[extropy-chat] Tax Burden Gap

[J. Andrew Rogers]

On Aug 19, 2004, at 11:02 PM, Matthew Gingell wrote:
>> 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.


I would define any person who can command vast quantities of capital, 
whether from a few wealthy sources or millions of middle-class folks, 
as "wealthy".  This was the basic scheme of the old communist bloc, 
where no one had much in the way of income, but a few folks near the 
top of the political food chain controlled millions or billions of 
dollars.  Wealth mostly has to do with the amount of capital you 
control, whether millions of peasants gave it to you or a trust fund 
did.

My original point was more that you can't have vast quantities of 
capital under the control of a small number of people without also 
having a de facto "wealthy" class.  There are a dozen different 
creative ways to dress it up, but the result is roughly equivalent.  
All that happens when everyone is nominally in the middle-class is that 
the pool of the wealthy (no matter what its guise) becomes very, very 
small which is not a fertile economic ecology.

And yes, progressive income taxes destroy class mobility by making it 
difficult to escape the middle class.  There were a few economics 
papers published several years ago that showed a lovely mathematical 
correlation between effective income tax rates as a function of income 
and the distribution of wealth in a population.  Steeply progressive 
rates concentrate control of capital in the hands of a few.  How making 
it progressively difficult to convert income into wealth is supposed to 
help class mobility is beyond me.  If the tax structure aggressively 
limits the conversion of income into wealth, exactly how is that 
supposed to help people in the lower economic strata that have income 
but little or no wealth?


j. andrew rogers