Thursday, January 8, 2009

Is income taxation progressive?

Superficially it is.  Those with higher incomes pay at higher marginal rates.  How could it not be?  The fallacy here is in accepting how is income defined.  

One cannot define income without accounting for the expenses of generating that income and offsetting these against it.  To do otherwise is to measure revenue or sales, not income.  If those at the bottom truly identified all those costs and could deduct them, if they did not have to pay more for less, if they had healthcare and pensions, they would have no true income and would not be paying any tax. The rich get very nervous at the thought of this, that a large number of people that pay no taxes would have no objection to raising them. To circumvent this, they tax them on income they don't actually have, only to subsidize them and complain about having to do it, to persuade them to oppose taxes on themselves while telling them they are on their side and support them through those subsidies. This is called having everyone pay their fair share, or pay something.  It is all a shell game played through the tax code and other spending.  

Now if everyone could deduct anything soon no one would have any income.  The main difference is the rich have more power to accommodate the law and accommodate to the law.  

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