Tag Archives: Vladimir Ashkenazy

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.

Advertisements

Mr. Darcy & American Aristocracy

So apparently Romney pays around 13% a year in taxes on an income of over 20 million dollars.  Paul Ryan paid 20% on $323,000 in 2011.  And many of the most wealthy people in the United States, billionaires even, are paying less than 10% (CNN).

This is because wealthy individuals gain most of their income through return on investments, quite often in the form of capital gains which is taxed at a lower rate.  This is because not all real income is real income.  Some of it cannot be spent on whatever the new owner of fake income wants to buy.  And much of it cannot be deposited in a savings account because it can spontaneously combust.

Lately I have had a strong sense that I live in an immoral society—tt assails me like a stiff wind—not because everything about America is awful, indeed I love my country, but because we are thoroughly corrupt in at least this respect: as a society we have decided to favor, and to create, an upper-class.

Until quite recently, the English aristocracy was alive and well, and dominated English society.  I love Victorian movies and books (I’m still a hardass though!) and recently my curiosity was piqued by the constant discussion of income, “Mr. Darcy has 20,000 pounds a year!”  Do they mean wages, capital gains, or what?

I looked into it, and it turns out that to be an English aristocrat you usually had to make over $3 mil. a year (adjusted for inflation).  They did not acquire this income through business ventures, mercantilism, wages, or through any great talent on their part really.  It came from speculation, investments (most often chosen by others), and rents from large estates and tracts of land — it came from pre-owned wealth.   The Duke of Marlborough, one of the richest aristocrats of the time, pulled in $52.5 mil annually.  To put that in perspective, Warren Buffet pulled in $62 mil. last year, also from pre-owned wealth (admittedly cleverly invested wealth, likely more cleverly I imagine than the Duke of Marlborough).

But Victorians considered the Duke’s income as real income while we pretend it is not, at least not as real as income made from wages.  Indeed, wages, the money received based on time, skill, expertise, and effort, should be taxed heavily.  That stuff simply should not be incentivized.  Don’t these people know they should already have wealth to invest?  Rather, aristocrats sitting on pots of gold and passing it down to their children…that is the stuff civilizational dreams are made of.

So if you love this American economy
Than vote for Mitt Romney
And I won’t forget the men who died
So I could make money,
And I’ll gladly stand up
For freedom
To speculate at low tax rates
Cause their ain’t no doubt I love this land
God bless the USA

(Based on the chorus of Proud to be An American)