Thursday, December 1, 2011

70%

An interesting and short discussion of one way to look at taxation. The argument is that we should base taxation of the wealthy, not on how it affects the happiness of those taxed, but how that tax rate will benefit the rest of society. Based on this model, the top tax rate is theorized to be at a premium around 70%.

That may sound high to us today, but consider the rate in relation to historical top tax rates. The highest we've ever had in this country is 90%.  With all of that money, we built America into a powerhouse of industry, a cutting edge nation in technology, and still had money left over the build the infrastructure that is now crumbling. So, 70% isn't the highest it's ever been. But even more important, and as the article points out, the reason we feel that the rate should be so low has a lot to do with our perception of the wealthy.

We tend to revere and feel a strong attachment to others, especially those we admire. The more postively we view someone, the more we sympathize with them. We also have a tendency to reject the idea that those who work hard should have to give up their money. But here's the thing: the wealthy don't necessarily work harder than the poor. How many wealthy individuals work three jobs? How many put in 80 hours a week, or work nights and weekends? How many have to go into work when their sick because not doing so will cause too great a hit to their paycheck? No, the wealthy don't work nearly as hard as the poor. This is not true for all of them of course, but I honestly believe that most do not work nearly that hard.

So, raising the top tax rate to 70% may sound ridiculous at first, but consider what we could do with that money. We could fix our infrastructure, fully fund eduction, medicaid, medicare, stop funneling money from SS, stop deficit spending, beef up our R&D, and pay off our debt to foreign powers. That's a lot of good for some sacrifice. And bear in mind, this tax rate would apply to the wealthiest individuals. They may be paying 70% in tax, but that's still leaving them with thousands of times more money than the majority of Americans to live on.

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