Bone's Lemma Re: Dave's Denial

From: Jeff Bone (
Date: Tue Mar 27 2001 - 12:50:37 PST

Up front: Bone's Lemma.

     Any fair and equitable tax system should not inhibit someone from
     bettering their economic situation through increasing their
     economic productivity, i.e. income. The amount of increased
     individual economic productivity a person is able to achieve
     should directly and proportionally translate into corresponding
     betterment of their economic situation, regardless of the
     magnitudes involved.

Dave Long wrote:

> I haven't debunked it, because I agree with
> you on that point. The disagreement is that
> I don't call regressive systems progressive*,


> hence:
> A'/ Regressive tax systems perpetuate/increase wealth gaps.
> 4'/ Regressive taxes perpetuate and increase the Matthew effect.

Regressive taxes increase the Matthew effect how, exactly? Let's take a
classic "regressive" system: a consumption tax. You pay a percentage on
what you spend. Spend less, pay less. Now, it's *possible* that a high
income-earner might still not spend as much as someone lower-income, and
therefore would pay less taxes, resulting in more wealth accumulation. In
that situation *only* would this particular regressive tax system perpetuate
the Matthew effect -wrt- income. If there is a general correlation between
income and spending, then a "regressive" universal rate tax system based on
consumption shouldn't impact Matthew at all.

> Going back to wednesday:
> How does a universal consumption tax (or any
> regressive tax system, for that matter) act to
> remove wealth gaps?

Is "removing wealth gaps" the kind of thing a tax system is supposed to do?
If your answer is yes, then you and I have bigger disagreements than just
tax systems. I don't have any problem with the notion that some people are
just going to have a hell of a lot more money than others. OTOH, I do find
the current system odious: I believe it is most burdensome on the middle
economic strata and (even moreso) on the low end of the upper economic
strata, while dressing itself up as a power-to-the-people "progressive"
system. *Even if* its goal is to decrease the Matthew effect, it quite
obviously fails.

> > You really can't rely on luck.
> Never said one could. Luck and smarts are
> potential ways to increase income besides hard
> work. Hard work is very important**, but it
> isn't the only variable.

And I never said it was. I said it was the only variable that matters,
keeping in mind that I still don't buy your difference between working hard
and smart. What you're calling smart I just call hard work, but that's
semantics. Luck may be a variable, but it's not one you can model or count
on. I could accidentally come across the winning lottery ticket laying on
the sidewalk tomorrow. I'm not making any financial plans based on that.

> ** I might agree that "success is 1% inspiration, and 99% perspiration",
> but substitute "financial gain" for "success" and I disagree.

Okay, so what percentage of "financial gain" is related to each of the
following things, in your taxonomy:

  * Smart work?
  * Hard work?
  * Luck?
  * Other variables you haven't mentioned?

> If a group of well-meaning people, who wish to
> reduce wealth gaps,

I don't wish to reduce wealth gaps in general, assuming that those gaps are
the result of legitimate economic activity and commerce, rather than
artifacts and consequences of some system of wealth dedistribution /
protection. I think the very notion of a group of people having that ---
closing wealth gaps through manipulation of the law --- specifically as a
purpose is an evil notion. I just wish to be able to close the wealth gap
with respect to myself, through my own economic activity, without being
unnecessarily hindered by the tax system itself.

> believe that
> - progressive taxes perpetuate and increase wealth gaps
> then it would be reasonable to also believe that
> - progressive taxes are evil
> and hence a regressive tax, such as
> - fairtax (universal consumption) is good
> and they could create positive change by implementing it.

My advocacy of the FairTax proposal is not based on any desire to decrease
wealth gaps in the large. That's Geege's --- and your --- hot button. I
advocate FairTax because it's *fair.* I believe that the FairTax has no
particular impact, positive or negative, on the Matthew effect occurring
through the normal processes of capitalism. And that's fine by me.

So what's wrong with fairness? Should you be forced to pay $1 for something
I get for $0.50, and which Geege gets for free? Of course not. That's
definitionally unfair. And that's precisely what any non-flat tax
accomplishes. The Matthew effect is a separate issue entirely.

> However, if it is instead true that
> - regressive taxes perpetuate and increase wealth gaps
> then, despite good intentions, they would have
> collaborated to inadvertently create a system
> much worse than the alternatives.

And now, the heart of the argument: I do not believe that wealth gaps are a
bad thing in general. I do, however, believe that any systematic
suppression of attempts to close those gaps would constitue a bad thing.
Whether a system is regressive or progressive or aggressive or anything
else, Bone's Lemma holds in my philosophy. Any tax system which does not
demonstrate this characteristic is both unfair and wrong-headed, and based
on a lack of trust in capitalism and free markets.


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