The Necessity of Progressive Taxation: 01

Many CONservative idiots, and their ilk, oppose progressive taxation. I am going to dissect their arguments in this series of posts.

First let us define progressive taxation:

Progressive taxation is a method of determining tax rates based on the income of taxpayers, such that those who earn more pay more.

CONservatives and libertarians are usually strongly opposed to progressive taxation. I have to say that seeing a stupid tool give his tormentor the biggest dildo available is somewhat amusing.

Ironically it was Adam Smith (“invisible hand of market” guy) who wrote:

The necessaries of life occasion the great expense 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 expense 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 anything very unreasonable. It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.

One of the most popular myths against progressive taxation is that only the rich create jobs, and that we should therefore give them more money.

My counter-question is: jobs doing what and for whom?

The rich constitute the majority of economic activity only in feudal and neo-feudal systems. Such systems are fairly unstable and in our current world untenable beyond a generation or so. Most economic activity in developed countries is between average people, and almost all jobs are meant to satisfy their needs, wants and desires.

How many of you have jobs that create products or perform services exclusively for the rich?

To keep this circulatory system of money going, it is necessary to prevent money leakage or concentration (or even increase it as necessary). The rich will always try to monopolize and concentrate money even if it is to their own ultimate detriment.

Let me explain with an example:

Consider two roughly equivalent systems:

In system 1, the state tries to tax the bottom 95% to within an inch of their existence while pretending to tax the rich 5%.

In system 2, the state does not tax the bottom 95%, but collects reasonably high taxes from the top 5%.

Which system will last longer?

CONservatives and libertarians would suggest that system 1 would fail before system 2. They would advance the specious argument that the rich will just do business elsewhere. My answer is: let them try!

You see, return on non-financial investment for almost any business in our world depends on the ability of consumers to buy items/ services. If the consumers has no money or credit, businesses cannot survive let alone make profits or grow. Since ww1, and especially after ww2, the average middle class person is the biggest consumer in developed countries.

If you remove non-debt-based money from the average consumer through layoffs, “cost-cutting”, “smart management”, off-shoring, growing inequality, excessive credit- you are destroying the very circulation that keeps the world going. Most people are however oblivious to this fact, because they have been suckered by the false money created through financialism in the last 30 years.

Money created through financialism cannot support a real economy for long. It is not real in that it cannot buy more than a fraction of its paper value in goods and services. Such money is notional, and requires to made real through selling the financial instrument for fiat currency. You can however extract some value out of notional money as long as there are bigger fools to buy your financial instrument. But watch out when everyone runs for the exit!

Saving and hoarding excessive money also take it out of the real economy and put it in a useless place- a.k.a a bank. You might think that banks loan money against their savings, but that is simply not true. Reserve requirements are for all practical purposes fictional, and have always been so (even in the days of the gold standard).

Banks have ALWAYS created money out of thin air, and then expected you to pay it back with real products and services.

Ultimately it is the average person’s spending that keeps our world going. The more they spend, the better everyone is- especially the rich. Therefore progressive taxes should be seen as a way to balance the flow of money in our economy by keeping its velocity and rate of flow high enough to prevent significant leakage or stagnation.

If you give a taxbreak to an average person, he/she will spend it and thereby create more jobs. If you give a tax break to the rich they will take that money out of the real economy and either invest it in a financial ponzi schemes or store it in a hole in the ground. The rich never invest in productive endeavours unless they are forced to, because making money off money is much easier.

More in my next post in this series.