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Tuesday, April 17, 2007

Moral tax policy?

I've mentioned before that one of the cards I leave in coffee shops says, "Is there such a thing as a moral tax policy?" The point of the cards, titled Discussion Starters, is to present something neutrally to allow discussion. And, like all of the questions, I do not have a fully formed opinion.

Here's something from MoveOn.org.

"The share of after-tax income going to the top one percent rose from 12.2 percent in 2003 to 14.0 percent in 2004," making that the largest one-year increase in the share of income going to the top one percent in 15 years.

MoveOn has an agenda, but I selected this statistic because I think it is helpful. (Cf. comparing Dick Cheney's tax savings to the average person in the bottom 20%, which is a completely unhelpful statistic.)

Here's what I think about this as a modern Christian. Concentration of wealth makes me uneasy because I don't like concentration of power. But, as far as people with million dollar incomes keeping a bigger share of the pie than people with $100,000 incomes, I'm not sure I can become too upset with that. And, I think that is what is driving the statistic. In fact, much of that change is the result of the Alternative Minimum Tax affecting more people, which would case just this result for just this reason.

As a Christian, I don't want to see funding the government to be an undue burden on someone struggling to survive. I need to not have people going without necessities of living (for sure), and (I think) health care or education in order to pay their tax bills. I don't think that is happening now. So, I think we have a moral tax system.

This is a good example of a matter for which I have opinions that are entirely unrelated to my moral opinions. For example, I think the economy functions better when the tax system prevent money from pooling in the hands of a few. When you spread out wealth, you have more transaction/spending. And, that is the engine that drives our economy. For that reason, I believe our tax rates should be more progressive. But that is the ramblings of a non-economics trained liberal. It has little to do with economics and nothing to do with morality.

2 comments:

Matt Dick said...

Here's an interesting thought: It is projected that before I die, barring big events like asteroid impacts, another world war, etc., that the average Bengladeshi will have a standard of living equal to that of the average Belgian in 2007.

The average Belgian at that time will be even better off -- he will live longer than that Bangladeshi, he'll have access to better education and more information. He'll maybe be safer, but that's a second-order calculation and harder to project.

So thinking about a 30 year-old man in Bangladesh in 2070 (I'm living at least 100 years), should we derail our current economic models (The US, Europe, Westernizing South Asia, the Free Far East) in order to make life a little more fair for Bangladeshis today? What's fair? What is the floor below which a human is existing in such a way that we have a moral obligation to stop everything and help him?

Right now, the US top 1% of income-earners have more money than they ever have had proportionally, but at the same time, the average and low 20%iles are way better off in absolute terms. There are good reasons to believe that the same effects that make the top 1% so wealthy also bring up the average and the floor in standards of living.

And spreading wealth around is not necessarily a good thing. Lots of the wealth in the United States is related to the movement of large amounts of money. That movement is generated to a large degree by large money holders spending large sums of money, not hoarding it. It's a misnomer that Bill Gates is hoarding his huge sums of wealth. He's not, he investing in Microsoft making more money, which in turns enriches his shareholders, his employees, and the US economy.

What does Donald trump do when he amasses a huge sum of money? He buys an office building downtown, tears it down and builds a new building -- creating massive commerce for Chicago. If 1000 people had a million dollars instead of one man having a billion, this could not happen.

Now all those millionaires might also create a lot of commerce, but the models have shown that often the concentration is better.

Just some stuff to think about -- at what point do we declare poverty solved? I think when a common Bangladeshi has the opportunity of a 2007 European, we can stop worrying that some guys have a lot more than anyone else.

JimII said...

That is a very interesting thought. And it is exactly why I have concluded that our tax policy is probably moral; and why capitalism is good.

I also believe that the value of money is based on how fast the person holding it will put it into the economy. Trump does that faster that you or me. [I'm not sure how he compares to the minimum wage worker, who also puts the money into play very quickly.] So, to the extent fixing the AMT puts more money in our hands and less in Trump's it is probably bad for the economy.

Okay, that's enough creating a record of my ignorance. This is something we need to do in person wherein there is not permanent record.