[extropy-chat] Tax Burden Gap

Rafal Smigrodzki rafal at smigrodzki.org
Fri Aug 20 22:04:49 UTC 2004

J. Andrew Rogers wrote:

> It wasn't I who was suggesting that having a few people control the
> wealth is a good thing, but anyone supporting steep progressive taxation
> is tacitly supporting such a thing.  We don't get to pick and choose the
> consequences of such things.  You will *always* have a Pareto
> distribution of some type, and the lower the alpha, the greater the
> wealth and benefit to the average person.  Steep progressive tax
> functions greatly increase the alpha, thereby increasing the class gap
> and further unbalancing the distribution.

### This is a very interesting issue, and you have induced me to rethink 
some of my beliefs. I absolutely agree that a low-alpha environment 
appears much more attractive than a high-alpha one, which should be 
intuitively obvious for anybody who appreciates the power of the free 
markets, and the importance of having large numbers of independent 
agents for rational decision-making.

There is also no doubt that an income tax is one of the stupidest ways 
of financing public goods. Currently, the  most inept decision-makers 
(i.e. non-profitable businesses and individuals) are rewarded by not 
having to pay taxes, while the successful ones are forced to pay fines 
for their success (euphemistically referred to as income or corporate 

However, I wonder what do you think about the idea of progressively 
taxing the size of economic entities, rather than their income. Perhaps 
naively, I expect that a tax applied to any transaction (no matter 
whether an economic gain or loss is claimed) in proportion to the net 
value (market capitalization, real estate market value, total equity 
holdings) of the involved entities (no matter whether persons, 
corporations, non-profits), would serve to lower alpha, by punishing 
size but without  punishing success.

I think that under some favorable cicumstances the state could be 
profitably dispensed with altogether, but for the time being, given 
insufficient economic savvy of the citizenry, it still has a role to 
play, and the least harmful way of paying for it might be the universal 
progressive transaction tax.


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