A few weeks ago a family member explained the simple and appealing logic of progressive tax rates — or tax rates that get progressively higher on higher incomes.
Someone who makes $10,000, pays 10% to the government only has $9,000 left. Someone who makes $1 million pays 50% still has $500 thousand left — a lot more even though they pay a higher rate.
I’m looking for a simple and appealing argument against it. I don’t think I’ve found it yet. But I think some good reasons against it are in the following sources.
In St. Augustine Anticipates H.L. Mencken and Walter Williams, Don Boudreaux quotes from St. Augustine’s City of God. The quote equates the use of force to take from folks via the state with robbery.
I explained another good reason in my post, The political power machine. Giving government officials the power to set different tax rates for different people doesn’t do much except give those in government the power to extract economic rent.
But both of those arguments may not be necessary if F.A. Hayek is correct. In the comment section of Don Boudreaux’s post, commenter DG Lesvic quotes from Hayek’s The Constitution of Liberty (p. 306). Hayek claims the only argument needed against government redistribution is the economic argument that redistribution increases inequality. All other social, political and moral arguments leaves the door open for the economic argument that it decreases inequality.
Hayek might be onto something. Folks seeing progressive taxes as a means of decreasing income inequality may be why the simple logic that my family member articulated is so appealing.
If Hayek is correct, then we need to know how redistribution increases inequality and be able to articulate that in a way that is as intuitive and simple as the two sentences from my family member.
Does anyone have any ideas on how to do that?