Great Moments in Progressive Taxation
Many government programs have both a stated justification as well as a second, unstated justification which is the real reason that politicians support the program. For example, many regulations are portrayed as pro-consumer when in fact their real utility is in protecting a favored company or political donor from new competition.
The same is true for progressive taxation. The public logic is usually about the rich paying a "fair share" or reducing income inequality (by cutting down the oaks to give the maples more sunshine). However, progressive taxation pays rich dividends to politicians looking to increase the size of government and their own personal power. Some time in the last 10 years, we crossed an invisible line where less than half of American families pay for effectively all government programs (leaving aside Social Security).
This means that when any politician stands up and proposes a new program, a majority of Americans know that they are not going to pay for it. In fact, the situation is even more obvious when you consider new programs at the margin. If you listen to the Democratic debates, nearly every candidate is proposing to pay for his or her expensive programs via new taxes aimed solely at the top 10 or 20% of earners. Every time they propose a program, there is an unstated but increasing clear clause "and 80% of you won't have to pay anything for this." Already, we see many states funding new programs with surcharges on the rich. Here is but one example:
California voters agreed to tax the rich to support public mental health
services.More than half of them (53.3 percent) voted last month in favor of
Proposition 63, which will impose a tax surcharge of 1 percent on the taxable
personal income above $1 million to pay for services offered through the
state's existing mental health system. The initiative will generate an
estimated $700 million a year....Richard A. Shadoan, M.D., a past president of the CPA, wrote in Viewpoints
in the September 3 issue of Psychiatric News, "The scope of the
program and its tax-the-rich source will provoke a debate. But it's an
argument worth having to make California face the neglect of not providing
treatment to more than 1 million people with mental illness."
So what happened? I don't know how many people make a million dollars in California, but it is certainly less than 5% of the population. So the headline should read "53.3% of people voted to have less than 5% of the people pay for an expensive new program." If the 53.3% thought it was so valuable, why didn't they pay for it? Well, it is clear from the article that the populace in general has been asked to do so in the past and refused. So only when offered the chance to approve the program if a small minority paid for it did they finally agree. This is the real reason for progressive taxation. (by the way, these 53.3% will now feel really good about themselves, despite the fact they will contribute nothing, and will likely piss on millionaires next chance they get, despite the fact that they are the ones who will pay for the program).
Ultimate Example of Progressive Taxation
My story today comes from the Roman Empire just after the death of Julius Caesar. At the time, three groups vied for power: Octavian (Augustus) Caesar, Mark Antony, and republican senators under Brutus and Cassius. Long story short, Octavian and Antony join forces, and try to raise an army to fight the republicans, who have fled Italy. They needed money, but worried that a general tax would turn shaky public opinion in Rome against them. So they settled on the ultimate progressive tax: They named about 2500 rich men and ordered them killed, with their estates confiscated by the state.
This approach of "proscriptions" had been used before (e.g. Sulla) but never quite as obviously just for the money. In the case of Octavian and Antony, though nominally sold to the public as a way to eliminate enemies of Rome, the purpose was very clearly to raise money. All of their really dangerous foes had left Rome with the Republicans. The proscriptions targeted men of wealth, some of whom had been irritants to Octavian or Antony in the past (e.g. Cicero) but many of whom had nothing to do with anything. Proscribed men were quoted as saying "I have been killed by my estates."
I wonder how many of today's progressives would be secretly pleased by this approach?
Doug:
"I wonder how many of today's progressives would be secretly pleased by this approach?" My guess: all of them.
All this does is to point out the wisdom of the Founding Dads, who recognized "democracy" as the evil that it is. What's the old adage? "Democracy is 3 wolves and 2 sheep deciding 'what's for dinner?'" I cringe when I hear presidents praising democracy. A socialist state is unquestionably fairer than a democracy.
December 3, 2007, 1:20 pmTim:
Doug, Please tell me you are kidding. Democracy is Way better than socialism but even then you are comparing apples to oranges. The opposite of Democracy is Totalitarianism; the opposite of Socialism is Capitalism. You can have a democratic socialist country (France), a Democratic Capitalist country (USA, arguably), a totalitarian socialist country (North Korea, Cuba) or a totalitarian Capitalist country (Chile under Pinochet).
The place where the USA shines through is in protecting the rights of the minority. It’s the reason we have a bill of rights. No matter how many wolves want to decide what is for dinner, my rights as an individual are sovergn.
December 3, 2007, 2:09 pmCraig:
Politicians also like to make moves that encourage industries that may avoid political contributions to start paying their "fair share" in that regard. IIRC, the talk about changing tax rates on hedge fund managers encouraged that group to start making donations.
