[teal]

Originally posted by geoschmo:
So what if the lower income person pays a greater percentage of their income in taxes? That is simple economics. The more money you have to begin with, the more you have left over after you pay for all those things which are the neccesities of life, food, shelter, clothing.

In a perfect world, everyone would pay for government services exactly what they got out of it. So, if I drive my car 100 miles/month on the county roads and someone else drives 1,000 miles/month on those same roads, I should pay 10 times as less in "county road tax" as the other person because I used the road ten times as less. Sadly, I know of no easy way to calculate this benefit and thus to pay a fair tax for my use of government services. Could you imagine the paperwork that would result from such a system: "let's see here, I drove 14 miles yesterday, that's $1.40 in road tax, and the police arrested a burgular who was going to break into my house tommorow so they have billed me $200 and the firedepartment was nice enough to stop that house across town from burning down and setting the whole city ablaze. They have billed me $0.77 which they calculated as the cost of my home times the percentage chance it would have burned down if they had not acted, etc. etc." (and yes, these examples were shown as being deliberatley impossible to calculate in the real world, how do you quantify the benefit that you recieved from the police department?)

So, given that calculating the exact benefit each individual gets from government services is imposible, we should try and arrange things so that whichever simple model we adopt get's closest to whatever that value actually is.

Geo has effectively argued that benefit is proportional to how much one *spends*. I.e. I get more out of government services the more I spend. I shall argue that benefit derived is more closely proportional to how much one *earns*. Or to put it another way: given the choice between a sales tax generating $X and a flat income tax generating $X (in a world with no other taxes, ha!), which one should we choose?

To answer this question, let's look at several government services and try and decide whether the benefit recieved from them scales more closely as a function of spending or of earning.

1) Roads: Here it seems likely that spending would scale more closely to benefit. One would buy more gasoline if they used the roads more, and the more goods one buys the more that they had to be trucked in from elsewhere and thus the more the roads were damaged due to your buying the good.

2) Police and fire protection: Once again it seems that the benefit scales as a function of spending, since the more expensive house you buy, the better the nieghborhood and the more likely it is to be that you will have excellent police and fire coverage.

But what a minute here. How do I put a value on the stability that functioning infrastructure brings to a society? The wealthier person only has a wealthy career because of this stability. Smack a New York City stock broker into downtown Kabul, Afghanistan (which lacks the devloped infrastructure of the west) and ask them to start earning a living and they will soon find themselves doing something other than stock brokering. Put a janitor in the same situation and it is much more likely they will be able to continue janitoring. In this case, we have to say that the stock broker got far more benefit from the government services provided by the U.S.A. because put him in a situation where those government services function poorly and his livelyhood is hurt drastically more than the janitors. In this case I think we have to say that benefit scales as a function of income, not necessarily spending. Much of whatever income you are making is really only possible because the society as a whole is quite stable and that is largely a function of a mostly good government providing roads, courts, police protection, national defense and even quite possibly help for someone who recently lost their job and would other wise have to turn to crime (gasp!, ok maybe not that Last one .

So which of these two viewpoints more closely resembles reality? I have to say that income scales more closely to benefit derived than spending does, although both are imperfect.

Also, we may decide as a society that people should not be taxed on necessities (i.e. food, clothing, shelter). This is because if we tax someone who can not quite provide for all their necessities then we are in effect taking the bread out of thier mouths. We may decide, as a society, that we would rather just tax people on "luxuries" instead. Now the question arises, what is a necessity and what is a luxury? Buying a $2 shirt from Goodwill is surely a necessity, how about a $10 shirt from the Gap, or a $100 shirt from a designer store? Obviously the $100 shirt is a luxury, yet if we have a blanket "no taxing clothing policy" then the person who buys it would be able to escape the luxury tax in part by buying luxurious "necessities". A better way to approach the problem would be to allow each person a set deduction of $X where $X was determined to be the necessity threshold (that amount of money necessary to provide for basic necessities). This would involve far less paperwork and interfering with the market than trying to figure out which kinds of shirts are luxuries and which are necessities.

One final argument against the sales tax, which, although short, is perhaps the most powerful of all. The world is becomming increasingly globalized and it is now quite easy to buy something from somewhere other than where you live. Typically when you buy something off the internet (for example) you do not pay sales tax. Some people seek to avoid sales taxes by using the internet for big ticket items. Thus a sales tax (even a national one which could be circumvented by ordering from Canada or Mexico) has a bad effect on the free market and will become increasingly more of a logistical hassle to collect and fairly distribute as time goes on.

Teal, who has used up his "arguing on the internet" time quota for the month and must now turn back to "doing productive things" time.