Another related point is the purpose of taxation. I believe its only purpose should be to pay for government services. This means no social engineering with deductions, credits, and special provisions. The ideal income tax would be a flat tax with absolutely no deductions that everyone pays.
So far I have only read the first sentence. Has Professor Huemer previously made the case (on this blog or elsewhere) that we don’t need a government that collects taxes? If so, could someone please direct me to it?
I'm unsure supporters of a progressive tax scheme would concede to analyzing the fairness of taxation in a moral bubble like this: wouldn't they justify (or try justifying) uneven taxation within their broader program of distributive justice?
Does this analysis not ignore differences in how the governments and private individuals put funds to use? Sure, taxing the rich likely removes incentives on the most *privately* productive people in society, but what if government is able to put the dollar to better use (from society's perspective) than rich people? Classical cases of this would be providing public goods, correcting market failures, etc. I don't know whether or not government is better or worse at spending money, but doesn't this at least need consideration here? If there is a certain optimum level of government spending at the expense of private spending, then taxing the rich more may simply be necessary to generate optimal tax revenues (though not necessarily through progressive taxation).
“But saving & investment is the key to economic growth. So progressive taxation is a big drag on economic growth. Reducing the growth rate has exponentially increasing costs over time — e.g. if you lower the growth rate by 1 percentage point a year for a century, then by the end, you’re looking at a vast total cost.”
This might work under a more sophisticated model (e.g., a connection between saving/investment and ideas), but the way it’s presented, this argument seems to run afoul of the Solow model: physical capital has diminishing returns and depreciates, meaning you can’t get this kind of exponential growth permanently from an increase in saving. If you raise the share of GDP that is saved, you get a level effect, but the growth rate eventually returns to g = Ȧ/A, the growth in technological progress.
I’m mostly ignorant about tax policy but it seems to me that unlike dinner among friends, citizens don't voluntarily opt into their society and its associated costs.
You suggest that the tax system is super unfair to the rich without even mentioning corporate tax loopholes, deductions, etc. Federal income tax is progressive but the tax burden across all levels of government isn’t so simple.
Your argument about "costs incurred" focuses on direct government services but doesn't really talk about the less direct ones like social stability and infrastructure that help make rich people rich.
You talk about how much the poor pick on the rich for being rich and how unfair that is. It sounds like you’re trying to get a rise out of people who are sympathetic to people who don’t have much, but if you actually want to make the country safer for rich people, and increase sympathy towards the maltreated wealthy minority, this doesn’t seem like a sensible approach.
Correction: I received the following message from an anonymous reader, which helpfully clarifies how progressive the total tax burden is:
The total tax burden in the US is progressive, just as the income tax burden is. See e.g. here: https://taxfoundation.org/research/all/federal/who-pays-taxes-federal-state-local-tax-burden-transfers/
which looks at the 2019 total tax burden, including transfers, not limited to income tax and finds the bottom household quartile pays -127%, the second quartile pays -31%, the third pays 2%, the fourth pays 16% and the fifth pays 31%.
I felt like he glossed over the utility part. Clearly taking a dollar away from a poor person does way more damage than taking a dollar away from a rich person. He acknowledges this but only briefly, treating it as a minor consideration. I think this is by far the most important reason for progressive taxation and he needs to provide a convincing rebuttal for this argument.
In the case of tax policy, taking a marginal dollar from the rich does not result in the poor receiving an additional dollar. So even if we could make reasonable interpersonal comparisons of utility, the calculation would be rather complicated.
Huemer may be saying that the negative marginal effect of taxes on consumption due to reduction of investment swamps the positive(?) marginal effect of a government revenue increase on consumption for the poor. This would be true if growth provides more jobs for the unemployed and hence both more income and a larger tax base. The harm that government does to the poor is not restricted to the possibility of lowering the food stamp budget. The food stamp budget is just more obviously related.
Excellent points. If Dave were here he would be proud ;)
Another related point is the purpose of taxation. I believe its only purpose should be to pay for government services. This means no social engineering with deductions, credits, and special provisions. The ideal income tax would be a flat tax with absolutely no deductions that everyone pays.
Wouldn't incentivism imply Georgism rather than taxing things like labor and capital?
So far I have only read the first sentence. Has Professor Huemer previously made the case (on this blog or elsewhere) that we don’t need a government that collects taxes? If so, could someone please direct me to it?
https://www.amazon.com/Problem-Political-Authority-Examination-Coerce/dp/1137281650/ref=sr_1_4?crid=2WKSIK2U6XDC3&dib=eyJ2IjoiMSJ9.JVNubelprF0LwinbCezzv_Y9VliLH3Js97rxkf4oke5KY5h517RxWMdacMX_Z6I0Lmux9VAVU3Hab9d2CYMmUr6MfnqLnNssO4HjWgaVujh4o43f4OADLCreLEdZx5D9gAwoWHX89AdqbvFO4s310uvN0Chy-9XH4qVUYGBBIOFtpIymSZdrI7G3LhLbU9QMNIdIwR7zCEeCaN3OTiT38StsF_lwPkr0dMi0O5H_U6pE7R9rQZ6eBU6hQGN9bpv2FolgmpFyWyTwQrkiOpZZXJ3jX9A437vlMIC7elENJF9CF81fgpyMKGw7Jh99jOgeXvnM2HAPOpOc5FWz7uar_Kif0hUhvYh8VfnyZPqhZsNkvVnOlgHw5vWmHhDI-h-SohOsjoG6YavJ2SkSmy_WkPK4lcPObqJwpRqwfw6Jv-sX4T7zvEnUXAr6ODnyHRXO.5g8c6j-8E10XVYeLOMTQVxD4fRSqsg70Aclci84Qcu4&dib_tag=se&keywords=Huemer&qid=1737832164&sprefix=huemer%2Caps%2C194&sr=8-4
Thank you!
I would like to cite the tax money distribution chart. Can you please tell me where does it exactly come from? Thanks <3
I'm unsure supporters of a progressive tax scheme would concede to analyzing the fairness of taxation in a moral bubble like this: wouldn't they justify (or try justifying) uneven taxation within their broader program of distributive justice?
Does this analysis not ignore differences in how the governments and private individuals put funds to use? Sure, taxing the rich likely removes incentives on the most *privately* productive people in society, but what if government is able to put the dollar to better use (from society's perspective) than rich people? Classical cases of this would be providing public goods, correcting market failures, etc. I don't know whether or not government is better or worse at spending money, but doesn't this at least need consideration here? If there is a certain optimum level of government spending at the expense of private spending, then taxing the rich more may simply be necessary to generate optimal tax revenues (though not necessarily through progressive taxation).
“But saving & investment is the key to economic growth. So progressive taxation is a big drag on economic growth. Reducing the growth rate has exponentially increasing costs over time — e.g. if you lower the growth rate by 1 percentage point a year for a century, then by the end, you’re looking at a vast total cost.”
This might work under a more sophisticated model (e.g., a connection between saving/investment and ideas), but the way it’s presented, this argument seems to run afoul of the Solow model: physical capital has diminishing returns and depreciates, meaning you can’t get this kind of exponential growth permanently from an increase in saving. If you raise the share of GDP that is saved, you get a level effect, but the growth rate eventually returns to g = Ȧ/A, the growth in technological progress.
Can you share the data for the chart?