Eric Kleefeld weighs in on progressive taxes in the ongoing debate at the Daily Dish, with a point and a concession. The reason he's for it is that the wealthy are the ones with money. This is true, but there's more to say on that point.
- I've argued elsewhere that there's an even more important reason: the preservation of democracy. Money is power, and it tends to accumulate—most of the money that ends up in the hands of the rich was never really earned by the rich in any normal sense of the word. When you have money, it's easier to get more money, for many reasons, and in many ways that have nothing to do with any contribution to society.
- Because money is power, this pooling of wealth is really a pooling of power. It allows the few, who have a disproportionate and largely unearned wealth, to influence culture, government, and the economy in ways that are often, if not always, detrimental to the common good.
His concession is that "this introduces economic distortions and can have some bad effects if we take it further than necessary." It's hard to disagree with, given how carefully he's phrased it. (Almost anything can be said to have possible bad effects, if we take it further than we should.) But I'm going to disagree with it anyway:
- I'm not at all sure that progressive taxation "introduces economic distortions". Rather, it's the other way around. The pooling of wealth introduces economic distortions. A free market only works when trading is done between a "willing buyer and a willing seller". It depends upon the idea that neither party is constrained or compelled by exterior forces, or by the other party—that the trade occurs on an even playing field. But when one party (or a small group of parties) has so much wealth, so much power, that it can afford to control the playing field the market ceases to be free.
- As to the "possible bad effects", I'm not at all sure of that, either. This country had some of its most prosperous years under some very progressive tax policies. Even Henry Ford recognized that the important wealth was the wealth of the consumers—the custormers—without which the economic engine grinds to a halt. The more money there is at the bottom, the more enterprises will find ways to earn it. And we are certainly nowhere near the point where there isn't enough capital investment to go around: in fact, most of it is squandered on speculation: trading for profit that produces neither jobs or goods.
- There are, in fact, huge economic benefits from a sufficiently progressive tax system—by which I mean progressive across the board. A sufficiently progressive corporate tax would make it financially advantageous to break up mega-corporations into smaller corporations (without the need for trust-busting, since the break-up would be voluntary). This would lead to more competition, and a more efficient, and freer, market. It would, eventually, lead to better prices, better products, and better services. On the other end, it would create jobs, a more fluid job market, and better wages. At the top, individuals would be less wealthy, but there would be room for more wealthy individuals.
- Finally, by reducing the influence of super-wealth on government—and by dividing what influence was left among a great many more players—it would reduce corruption and influence in Washington, and create a more responsible and democratic government.
Otherwise, I like what he said.
