Tag Archives: Tax

Flat Tax is Progressive and Insufficient

Obviously, a flat tax based on a percentage of income is already a progressive tax.  Assuming a 10% flat tax, the Trumps making 30 million a year are paying 1,000 times the amount in taxes as the Browns making $30,000.  However, this is still insufficiently progressive and makes me think about a passage from the Bible.

38 As he taught, Jesus said, “Watch out for the teachers of the law. They like to walk around in flowing robes and be greeted with respect in the marketplaces, 39 and have the most important seats in the synagogues and the places of honor at banquets. 40 They devour widows’ houses (emphasis added) and for a show make lengthy prayers. These men will be punished most severely.”

41 Jesus sat down opposite the place where the offerings were put and watched the crowd putting their money into the temple treasury. Many rich people threw in large amounts. 42 But a poor widow came and put in two very small copper coins, worth only a few cents.

43 Calling his disciples to him, Jesus said, “Truly I tell you, this poor widow has put more into the treasury than all the others.44 They all gave out of their wealth; but she, out of her poverty, put in everything—all she had to live on.” (Mark 12:38-44, NIV)

What I take from this example is that the cent we might tax from the widow is worth more to her than $1,000 from the Browns, which is worth more to them than $10 million from the Trumps.   If we tax the widow, she starves.  If we tax the Browns making $30,000 a year very much at all, it makes it entirely likely that the daughter cannot take piano lessons, the son cannot go to college, they cannot afford to have a vacation that year, and perhaps the father cannot start a business.  For the Trumps at $30 million a year, even taxing them at a rate of %90 would not threaten their ability enjoy any of these opportunities, and they certainly would not starve.  They would still have $3 million a year; dad can start a business, son can attend the ivy league, and the daughter can take lessons from Vladimir Ashkenazy if they want.

I am also reminded of this dynamic as I live in Sri Lanka.  For example, a typical taxi fare in a Tuk Tuk is 50 rupees per kilometer, which is the same as $0.62 per mile.  A 15 minute trip can cost $1 and people can haggle for 10 minutes over 25 cents.  Clearly, not all 25 cents are equal.  It depends on where it comes from.

In the Great Leap Forward, Mao Tse Tung quite famously required his people to fill quotas for mining iron, with the result that many peasants simply had to bring in their pots, pans, and plows to be melted down.  Obviously, this is an extreme example, but the point remains: if our tax policy and economic system threatens the Browns’ opportunity for education, advancement, of building up savings, of pursuing dreams, we will certainly have more iron ore, but at great expense.

The deficit does not care who pays it—a dollar from the Browns is no better than from the Trumps.  Perhaps we should consider, among other important considerations, using the least costly money whenever possible.

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