Comments on: Unfair to the readers

By: Chris Martin

Chris Martin — Sun, 24 Oct 2004 21:12:51 +0000

Quiggin, Is there proof that high income earners also use more government services and therefore are rightly charged more in taxes? I’ve heard this argument before but I haven’t seen anyone point to reliable research that tries to calculate exactly how much more government services are used by high-income earners.

By: James J. Kroeger

James J. Kroeger — Sun, 24 Oct 2004 11:43:53 +0000

Yes, Roger, the “equality of sacrifice” argument has always been the most difficult argument for right-wing apologists to answer. It becomes even more difficult for them to answer when it is pointed out that even steeply progressive income taxation imposes no real sacrifice on wealthy income earners in terms of lost purchasing power. How can I argue that it would be unfair for me to pay a larger percentage of my income in taxes if I can see that market prices are sure to adjust in a way that will make all of my purchases just as affordable as they were when I had twice the disposable income to spend? The fundamental error in logic that these apologists are guilty of is the fallacy of composition. They assume that the sacrifice a single income earner would suffer if only her tax obligation was dramatically increased would be imposed on all taxpayers if all of their tax obligations increased. This is, in fact, not true. When the same “sacrifice” is imposed on all income earners, none of them actually experiences any real sacrifice because market prices will adjust. When it comes to the purchasing power of incomes, what matters is not your absolute level of income, but only what your level of income is relative to everyone else. For an elaboration of these points, see www.taxwisdom.org. Any economist who understands 1) the phenomenon of inflation, and 2) how markets set prices, can only disingenuously object to progressive income taxation. James J. Kroeger

By: roger

roger — Sat, 23 Oct 2004 19:57:57 +0000

It is rather funny that a man who writes for a blog called Marginal Revolution seems blithely unaware of the historic roots of the progressive income tax. Martin Daunton’s essay in History and Policy, “Quality and incentive: fiscal politics from Gladstone to Brown” shows that Adam Smith’s precept for taxation—that it should involve ‘equality of sacrifice”—was recalibrated by the marginal utility economists, like Alfred Marshall: “Alfred Marshall’s Principles stressed the marginal costs of producing another unit of output, and the marginal satisfaction to be derived from consuming it. In this approach, an additional pound did not produce the same satisfaction for someone in receipt of an income of 1,000 as for someone in receipt of an income of 100. The meaning of equality of sacrifice was more complicated than writers in the past had appreciated. Did equal sacrifice mean each taxpayer should surrender the same proportion of their total utility? “That is, the aim should not be to take 10 per cent from all income levels ( 5 from an income of 500 and 10 from an income of 1,000), but rather to extract the same proportion of happiness or satisfaction, which varied according to income. Or did it mean an equal marginal sacrifice in order to produce minimum disutility? By this definition, the aim was to calculate the additional satisfaction produced by the final increment of income, and to ensure that the rate of taxation on that income imposed the same loss of utility or satisfaction. Thus the final 10 of income for someone earning 500 might produce three times as much satisfaction as the final 10 for someone earning 1,000, so that the tax rate could be three times as high on the larger income with the same marginal disutility.” But an economic sophist like Landsburg is, of course, not going to be aware of this history, or interested in it, even as he uses the theory. Typical.

By: Don Quijote

Don Quijote — Sat, 23 Oct 2004 14:50:02 +0000

We should just go to a flat tax to end the griping from both sides about who is getting the short end of the stick. Sounds like a fine ideal, but let’s make it a flat tax on Wealth. Get your accountant to figure out your net worth on Dec 31 and pay a flat percentage of it to the IRS. Simple and fair every one pays the same percentage.

By: abb1

abb1 — Sat, 23 Oct 2004 10:09:36 +0000

The looting thing is obviously tongue-in-cheek, typical Slate/Kinsley-style contrarianism, the “why idiots make better presidents” kinda stuff. Call it ‘silly-clever’ if you wish, but it’s often good, it’s funny. And I thought the ‘Bush tax-cut benefits the poor’ would be one these things too. But if the guy who posted here is indeed Steven Landsburg, then it’s a bummer – he actually believes it. Instead of saying: hey, where’s your sense of humor, folks, this was merely a parody of the Heritage – he actually defends it. Perhaps over the years these Slate people have gotten brainwashed by their own shtick. Come to think of it, this is also very funny.

