Re: Why "progressive" tax schemes are evil

From: Jeff Bone (
Date: Mon Mar 19 2001 - 16:55:11 PST wrote:

> i guess i'm under the impression that those who have pass on their costs
> associated with risk to the average-wage earner (or crack whore, as they're
> perceived by libertarians).

Modulo competitive pressure; they can only pass on expenses to the extent that
the market will bear it. Wonderful thing about capitalism, that...

> what i see as progressive: GREATER PERCENTAGE OF
> WEALTH HELD BY FEWER PEOPLE, progressively more each year.

Which, I'll point out, is a situation that developed under a *progressive* tax
scheme. Let's look at *why* that happens.

Right now, it's VERY, VERY difficult to make the leap from upper-upper middle
class and financially independent. (The phenomenon that results from this is the
"millionaire next door" syndrome. BFD. "Millionaire" doesn't mean jack, and it
sure doesn't mean the system is helping you achieve wealth, i.e. financial

Think about it: our generation of techies is probably the wealthiest generation
of people our age, relative to median income, that there's ever been. And yet,
for every one of us that's had a liquidity event and managed to generate real
dinero, there's ten of us we know who are living in shared houses where there's
six geeks and a T1. This despite salaries which *most* Americans consider
insane. For all our *money,* where's our *wealth?* Think about it. You
Californians: how many 20- and 30-somethings do you know who actually
individually *own* houses out in Palo Alto, not including those who have had some
kind of level-skipping / accelerating liquidity event?

This is all a direct result of progressive income tax, onerous short-term capital
gains tax, ABSOLUTELY INSANE regulation of securities and commodities trading,
myriad Byzantine tax laws, and the "infinite regress" of taxation that occurs when
an asset appreciates, so you sell a little to pay taxes, which generates another
taxable event, which you sell to cover... (recurse infinitely until you're
destitute.) Now granted there's also some rules that benefit those who already
have which aren't available to those who are in the process of *getting* --- those
are bad, too. But the bottom line is that the system right now makes it very easy
for those who are at some magic number --- my estimate of that number is around
low 8 figures --- to accumulate increasing wealth, while those just below that
magic number are penalized most.

That's another dirty little secret of the progressivists --- who, by the way, were
and are still largely dominated by the old-school New England liberal uber-rich.
The dirty little secret? That behind all its populist rhetoric, "power to the
people" and all that, progressivism is *most* about *maintaining* and even
broadening the barrier between those who truly have and those who just wish they
had. It's all about making the last step up the ladder the hardest one,
preferably impossible.

There's a psychological impact of this, too. Because the system *most* penalizes
those who are almost but not quite all the way "there," it disincents striving to
make that leap. There's a gestalt moment when a person making that journey
realizes this, and thinks "holy shit, is this all worth it?" Why bother, when you
know that most of that hard work and effort along the way --- the hardest effort
you're ever going to make on the way to wealth --- is just going to get taken away
and given to the (ahem, Geege's word) "crack whores?" Do I *really* want to fight
and claw my way to $2X a year in regular income when I'm living comfortably, if
not the life of Croesus, on $X a year consulting? (BTW, it's all the built-in
costs I'm talking about; the aggregate tax rate across the board once income's
into six figures is about 2/3, so I'm going to put in *at least* double the effort
to actually achieve a net gain of about 33%.

"No," the system says. "Don't put in that extra effort. Don't strive to
achieve. Relax. Be lazy. Enjoy life, don't worry so much, don't be so greedy.
Money can't buy happiness anyway. You've already come further than most people;
you're *already* rich. (Ahem.) Leave being uber-rich *to* the

Net result: more and more of the wealth accumulates in the hands of a
dwindling-by-attrition already-uber-rich crowd, the gap between haves and
have-nots widens, all a direct result of a progressive system which most onerously
penalizes the demographic just below true financial independence.


> regarding percentage of taxes paid (another post i'm too lazy to look for
> now) is it not true that anything over $800k in income is not taxed?

No, that's not true even for regular income, and certainly not in the macro view
where regular income isn't the primary generator of net worth.


This archive was generated by hypermail 2b29 : Fri Apr 27 2001 - 23:14:27 PDT