Monday, January 2, 2012

The "wealth redistribution" canard

Churchill: "Would you sleep with me for five million pounds?"
Woman: (taken aback) "Why, well... yes, I suppose I would."
Churchill: "How about for 10 pounds?"
Woman: "Mr Churchill! What kind of woman do you think I am?!?"
Churchill: "Madam, we’ve already established that. Now we're just haggling about the price."
Conservatives often decry "wealth redistribution," by which they mean taxing the rich at higher rates than the poor or middle class. "It's not fair," the argument goes, "to take more from one person and give it to someone else!" It is seen as an evil to be minimized (lower tax rates for the rich at least somewhat) or eradicated via a flat tax (everyone pays a certain percentage of their income no matter how much income they have).

However, as far as I can tell this is completely wrong-headed because of the simple fact that a flat tax would still be extreme wealth redistribution (I'm using "extreme" in the sense that it's a lot more than no wealth redistribution at all). That's because the conservative idea that a flat tax avoids wealth redistribution is either a) flat out wrong, or b) using words in a totally unnatural way.

The definition I gave of wealth redistribution seems pretty intuitive: taking more money from one person and giving it (or the benefits it buys) to another. But when you think about it, a flat tax would still do that, and on a large scale. To see this, assume you are Bill Gates and thus make $1,000,000,000 each year and under a flat tax you pay 10% of that, or $100,000,000, to the government. The government then uses it for providing roads, post offices, public transit, national defense, or whatever services you think government ought to provide. Now assume that I am a bum who makes no money at all during the year, thus avoiding any tax liability at all. I am still benefited by your tax money: I can still walk the streets lit well at night, the police will still arrest someone who beats me up or steals my stuff, I still get to use cheap public transit if I find enough quarters to buy a bus ticket, etc. In short, the money that was yours and was "taken" by the government is going to help me. Your wealth is being redistributed to me. I don't see why taking the same percentage from everyone avoids redistributing wealth; money is still moving from the richer to the poorer.

Of course, conservatives might argue that they're using "wealth redistribution" to mean "progressive taxation" (the correct term for making rich people pay higher percentages of income in tax). In which case I say: then use words to mean what they plainly mean! Conservatives win lots of political points by creating fears that the government is "stealing" money from more productive, innovating, "job-creating" people and redistributing it to the poor--sure sounds an awful lot like SOCIALISM to me! The problem is that their solution... still "steals" more money from the rich and redistributes it to the poor. I admit that the flat tax does so on a much lesser scale than progressive tax systems, but it indubitably still does it, and to a large degree.

So the real question is: how much redistribution of wealth do we as a society want? I'm not saying necessarily that the marginal rates we have right now are ideal, either morally or economically, but just that we should have a debate that answers the question of just how much redistribution of wealth is desirable. The only way to avoid all wealth redistribution is to have a "head tax" which is when everyone pays the exact same amount of money; truly no wealth gets redistributed under such a system: we all pay the same amount and we all get access to the same government benefits--something I haven't heard anyone seriously propose.* In other words, conservatives have already established what kind of party they are, now we're just haggling over the percentages. This isn't meant to be a slam-dunk against the conservative position--it's perfectly valid to argue that taxes are too high and that they should be lowered, and there may even be benefits to flattening out the tax system--but it is meant to be a plea that we all avoid scare tactics that don't make any sense on inspection.

In short: the specter of "wealth redistribution" to oppose progressive taxation is hypocritical demagoguery unless a head tax is advocated in its place (or no tax, but anarchy is a great topic for another post). Let's get down to haggling about the right price instead of calling the other party immoral thieves.

* Interestingly enough for the conservatives who point to tithing as divine approval for a flat tax, God also instituted a head tax in Exodus 30:13-15 for everyone 20 and older, so who's to say that isn't an even more moral way of doing things than a flat tax? Or if God's tax preferences change, why not have a progressive system now? [aka I don't think God particularly cares about the details of our tax system]

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