Propensity to spend; marginal utility, ability to pay, regre

Posted on: February 4, 2019 at 16:31:06 CT

A few reasons:

1) propensity to spend, i.e. stimulation of demand resulting in economic growth.

2) Marginal utility, resources should be put to their best use to optimize outcomes for society as a whole. ----resource allocation - after all capitalism is at its core a resource allocation method.

3) Many other taxes are regressive --- the lower your income the higher percentage of your income paid in that tax - for example sales taxes, gasoline taxes, various sin taxes like the lottery.) A progressive income tax offsets the regressive nature of other taxes.

4) Social cohesion -- high income inequality results in poor social outcomes such as higher crime and substandard childhood development and education, poor nutrition --eating a bunch of food with poor nutritional value. This is Related to the misallocation of resources. Please spare me the moral lectures about how if people would only be smarter and work harder. The evidence applied to large populations is clear - if you adopt these policies you get these outcomes. The whole "pull your self up by your bootstraps" class warfare deflection is 3,000 years old. It is just a blame shifting tactic to take the focus away from empirical evidence. It is also used to dehumanize those whose outcomes are made worse by the tactics favored by plutocratic class warriors. The dehumanization tactic is also many thousands of years old.


5) Reduced political corruption. High income inequality and pay for play politics results in the wealthy dominating government decision making - again resulting in suboptimal resource allocation from the perspective of society as a whole.


These are a few of the long-standing arguments for progressive taxation.


Of course everything in moderation. Incentives are important. But even the incentive argument is not as clear cut as you may think. While lower taxation increases the returns earned by capital and therefore increase the incentive to invest, they also create incentive for perverse anti-social behavior such as fraudulent/deceptive marketing, pushing pharmacutical meds that have harmful consequences for many in the population and anti competitive behavior. Some behavioral psychology studies suggest that as people accumulate more wealth than they will ever be able to spend, that reduces the incentive to work. (I know strange idea).

Edited by Knucklehead at 16:44:19 on 02/04/19