Why Taxation Always Becomes Regressive

Since April is the month for filing income taxes across North America, I decided to write a post or two on the whole topic of taxation. Some of you might be stupid enough to think only something explicitly labelled as a tax (such as income tax, sales tax etc) is actually a tax. The reality is rather different..

Many charges and costs which you do not consider as taxes are precisely that, in everything but their name.

While there are, somewhat obvious but, non-standard taxes such as the payroll tax deductions to cover for social security and medicare- the real extent of taxation requires you to examine many daily transactions through the lens of reason. Is paying more for living in an area with a good school district a tax? You bet it is! What about paying a higher price, and therefore a higher mortgage, for a house in the better areas of your local human termite hill- aka city? What about paying much more to be treated by a doctor in a western country when he, or she, cannot offer a better outcome than somebody from a middle-income country? Do you pay for the use of facilities, services or utilities that are effectively private cartels with the ability to block competition through ‘laws’? What about the ever-increasing rates of spending, and use, of corporate lawyers without a proportional increase in the income of the entities that use their services?

Most forms of taxation are best understood as the excess cost incurred due to the parasitic behavior of people and legal entities with ‘power’ over somebody else. This is also the starting point for my explanation about why most taxation is regressive or become will become regressive as time goes on.

It is important to remember that the vast majority of people who pay any taxes, in any form, have far less ‘power’ than those who collect them. Therefore the potential for those involved in collecting taxes to abuse their power and maximize their collections is omnipresent. Since most human beings, especially those with any amount of ‘power’, also tend to be more greedy and hubristic than those who don’t- it is almost a given that people involved or benefiting from tax collection of any sort will abuse their power. Furthermore, they are more likely to abuse their power and extract proportionately more from the most vulnerable than those who can defend themselves.

In most societies the ability to defend oneself is linked to how rich you are. Consequently a person with lots of money can often avoid paying taxes of any sort by employing lawyers or paying off legislators and enforcement personnel. He or she can also transfer the burden of taxes onto poorer people who are less able to defend themselves. Therefore any society with serious income inequality will always result in richer individuals further enriching themselves by transferring their tax burden onto poorer people- irrespective of the effect of such behavior on the long-term health of that socio-economic system. The ‘socialization’ of tax burden is one of the main mechanisms through which the rich can privatize personal profit while socializing losses and costs.

Regressive taxation ultimately destroys the very socio-economic system that created and allowed it to exist.

What do you think? Comments?

  1. April 14, 2012 at 12:05 pm

    You always surpass yourself. Regular people should stop playing by the rules.

  2. April 14, 2012 at 12:51 pm

    In our age, taxes are useless.
    Instead of taxes, governments need only to print money.
    Taking money from the producers and giving it back to those who need it = Not taking money from the producers and printing money and giving it to those who need it. In both cases, those who need money will pass it to producers again.
    In the first case, money flows as such:
    government -> people -> producers -> government -> poor -> producers
    In the second case:
    government -> poor -> producers
    It is obvious that the second case is simpler, therefore better.

    What you are talking about is called MMT or Modern Monetary Theory.

    • April 14, 2012 at 10:03 pm

      I haven’t read any MMT text. What I’m saying is what I’m seeing.

      This revelation occured to me in August through comparing between the ancient systems (Roman, Islamic, Ottoman) and the modern systems. What separates the modern world from the ancient world is that paper/electronic money has zero value; and because of its zero value it acts as a tax by itself. In ancient times, the government used to take food from the producers and give it to the poor; in our times, the government can just print money, give it to the poor and the poor takes the food from the producer through this money. Even gold or silver can be used for the same purpose, but most humans were deluded by the value of these metals.

    • April 14, 2012 at 10:31 pm

      And is MMT right or wrong? Could you explain?

      • April 14, 2012 at 10:48 pm

        we would assume that advipoops believes it to be right as he has talked about a minimum payout of 10k or so for everyone….

  3. InT
    April 14, 2012 at 11:15 pm

    This reminds me of something I’ve realized.

    A problem I have with taxation of the rich is: You buy it, you own it.

    I don’t think the “tax the rich” people are fully aware of this. The more the rich pay taxes, the more effective control they have over the government, resulting in more cartels etc.

    I am unsure of how to resolve this paradox.

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