The Head Tax (reprise)
A while ago I discussed reintroducing the head tax - a thought experiment where I asked what was wrong with every American paying the same dollar amount in taxes since every American was equally protected by the same government. It didn't seem like a good idea, but I wanted to explore why it didn't seem like a good idea.
My first reason is that it's simply not workable. In America, 9,795,000 American households have income less than $9000 per year. Even if each of those "households" are just one person and you approach them at gunpoint you simply can't get their "fair share" from them. Are there no prisons? Are there no workhouses? These would still force higher costs and push a growing tax burder on a shrinking pool of not-yet-incarcerated citizens. It is simply not possible to run a country on a head tax. Not this country, anyway.
My second reason is diminishing marginal utility of money and inelastic demand for basic necessities. People who make twice as much money do not spend twice as much money on food and shelter; they just spend a little more. To a rich person, $1000 is less valuable than it is to a poor person. You inflict less economic and physical hardship on a rich person than on a poor person by levying the same tax dollar amount. A poor person who pays $1000 more in taxes goes hungry, while a rich person buys fewer "luxuries and vanities". As Adam Smith, the father of economics, explained in "The Wealth of Nations":
"The necessaries of life occasion the great expence of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expence of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be any thing very unreasonable. It is not very unreasonable that the rich should contribute to the public expence, not only in proportion to their revenue, but something more than in that proportion."
- Adam Smith, "The Wealth of Nations"
My third reason is that rich people have more to lose. Government keeps order, preserves freedom, and protects its citizens from both internal and external threats of force. Who has all the best stuff? Rich people. Whose broken windows did looters carry jewelery, TVs, and harpsichords out of in France, Moscow, and Baghdad? Rich people's windows. Rich people can hire an army of personal mercenaries, but that can be expensive. Nationalizing those mercenaries and keeping a consistent state of order throughout the kingdom is a more cost-effective decision. There is greater demand for government among the people who hold the wealth that the government protects, and they are willing to pay more for that protection. I'm not trying to support or defend anarchist looters any more than I'd try to support or defend flooding in cities built below sea level, but that's the reality of the world we live in. That's what you get.
So rich people should pay more than poor people. How much more? As long as we agree on the principle we can haggle over the price. It's a value judgement with room for reasonable people to disagree. I'm going to set that point aside for another discussion; for now I'd just like to establish the basic premise that the rich have to, ought to, and (if they are honest with themselves) want to pay more taxes than poor people do.
My first reason is that it's simply not workable. In America, 9,795,000 American households have income less than $9000 per year. Even if each of those "households" are just one person and you approach them at gunpoint you simply can't get their "fair share" from them. Are there no prisons? Are there no workhouses? These would still force higher costs and push a growing tax burder on a shrinking pool of not-yet-incarcerated citizens. It is simply not possible to run a country on a head tax. Not this country, anyway.
My second reason is diminishing marginal utility of money and inelastic demand for basic necessities. People who make twice as much money do not spend twice as much money on food and shelter; they just spend a little more. To a rich person, $1000 is less valuable than it is to a poor person. You inflict less economic and physical hardship on a rich person than on a poor person by levying the same tax dollar amount. A poor person who pays $1000 more in taxes goes hungry, while a rich person buys fewer "luxuries and vanities". As Adam Smith, the father of economics, explained in "The Wealth of Nations":
"The necessaries of life occasion the great expence of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expence of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be any thing very unreasonable. It is not very unreasonable that the rich should contribute to the public expence, not only in proportion to their revenue, but something more than in that proportion."
- Adam Smith, "The Wealth of Nations"
My third reason is that rich people have more to lose. Government keeps order, preserves freedom, and protects its citizens from both internal and external threats of force. Who has all the best stuff? Rich people. Whose broken windows did looters carry jewelery, TVs, and harpsichords out of in France, Moscow, and Baghdad? Rich people's windows. Rich people can hire an army of personal mercenaries, but that can be expensive. Nationalizing those mercenaries and keeping a consistent state of order throughout the kingdom is a more cost-effective decision. There is greater demand for government among the people who hold the wealth that the government protects, and they are willing to pay more for that protection. I'm not trying to support or defend anarchist looters any more than I'd try to support or defend flooding in cities built below sea level, but that's the reality of the world we live in. That's what you get.
So rich people should pay more than poor people. How much more? As long as we agree on the principle we can haggle over the price. It's a value judgement with room for reasonable people to disagree. I'm going to set that point aside for another discussion; for now I'd just like to establish the basic premise that the rich have to, ought to, and (if they are honest with themselves) want to pay more taxes than poor people do.