I'VE BEEN OUTLINING SOME OF the practical ways we can make our economy as democratic as our system of government, and I ended the last post by introducing the question of taxes.

"Each of those expenditures would also act as a stimulus on the economy, making our country both stronger and safer."

Suppose, for the sake of argument, that we put in place a serious policy of progressive taxation across the board, so that both individuals and corporations found it impossible to hold on to absurd levels of wealth.

This probably should not happen all at once, but would be put in place gradually over years. However, for the sake of argument, let's say it has already been done.

Corporations would tend to split up into smaller corporations.

It would be the exact opposite of the current situation, where they tend to constantly grow by absorbing each other, eating the competition.

When smaller corporations pay taxes at much lower rates, it becomes good business to stay small, or, if you are already large, to get smaller.

The advantage to doing it this way, as opposed for example to using anti-trust laws, is that if Microsoft decides, as a business strategy, to break up into smaller companies, it will almost certainly do a better job than a court or the justice department in deciding how to go about it.

Smaller corporations produce more jobs, produce more competition, and produce more consumer choice. They are generally able to respond more quickly to changes in the market, which means a safer and healthier marketplace.

They aren't too big to fail, which means they require less government support, and less need for government intervention.

In fact, a good progressive tax structure might well be the least invasive and most effective form of government intervention.

The effect on individuals would simply be to contain the wealth of that top one percent and spread some of it among the rest of us.

But how would this spreading be accomplished?

The most obvious way is through tax cuts, both for individuals and small business.

By lowering the tax burden on small businesses, we could encourage them to grow, and this, in turn, would accomplish several things:

1. It would create more competition for larger corporations, giving them even more incentive to contain their size in order to be competitive.
2. It would create many more jobs—it's exactly the small businesses which create the most jobs, even now.
3. It would help them to rebuild the roots of a vibrant economy, and the structure of vital local communities.

Lowering taxes on individuals would increase their ability both to spend and to to save, each of which would make our economy more stable, and each of which would improve the lives and fortunes of families.

But there are other ways to pass the money down.

We could use it to rebuild our infrastructure, to improve our schools, to build public parks, to supplement health care, to beautify our cities, to improve our police forces, to provide low-cost housing, to subsidize first-time home ownership, to improve social services, to improve our public libraries—in general to do a thousand things that make life better for everyone and increase opportunities.

Each of those expenditures would also act as a stimulus on the economy, making our country both stronger and safer.

And I'm not just talking about income taxes. The same principle would apply to property taxes, inheritance taxes, perhaps even sales taxes.

In every case the idea would be to tax largeness, and the various tax rates would be indexed to the national median, so that inflation didn't increase taxes on everyone.

The lowest incomes in the country would pay the lowest income tax rates, as they do now. The middle class would pay lower rates than they do now. The highest incomes in the country would pay at much higher rates than they do now.

Those who own the most property would pay the highest property tax rates, and those who own just a modest house would find their taxes lowered.

If I can only afford an inexpensive car, I will pay a very low percentage in sales tax when I buy it. If I buy a hundred thousand dollar car, I will pay a very steep sales tax, in addition to the high price.

If I leave a small or reasonably sized estate, I'll pay a very small percentage in estate taxes or none at all. If I have billions to leave, I'll pay a much higher percentage. But I might get to pay a little less if I decided not to leave them all in one place. I could be rewarded for dividing up a fortune among a lot of recipients, and thus spreading the wealth around from the top.

You get the idea—none of these specifics are essential, but the general idea is essential: we intentionally set up tax structures which encourage wealth to split into smaller pieces, encourage the development of grass-roots wealth and enterprise, and help the middle class working family aspire to a better life.

And, as I said in the previous post, the net effect of all this is political—in the sense that money is really power, so by spreading wealth around we spread power around: another name for democracy.

Next time: Can a democratic
economy be justified?