December 3, 2007, 3:53 pmJim K:
Tim,
Doug is right. The founders greatly feared democracy. With the experience of the French revolution fresh in their minds they were very concerned about tyranny of the majority, which was how they viewed democracy. It was precisely this reason they created the bi-cameral legislature, the bill of rights and the much derided "3/5 solution" for the slave states. If I am reading Doug's comments correctly, he is saying that at least in a socialist society you know the state is going to confiscate the fruits of your labors as opposed to a democracy which does it under the rubric of "the will of the people".
December 3, 2007, 4:04 pmdearieme:
It was precisely this reason they created the bi-cameral legislature, the bill of rights and the much derided "3/5 solution" for the slave states.
I suppose that the third of these was original.
December 3, 2007, 4:22 pmdearieme:
The Founding Fathers: did they really draw up the Constitution knowing about the French Revolution that hadn't yet happened?
December 3, 2007, 4:26 pmBearster:
Democracy is a form of totalitarianism. It is the form wherein the power to loot, imprison, and kill is vested in any majority.
All of the various flavors of totalitarianism are based on the idea that the individual has no rights, but disagree only on who ought to have the power to attack the individual.
Capitalism is the only social system that suborned might to right, government power to the individual rights of life, liberty, and property.
NB: The US was founded as a constitutional republic. "Democracy" should not be confused with a democratic process of electing representatives in a republic.
December 3, 2007, 5:08 pmDoug:
Tim, if you think your rights as an individual are sovergn (sic), just you wait until "single-payer healthcare" becomes law. For a dry run, try to opt out of Social Security. In today's America, the minority view is thrust on the majority in the name of non-existent group rights. Your individual sovereignty is a mirage, a victim of this horrid new-age democracy.
Jim K. has it right --- the Founders feared/dreaded/loathed The Tyranny Of The Majority, which was Coyote's original premise: 53% of the people vote a massive tax on less than 5% of the people. It's SOP in California. Where are the individual rights of someone sitting in that 5% bracket?
December 3, 2007, 5:26 pmterrence:
This kind of voting is really mob rule. When I see this going on in the good ol' USofA, I think Ayn Rand was right - Atlas should shrug.
If I was in the high tax group, I would move out of California.
December 3, 2007, 6:00 pmjimk:
@dearieme
You are correct about the timing of the French revolution relative to the adoption of the Constitution. Thank you for the correction. With respect to the originality of a bicameral legislature and the bill of rights, what difference does it make? The point was they were put there to protect minority rights against the tyranny of the majority as was the 3/5 solution.
December 3, 2007, 9:19 pmJMulcahy:
As famed socialist G.B. Shaw said, "When you rob Peter to pay Paul, you can always count on the support of Paul."
December 3, 2007, 11:26 pmJeffrey Ellis:
W00t! Rush lyrics, I love it! Oaks and maples, indeed. Except in the case of progressive voters, the motivation is probably just as much envy (wanting to bring the rich down) as greed (wanting to lift themselves up).
I agree with terrence, though; Atlas should shrug. Not sure how that could be easily accomplished, though.
Jeff
December 4, 2007, 6:11 amScott:
Look out for the new stealth tax for carbon dioxide. We can thank the fat all knowing one...No, not Buddha, Al Gore! The auto industry are already set-upon by the eco-fascists to plan for carbon dioxide reductions. The problem is that current law does not address carbon dioxide in CAFE standards. No matter, the fascists will make sure that it happens. Americans and citizens of the world will pay this tax forever. And even if Global Warming is proved to be a hoax, do you think the tax will go away? As Ronald Reagan said " Nothing so achieves eternal life as a Government program."
December 4, 2007, 9:31 amJoshK:
I never understand why some of my friends who are in the upper income percentiles vote for these folks who then turn around and tax them mercilessly. Everyone I know works very hard to minimize their tax burdens in every possible way. This behavior is so inconsistent, it amazes me every time.
December 4, 2007, 9:47 amDoug:
Amen, JoshK. However, the attitude of SOME of the rich is "what's the big deal with a $10 million tax surcharge? All you have to do is sell that Picasso painting over there in the corner, and it's over and done with."
December 4, 2007, 3:15 pmDoug:
Amen, JoshK. However, the attitude of SOME of the rich is "what's the big deal with a $10 million tax surcharge? All you have to do is sell that Picasso painting over there in the corner, and it's over and done with."
December 4, 2007, 3:15 pmDoug:
Amen, JoshK. However, the attitude of SOME of the rich is "what's the big deal with a $10 million tax surcharge? All you have to do is sell that Picasso painting over there in the corner, and it's over and done with."
December 4, 2007, 3:15 pm