[FoRK] Weird... interesting.

J. Andrew Rogers andrew at ceruleansystems.com
Tue Apr 14 13:34:07 PDT 2009

On Apr 14, 2009, at 12:07 PM, Bill Stoddard wrote:
> So, a flat tax fails the 'fairness test' by the most basic principle  
> of 'paying your fair share for services you consume and benefit you  
> derive from those services'.    Fat tails and all that... comments?

Without arguing for a flat income tax or anything like that, it raises  
a number of questions:

First, why should a person be taxed disproportionately for benefit  
rather than consumption? Should gas taxes be higher for people who  
drive a Prius because they are receiving more benefit from a liter of  
gas than someone who drives a Hummer? There is also the matter of  
incentives. I would think we would want to encourage people to  
maximize the benefit generated from a given unit of taxation and  
consumption, not penalize those that are efficient.

Second, what is a flat tax if not an excellent proxy for capturing a  
percentage of the real benefit a person receives from the economy?  
People making more money would be paying proportionally more taxes.   
And while it is not perfect, it certainly seems like a more rigorous  
metric of benefit than capricious political hand-waving that is more  
likely to answer to special interests than any semblance of reality.

Third, it is not obvious that wealthy people receive disproportionate  
benefit from the taxes they pay, and I doubt any credible intuitive  
argument could be made one way or the other. This is the kind of thing  
that would require an army of economists years of effort to even  
approach, and the real answer probably varies considerably by locale.

Lastly, I think it is important to distinguish between "available  
benefit" and "realized benefit". If you give everyone a million  
dollars, and half waste it on hookers and blow while the other half  
invest in a successful business, does the asymmetric outcome several  
years down the road really reflect an asymmetric distribution of  
benefits in a society? This is a tacit assumption in your rationale,  
but I think it is tenuous at best. It sounds more like a way to  
justify taking money from people with money that can be taken for  
taxes, without actually stating it that way. In other words, a  
politically comfortable and expedient fiction because the practical  
argument is at odds with the moral argument.

Given that we as a society have determined that these benefits are a  
Social Good(tm) that are worth raising taxes to provide, it is a bit  
perverse that instead of incentivizing people to take maximum  
advantage of those available benefits we disincentivize those that  
realize the available benefits.

I think the primary argument for flat tax models is that they go a  
long way toward eliminating many kinds of systemic perverse  
incentives, and there are a number of ways you can lash those models  
up to make them satisfactorily progressive (fixed exemptions, minimum  
guaranteed income, etc).  I think the biggest (political) negative is  
that it cannot easily be used by the fickle mob to punish people they  
don't like, which makes it a non-starter.


J. Andrew Rogers

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