Forum Post: Progressive Taxation
Posted 13 years ago on Oct. 19, 2011, 3:53 a.m. EST by sfsteve
(151)
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When a successful business owner or executive collects a salary they are removing the money from their business. The more they take, the less able is the company to grow. Growth is expensive and risky. Current tax rates make it an obvious choice to most executives. To avoid risk, avoid growth, and simply take the money.
Progressive taxation makes this choice more expensive. The effect is to encourage other options, such as, growth, increased worker pay, or increased share holder dividends. The general economy benefits much more when these choices are made.
When an athlete or actor, billionaire investor or real estate mogul, draws a tremendous salary, they do not have the same options as a business leader. To provide such options the tax code should allow for the several types of taxable salary deductions. These can range from donations to nonprofit charities, religious institutions, or municipal institutions such as schools. By offering deductions for specific costs, the government can subsidize industries producing products aimed at benefiting society, such as is currently done with health insurance, and mortgage financing.
Progressive taxation, in concept, is not to fuel government coffers or to punish the rich. Rather, it is to give incentive for generosity to those with the means to make an impact.
Progressive taxation is fine when all pay, but I don't see that with the lower 47% of taxpayers they pay nothing now. Before we raise taxes on the wealthy we need to raise them on the poor working class little bit so they have stake in terms of the fiscal future. Too many deductions already I lower the tax rate and cut most deductions. Why should tax payer subsidize mortgages interest it encourages taking on more debt. Rich can soak only so much before they find ways to move money offshore. Like you soak the poor so much before they have no money for food.
Why do you think you need to use force in order to get people to be generous?
The way it is currently, there is incentive for greed. Building a new factory is seen as a loosing proposition for the company while paying a huge salary to the CEO carries very little cost. Ask a CEO if they took the money because there was less cost to do so and they will say no, they took it because they worked hard and they deserve it. Its the American way.
In the US the average CEO pay is 200-400 times that of the average worker. In countries with more progressive tax rates, the ratio is more like 50-100. This is not because they lost all their money when they paid taxes, it is because they never demanded that salary in the first place.
Look I entirely believe that a CEO who runs a company that is responsible for so many aspects of so many peoples lives does deserve to make more money. I simply think that in a free society no one person is worth 200-400 other people, in money. That said, I do not believe the top rate should ever be 100% as that would institute a maximum pay. If a person wants to take home as much as 10,000 people they can. It would just be quite expensive in terms of taxes paid.
Progressive taxation has a transforming effect on a society. Ask the very wealthy in Amsterdam if they feel they are being forced to be generous. They will say no, they are generous because that's the culture of their country.
"The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be anything very unreasonable. It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion."
--Adam Smith
nice