Tuesday, September 16, 2008

The Progressive Tax Policy of Fairness

We have heard so much about who will cut your taxes and what that means it becomes ridiculous and nonsensical and this is exactly what the Republicans and conservatives want. Because an even superficial discussion of taxes reveals the lies and deceit behind a regressive tax policy, the current tax structure we now operate in and where McCain wants to take us even deeper. See above both candidates tax plans for yourself.

A progressive tax policy (taxing the rich at a higher rate than the poor) is a moral issue. Conservatives argue that we cannot punish the rich for their business savvy and we must keep taxes low so that companies will make life better for the masses in providing jobs, etc. This is a disingenous argument on its face. It is, however a disingenous argument that has been bought by much of the American public and make it almost impossible to have a discussion about why we should tax the rich at higher rates. Here is my attempt to explain it.

First, there are two fundamental functions to our government, protection and empowerment (no doubt conservatives would argue against this, but we shall see). Protection includes the police, firefighters, emergency services, public health, the military, and so on. Empowerment includes the infrastructure needed for business and everyday life: roads, communications systems, water supplies, public education, the banking system for loans and economic stability, the SEC for the stock market, the courts for enforcing contracts, air traffic control, support for basic science, our national parks and public buildings, and more.

It is a fundamental truth that empowerment structure helps the rich far more than it helps the poor and by a larger margin as a person's income grows. The Rockridge institute and George Lakoff explain this better than I could: Ordinary people just drive on the highways; corporations send fleets of trucks. Ordinary people may get a bank loan for their mortgage; corporations borrow money to buy whole companies. Ordinary people rarely use the courts; most of the courts are used for corporate law and contract disputes. Corporations and their investors — those who have accumulated enough money beyond basic needs so they can invest — make much more use, compound use, of the empowering infrastructure provided by everybody's tax money.

The wealthy have made greater use of the common good—they have been empowered by it in creating their wealth—and thus they have a greater moral obligation to sustain it. They are merely paying their debt to society in arrears and investing in future empowerment.

Warren Buffett and Bill Gates could not have made their money in another society because most do not have a banking system or a stock market where much of the money is made. Take Bill Gates for instance: The legal system protected Microsoft's intellectual property and contracts (to a fault I would argue). The tax-supported financial infrastructure enabled him to access capital markets and trade his stock in a market in which investors have confidence. He built his company with many employees educated in public schools and universities. Tax-funded research helped develop computer science and the internet. Trade laws negotiated and enforced by the government protect his ability to sell his products abroad. These are but a few of the ways in which Mr. Gates' accumulation of wealth was empowered by the common wealth and by taxation.

Protection and Empowerment are of the common good and the taxes that fund these endeavors are the common wealth. This used to be understood, but has been eroded since the New Deal and especially under Reagan. We are sold a bill of goods that the rich are being punished for their wealth when it is their debt to us so they can operate in a freer world made to help them enrich themselves. We will certainly not hear the argument phrased this way anytime soon, but here is hoping.

This same philosophy is leading to the financial meltdown on wall street. Read this article that this crisis is 28 years in the making leading back to Ronald Reagan and his deregulation policies. We deregulated and as the articles says: "The job of regulators is that when the party's in full swing, make sure the partygoers drink responsibly," she said. "Instead, they let everyone drink as much as they wanted and then handed them the car keys."

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