Progressive Taxation: Income-Dependent Utility of Government

Everything seems to be up for debate in the current budget discussion, with the tax code at the center. President Obama proposes creating a fair tax system that gives less money away in loopholes and itemized deductions, creating a flatter playing field. Republicans have decided, however, that the issue of fairness argues against having a progressive taxation system at all. From a comment thread on the Reality Based Community blog, here's the flat tax argument in a nutshell:

“Fair” is that you get what you pay for, and pay for what you get. I walk into a McDonald’s, a billionaire walks into McDonald’s, we both order a cheeseburger, we both pay 99 cents. THAT is fair. We both walk in, I pay 1 cent, and he pays $5000, just because he’s got a lot more money? No, not remotely fair. No matter how much I might appreciate a 1 cent burger. Not even if I’m really hungry, and don’t have 99 cents.

Ludicrous figures and CAPS in the original.

This commentator, whom we'll call Brett Bellmore, presumes that the super wealthy and the middle class both receive the same 'cheeseburger' from the government. If the government provides the same service, the customers should pay the same price. Sliding scale pricing (while economically efficient) are for an unexplained reason seen as 'unfair.' I don't want to get into the debate with an unexplored assumption here, so let's grant that the sliding scale is unjustified, anti-capitalist, un-American or whatever.

My issue with Brett's analogy is that he assumes the middle class and the wealthy receive the same cheeseburger. The top 1% of American income earners take home an enormous amount of resources each year. This accumulation of wealth, land, and capital places higher demands on the government. One middle class family can pretty well protect their own house from theft by taking reasonable measures; the security of John McCain's eight houses must be protected by police. Second homes, intellecutal property, and capital all must be protected by the government, yet these services are rarely provided to the middle class.

Flat Taxers would reasonably rebut that the taxes paid by the super wealthy would increase commensurate with their income, though the rate of taxation would simply be the same. The larger pie to draw tax revenue from would be sufficient to cover the extra unique demands on government resources of the weaalthy. This rebuttal implicitly posits a linear correlation between income and the quality, quantity, and overall value of the service that government provides.

The government provides astronomically better service to the wealthy than it provides for the middle class. The political process is captivated by the wealthy. "David Koch" had a thirty minute phone conversation with Scott Walker at a time when even the legislators he works with couldn't get him on the phone. This access to power and ownership of the political process is an exponential function of the Koch's wealh; not a linear one. The Flat Tax argument would have us believe that that relationship between wealth and political power is linear. Even if it were merely a one-for-one dollar of income for unit of influence, would Americans truly be comfortable with that? The flat tax ideology is deeply anti-democratic.

The singular focus on the tax rates for the wealthiest 1 percent of Americans demonstrates the absolute dominance of the super wealthy over the national discourse. National policy is so constrained by the wealthy that they should pick up more of the tax bill simply because they're the ones dictating how that money is spent. The Flat Taxers have it exactly backwards.

The value of societal stability provided by government benefits every American, but it enjoyed exponentially more by those with the most to lose. Stability is worth much more to the few who have much less tangible claims on vast resources. The middle class family uses its single house constantly. The wealthy's dominion of their surplus domiciles is an ethereal right, enforceable only through government. Brett Bellmore sees this contention as a thuggish threat:

(I didn’t burn down your factory, so I’m an important factor in production, you owe me!

One could view it through that weirdly Marxist lens, but it deliberately misses the point of a stable society.

The government simply doesn't redistribute wealth to pacify the poor. That is a class-bound analysis which is inappropriate in a capitalist society that strives for meritocratic achievement. When Right Wingers make these snide class-bound analyses, they belie their belief that poverty and wealth are stable, and their dedication to maintaining class stratification. America collects tax revenue to uphold our shared values; Social Security, Medicare, and Medicaid are required not by law, but by our sense of duty to our fellows. Conservatives wish that they could opt-out in theory, but even Ayn Rand collected benefits in practice.

The exponential function between income and benefit from being governed may seem intangible, but a clever economist could probably put together a workable model that could investigate this theory. The demands on taxpayer resources tell a part of the story, but the value of the rule of law also increases with the amount an individual has to protect from anarchy. The model would inevitably "controversial" in this media climate in which even physical science is under attack as uncertain and political.