[extropy-chat] Tax Burden Gap

[Matthew Gingell]

J. Andrew Rogers writes:

 > Class mobility, a function of wealth rather than income, matters at 
 > least as much as the distribution, as this is what provides much of the 
 > motivation to dare great things.  

 Social mobility is a function of the ease with which individuals can
 accumulate wealth - it's the integral of net income with respect to
 time, plus or minus a constant for what an individual starts off
 with. 
 
 We can look at income distribution in terms of how many people have
 been able to achieve great things, that is take it as the end point
 of the analysis rather than the initial condition. How many
 opportunities for advancements exist on various points on the
 distribution: Do we have a society in which most people find it
 possible to improve their lot somewhat, or do we have a
 winner-take-all society in which enormous rewards accrue to a few?

 If nothing else, I think it should be pretty clear that our extremely
 steep income distribution curve suggests something peculiar is going
 on with our allocation of human capital.

 > Very wealthy people contribute a lot to society by being able to
 > risk very large sums of capital on things that interest them,
 > including many things that the government will neither have the
 > will nor the interest to fund regardless of merit. This money
 > builds the companies and pays for the research that generates the
 > majority of the technology we enjoy today.

 A wealthy society with a healthy economy will find useful ways to
 employ its wealth, regardless of how it's distributed. My pension
 fund is every bit as interested in a diverse portfolio of risk /
 reward tradeoffs as is the Rockefeller family fortune. 

 > The engine of innovation is powered by private capital, and one
 > thing history has shown is that in hindsight most government funded
 > "innovations" were either unnecessary, expensive, or economically
 > irrelevant.
 
 I don't see how this assertion relates to the rest of your argument,
 but it's true as far as it goes. (With lots of qualifiers for the
 provision of public goods, funding activities with positive
 externalities, etc.)

 > If you have nothing but a middle class, who provides the capital 
 > required to have a strong economy?

 The market provides the capital. In any economy wealth is going to
 seek a return, and the banking system and financial markets will find
 ways to offer it. That's true whether "wealth" is million checking
 accounts or a single trust fund.

 > The irony is that progressive income taxes destroy class mobility.

 It would indeed be ironic if it were true, but it's difficult to make
 a sensible case that it is. 

 Matt