[extropy-chat] Tax Burden Gap

[Kevin Freels]

I have personally moved approximately $14.5 million this year. I really wish
it were my money! :-)

----- Original Message ----- 
From: "Matthew Gingell" <gingell at gnat.com>
To: "ExI chat list" <extropy-chat at lists.extropy.org>
Sent: Friday, August 20, 2004 5:35 AM
Subject: Re: [extropy-chat] Tax Burden Gap


> J. Andrew Rogers writes:
>
>  > 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 definition does not match what is is normally meant by "wealthy"
>  in a market economy. A bank loan officer might control millions of
>  dollars of capital but he isn't necessarily a wealthy person, any
>  more than the navigator of a hundred million dollar cruise ship is
>  necessarily a wealthy person.
>
>  Think of venture capital and mutual fund managers, arbitrage brokers,
>  currency traders, executives of corporations or pension funds, and so
>  on. They all control big pools of other peoples money and they all
>  try to make the pool bigger by finding interesting things to do with
>  it, and none of them are necessarily super-rich people.
>
>  > 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.
>
>  One of the miracles of capitalism is that this isn't true. Billion
>  dollar decisions can be made without anyone actually having to
>  possess a billion dollars.
>
>  Your 401K, my savings account, somebody else's stock portfolio, and
>  millions of other independent economically rational investments can
>  be pooled together to accomplish things none of us could accomplish
>  alone.
>
>  It isn't dressing anything up to distinguish the magnificently
>  egalitarian possibilities of markets from Soviet central planning or
>  from a world in which nothing happens unless some preposterously
>  wealthy aristocrat wants it to, and I don't think it's sophistry to
>  point out one of modern capitalism's greatest strengths.
>
>  > 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.
>
>  It seems, and perhaps I am misreading you, that you are advocating an
>  essentially command economy as an ideal growth environment: You seem
>  to envision a system where a small elite controls vast portions of a
>  nations capital, where growth is achieved by their centralized
>  stewardship of the nation's wealth. Your arguement seems to be that
>  it is only by the wise and judicious calculations of a tiny monied
>  class, by their analysis of what ventures are to be pursued, that
>  growth is possible.
>
>  > 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?
>
>  Any tax, progressive or otherwise, looks like a bad thing when the
>  consequences of its cost are analysied in isolation from the benefits
>  of the spending it funds. In reality, progressive taxation pays for
>  wealth transfer programs and - whether you or I believe it is a good
>  thing - transferring money from the wealthy to the poor manifestly
>  increases their social mobility.
>
>  For instance public funding of education, public sector careers in
>  the military, subsidized small business loans, employment and
>  relocation assistance, a public safety net which socializes some of
>  the downside of necessary risk taking, all increase mobility. That
>  the people who (in an well implemented system) benefit from such
>  programs are not those who pay for them makes the net effect a
>  clearly upward contribution to their mobility, and this is true
>  regardless of whether it's the way you or I think a country ought to
>  be run.
>
>  This is not to mention an entire range of other legitimate state
>  functions that have to be funded somehow - national defense, law
>  enforcement and the courts, whatever else you might agree is in the
>  domain of appropriate public expenditures - the burden of which must
>  be distributed on the shoulders of people who have already made it
>  and people who are still trying to. It seems obvious to me which way
>  you weight it if your goal is to make it easier for more people to
>  escape poverty and enter the middle class.
>
>  Matt
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