Most will think I’m crazy saying it, but I don’t mind taxes. I like them. I embrace them. I enjoy paying them. Indeed, I would love to pay even higher taxes in exchange for simply universal programs replacing old private plans, freeing myself from worrying about various accounts. They’re our contributions to society so it gives me a sense of pride and duty to others by helping finance vital public services. Sure, I detest the use of third-party software and companies to file income taxes. If that process were done via free filing with the IRS itself, that problem would vanish. However, that’s a separate procedural issue which can be solved otherwise. I won’t argue about the fundamentals of why taxation is not theft against the typical libertarian viewpoint. Instead, this post is particularly aimed at both liberals and socialists who at least accept taxes, although begrudgingly for the former and misguidedly for the latter.
First, taxation can never be considered in a vacuum because if so, we focus solely on our pocketbook over the recipients of anything funded by taxes (including oneself!). That can range from mortgage breaks to roads to simple garbage collection. Even if municipalities “privatized” certain functions, it’s quite likely they’re getting tax relief or direct subsidies to cover costs and thus require taxpayer money…which is silly and inefficient but that’s a whole other discussion. This hits at the heart of those who begrudgingly pay taxes. It must be understood that it is helping others including yourself. It’s exactly why I talked about both welfare and taxes in full unison in my previous post. We contribute when we’re working and healthy, and receive help when we fall ill, retire, take leave, need a bus ride due to a broken car, etc. This provides us with a comprehensive view of how income gets distributed after both taxing and spending.
If taxes are being abused, then of course like any other political problem we should resort to the democratic process to amend it. And while I personally love a multitude of taxes when it comes to policy, some taxes are genuinely bad such as poll taxes, head taxes, or others that establish a truly regressive schedule. Property taxes are another instance where real issues exist in terms of egalitarian principles from when they were first implemented and should be reformed, particularly as it relates to school funding…I digress here.
On the other (further left?) hand, socialists can focus way too much on rich incomes. It’s great as a rhetorical matter, but policy-wise it immediately becomes inoperable which is why I have long abandoned talking about the rich as is and instead about owners of capital. After egalitarianism is applied, in the long term the rich will have dwindled into the upper reaches of the middle class, which leaves us with fewer dollars if only taxing “the rich”. In other words, in order to pay for all of our great services that people all across the income ladder benefit from (even richer people), everyone must be paying broad income, consumption, payroll, and social security taxes. With that said, taxation and welfare distribution combined should be progressive on net, taxing higher incomes relatively more while ensuring benefits, especially welfare, are tailored toward the lower brackets to even things out. With this broad-based approach though, we avoid being laser-focused on the rich and deter ourselves from silly arguments about who counts as rich, which seemingly befuddles anyone earning six-figures in the United States. We could impose outrageously high taxes for all, but if distribution through services still leaves the lower rungs better off relative to the top, then that still satisfies egalitarian principles.
Combining the points above, we avoid “rich” talk and talk of tax as it relates to what it’s financing. The general rule-of-thumb is then this:
- Welfare is for non-workers who make up roughly half of any given population (children, disabled, elderly, students, carers, unemployed, etc.).
- Even as the number of rich individuals decrease in an egalitarian society due to unions pushing lower wages up and high marginal tax rates dampening high wages, non-workers will still exist in similar proportions.
- Welfare is thus still needed, and because everyone can benefit, including those same rich people who are likely sliding into the middle class, taxes need to be broad-based and applied to everyone with a progressive bent.
This so far is not actual socialism as it doesn’t concern capital ownership. Rich people here encompass both owners of capital and those with very high salaries, so everything thus far is basic applied egalitarianism. If we’re keeping with exact terms though, socialism would be the final compliment and top-up to the tax and welfare system by ensuring that wealth from the means of production is enjoyed by all, not just a few. Social ownership would attack this concentration, which once rich people dwindle in number, there would be less need to keep socializing as wealth is now spreading out. Therefore, taxes like capital, wealth, and inheritance used for social ownership do largely fall on the rich here, but again, this is primarily for the rich who actually own the means of production, not because they receive high incomes.
Below is an example of a broad-based approach via the Tax Justice calculator developed by economists Saez and Zucman. You can see much of society up until even the 95-99th percentile are on net paying a broad 35-45% in taxes which nets us a lot of money, roughly just on par with the Nordic nations in this instance. This particular plan boasts a broad VAT and payroll tax coupled with a progressive income tax to even out the income ladder while corporate, estate, and wealth taxes fall on the top 1%. Indeed, the two gentlemen incorporate “hidden” taxes in their simulation and since we pay so much to “private” welfare and healthcare plans, on net most Americans wouldn’t see a change in their net tax rates (second graph) even after imposing such large tax increases.
The Market Socialist 