By: roger

roger — Sat, 23 Oct 2004 07:18:54 +0000

I’m so glad that Landsburg is distressed by Bush’s terrible liberalism. It reflects the sad state of the rich in the country at the present moment, who are, as Grover Norquist once remarked, undergoing the same thing, by paying their taxes, as the people thrust into the concentration camps by the Nazis. I’m totally looking forward to his embrace of Kerry as the true alternative for his brand of conservative economics. When are we going to see it?

By: Mark

Mark — Sat, 23 Oct 2004 06:53:00 +0000

there is no widely agreed upon definition of progressivity. Yes there is; dsquared already reminded you of what it is, and as a Ph.D. economist, you know it perfectly well. You may not agree with it, but virtually all economists not named Steven Landsburg do. The Bush-era changes to the tax code has made the tax code more progressive. You have presented no data that bear on this question. The percentage change in dollar amount of taxes paid is not the relevant number; as you know, progressivity is measured by looking at the percentage of income paid in taxes. To demonstrate your point, you would have to present data (not just a chart, but the underlying data) on that percentage, or use some other recognized measure of progressivity, as used by Brian Roach in the article John linked to. Finally, I want to reiterate that I was especially disturbed that, in complaining about the "unfairness" of the Bush tax cuts, you simply pretended that the well-established principles of tax equity, which I referred to earlier, do not exist. You did not address them at all. For a Ph.D. economist, well-versed in these matters, to discuss tax fairness without addressing these issues is, to say the least, highly irresponsible, if not downright dishonest.

By: Russell L. Carter

Russell L. Carter — Sat, 23 Oct 2004 06:37:08 +0000

“I did not say that useful definitions of progressivity are impossible; I said that there is no widely agreed upon definition of progressivity.” False. There is no evidence for your claim.

By: PG

PG — Sat, 23 Oct 2004 03:20:20 +0000

Ooh, I wished I’d checked CT earlier today. The Case for Looting was one of the most idiotic attempts to apply economic thinking that I’ve ever seen.

By: son volt

son volt — Sat, 23 Oct 2004 02:50:27 +0000

Prof. Landsburg, in comments above: It seems to me, based partly on a casual reading of recent history and partly on gut feeling, that it is easier to make the tax code more progressive than to to make it less so. Sure, but it’s also easier to cut taxes than to raise them. If the affluent will pay higher taxes, in absolute terms rather than merely a higher relative share, in the future than they did before Bush, that consequence is almost certainly an unintended one. Clearly the Bush admin is betting that, at some future day of reckoning made more painful by massive deficits, America will opt to revoke the New Deal rather than raise taxes. Usage note: Perhaps the issue might be viewed more clearly if we used the term “tax holiday” to refer to tax cuts that aren’t offset by spending decreases.

By: Taxwisdom.org

Taxwisdom.org — Sat, 23 Oct 2004 02:32:39 +0000

I would be very much interested in a philosophical analysis of the arguments presented at www.taxwisdom.org. The essential argument is that the progressive income tax does not impose any real burden on taxpayers in terms of purchasing power because it preserves the relative "bidding positions" of all taxpayers within the hierarchy of all disposable incomes. Can anyone offer a cogent counter-argument? Thanks, Linette

By: Steven E. Landsburg

Steven E. Landsburg — Sat, 23 Oct 2004 02:05:57 +0000

Russell Carter: I see. If the imperfectly designed rate function is not provably monotonically increasing across the entire income range than useful definitions of progressivity are impossible. And we should look into our hearts and use our faith and feelings to determine what a progressive system really is. I did not say that useful definitions of progressivity are impossible; I said that there is no widely agreed upon definition of progressivity. What do you think is gained by inventing preposterous statements and attributing them to people?

By: Russell L. Carter

Russell L. Carter — Sat, 23 Oct 2004 01:20:23 +0000

Blast! Stephen is actually making a (slightly) stronger claim that mathematically I probably should account for. I mean since he’s being such a pedant and all. Insert the word ‘strictly’ in the appropriate place in the second sentence of my previous comment.

By: Russell L. Carter

Russell L. Carter — Sat, 23 Oct 2004 01:02:41 +0000

“To dsquared: There are functions that increaase over some ranges and not others. ” I see. If the imperfectly designed rate function is not provably monotonically increasing across the entire income range than useful definitions of progressivity are impossible. And we should look into our hearts and use our faith and feelings to determine what a progressive system really is. Thanks for clearing that up!

By: Simon Rippon

Simon Rippon — Sat, 23 Oct 2004 00:58:20 +0000

Apologies to Mr. Landsburg for misspelling “Steven” in that last post