Proper Use of the Tax Code


I’m continuing to weed through my archived stack – came across this one regarding the tax code.

I’ve always been suspicious of those folks who try and use the tax code too achieve some sort of social change.  For example, we can raise taxes on the wealthier folks and then lower taxes on the less wealthier in an attempt to more evenly distribute wealth.

I think that’s bad policy – for two reasons.  One, we’ll never get it right, two, the whole process is wide open to corruption and three (okay – three), it is simply not okay for people to vote to steal money from one man to give to another.

Turns out I am not alone in my thinking:

President Obama believes the federal tax code should bolster the middle class and make the rich pay their fair share. I have a different view: The tax code should make no attempt to differentiate rich from middle-income taxpayers, nor should it attempt to redistribute wealth to middle-income taxpayers.

Right – exactly.  But can the government do anything?

Yes – undo what it’s already done!

Big banks, for example, earn undeserved profits because they are protected by too-big-to-fail policies along with myriad regulations that limit competition in financial services. Doctors and lawyers, too, make higher incomes than their talents alone would warrant because government licensing restricts entry and competition. Scientists and engineers earn excessive incomes because our misguided restrictions on high-skill immigration (the H1-B visa quota) exclude talented foreigners.

Sugar barons get rich because of government-imposed import quotas. Ethanol producers cash in because the government mandates the use of their product. The military industrial complex profits from government-facilitated sales to authoritarian regimes around the world.

In short, instead of making the tax code more complicated by implementing more redistribution, the president and Congress should stop redistributing wealth altogether. Then we can have a truly simplified tax code.


10 responses to “Proper Use of the Tax Code

  1. Most progressive tax codes treat people equally. Everyone that earns under, say, $40,000 pays X%. Then as income rises, people all pay a higher percentage on that greater income (but still only X% on the $40,000 I’m arbitrarily using as an example.) The higher percentage on the greater income simply reflects the fact that the benefits of a stable and well governed society has yielded greater rewards to those, and they pay a little more. In theory. In practice the wealthy have the accountants who can actually end up paying less as a total percentage than the poor!

  2. Where do these absurd talking points come from? The poor have a net *negative* tax rate, some receiving total annual benefits of around $60,000!

  3. You know, my nine year old just gifted a poor friend of his a bike. He is working for it, I said I wouldn’t just buy it – he has to learn that it takes effort. We delivered the bike. The family is really, really poor. They clearly don’t get $60,000 – nowhere close. So I think you just make up the stuff you post.

  4. Naw, making up stuff if your specialty. You’re too lazy to do any actual research, just parrot nonsensical memes. Oh well.

    • Actually I research all serious claims. I have to – when I talk about things in class I have a professional duty to make sure I’m teaching students (many of them future teachers) the facts. You’re the one with talking points straight from talk radio – but it inspires me to make sure the next generation doesn’t fall for that!

  5. If you actually did research anything, you’d be able to prove your absurd claims; but you can’t, so you haven’t.

  6. Most progressive tax codes treat people equally.

    Yes – there seems to be three ways to determine tax:

    1. Straight number – we all owe $100.00
    2. Straight ration – we all owe 15%
    3. A progressive tax

    My major point, however, is that the taxes collected should be meant to cover the costs of running a State. Defense, roads, currency, postage laws and law enforcement and so on.

    I disagree with the use of the tax code to take money from one man for the sole purpose of giving it to another.

    The poor have a net *negative* tax rate

    This is true.

    Some receiving total annual benefits of around $60,000!

    This is also true.

    They clearly don’t get $60,000 – nowhere close.

    They probably don’t see an annual income of 60k, but there are folks out there that *consume* 60,000 of goods. The housing subsidies, the food, the day care benefits etc all add up to the consumption that would take a salary of $60,000 to support.

  7. There is not right use of the tax code, just legal uses. That is determined by our constitution. Since those who are wealthy get that way in large part because of being in a stable society with legal protections, infrastructure, and a functioning economy, I’d argue that the government has the responsibility to assure that stability and prosperity is maintained. Any look at history shows that high gaps between the rich and poor tend to create instability and less prosperity. Therefore, I think that government aid to the poor and programs to try to make sure opportunity is close to equal for all improve everyone’s standard. Most wealthy folk end up wealthier paying higher taxes than if they paid fewer taxes, thanks to that stability and prosperity.

    Still, how this is done, and what is “right” is not objective or somehow out there in the ether for us to find or discover. It’s based on what people choose within the framework of constitutional government. As a pragmatist, my measure is what works – I don’t really think our tax code now works well, and I’d agree that many programs meant to help people (and thereby increase stability and prosperity) aren’t working well. Ideas for what might work better can come from anywhere on the political spectrum, and should be judged on their own merit (pragmatically, not ideologically). One good thing is we can compare what states are doing – Jerry Brown put in place reforms that were opposed by left and right in California, and it worked – got California out of a deep crisis (alas, he’s not able to make it rain). It appears Brownback’s policies in Kansas did not work – though obviously we can give all of these time. Less theory, more practical experience, in other words.

  8. Scott,

    I believe you should debate yourself because in my opinion you make contradictory statements. I agree with Pino, the tax code is to generate revenue for government services. Anything after that is social engineering. Humans have consistently demonstrated their inability to do that with out corruption and with out adding out sized costs to society through over complicating the tax code.

    You say the wealthy should pay a little more. We know in theory that is not true. In the 1970s tax rates for individuals and couples in the $100,000-$200,000 income bracket were up to 70%. Now even if you are rich, giving 70% of your money to the Feds is not going to make you a productive citizen. You will find tax shelters and other uneconomic ways to shelter your money. As you said ” In theory. In practice the wealthy have the accountants who can actually end up paying less as a total percentage than the poor! ”

    So which is it? Are the rich to pay more to the government or more to their wiz bang tax lawyers?

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