Tax: Progress, Regress and Proportion
25 Jun 2024

Death and taxes are certainties, they say, but with technological advances, maybe not death, so much. The legitimized protection racket that is taxes has been in place for as long as humanity formed organised societies. In Ur (hometown of biblical Abraham, one of the early characters in a very ancient book) levied taxes on agricultural produce, livestock, and other goods – to build roads, fund military campaigns and splash on religious ceremonies. Farmers had to pay a proportion of their crops to the State since the days of ancient Egypt. Every now and then, taxes lead to trouble. One could argue that both the French and Russian Revolutions stemmed at least partly from relatively regular folks saying HELL NO, ENOUGH to excessive taxation… and Britain’s Stamp Act of 1765 and the Townshend Acts of 1767 created America.

What is clear is that once a government of any kind gets its grubby little paws on a new form of taxation, it becomes permanent and never goes away. Before the wars with Napolean, there was no income tax in Britain – but it’s still around today even though Napolean, last I checked, was no longer a threat. Don’t be too hard on the English, however. America only instituted Income Tax to fund the Civil War – and yet it seems reparations for that particular military adventurism is still being paid by everyone sleazy enough to dare to make a living circa 2024.

Taxes are, of course, couched in the language of the common good and of empathy. It is impossible to reach collective goals and act in the collective interest without a budget – nor is it possible to have welfare. But in the end, taxation is enforceable. Any way you spin it or skin it, the State takes what they can’t make for themselves, and they do so with the threat of imprisonment and/or violence, and if you don’t like it, at best, you can shop for another State to pay it to. They couldn’t get Al Capone for murder, theft, prostitution, the manufacturing, distribution and sale of illegal substances – but they got him on Tax Evasion.

We hear a lot about the rich not paying their fair share, or corporations avoiding tax through loopholes. To be clear, no corporation in the history of mankind ever paid tax – corporations are juristic and not actual persons, and so they might hold tax on behalf of governments, and they might pass on taxes to their customers, and they might collect it to pay over to authorities, but they don’t ever actually pay it themselves. Only natural subjects – that is, people – pay. Who exactly pays depends on how the laws are written, and who is reading those laws out loud and the audiences they are speaking to.

Progressive Tax (Because once we start we don’t stop)

In this system, the tax rate increases as the taxable amount increases. This system is designed to ensure that those who earn more pay a higher percentage of their income in taxes. It is commonly used in many developed countries, such as the United States, the United Kingdom, and Canada. You wouldn’t know it, given how certain politicians go on and on – and how ubiquitous the phrase “fair share” has become. The Facts are that the Top 1% of Income Earners in the United States pay around 42% of all income taxes paid. 88% of tax is paid, between them, by the Top 10% of earners. Incidentally, unlike opinion columns or campaign slogans, tax revenues are documented mathematical facts – so whether your ideology and convictions agree or not, anyone who claims that in the United States the rich don’t pay their fair share is – in technical terms – a fucking liar.

The idea is that progressive taxes are more fair – although this idea is not a mathematical fact and is open to debate. A highly successful person does indeed make use of public roads, but not in line proportionately more than an absolute loser does. The idea that progressive systems reduce income inequality also presupposes, rather generously, that government is as effective at spending the money they take in as they are taking it in – and that the results of any programs they may institute is exactly as predicted.

Progressive systems are complex and costly to administer, so they do tend to redistribute a lot of income to accountants. And rich people can afford accountants and lawyers to help them avoid or even evade tax. The contemporary world, like it or not, is a marketplace for those with the means. People can and indeed do buy citizenship, move their own domiciles and where their companies are domiciled so make no mistake – fair or not fair – jurisdictions compete for high earners. If I’m taxed too much, ladies and gentlemen, it is well within my capabilities to take my business – and all its economic value – elsewhere.

Of course, the amount I’m taxed is only part of the picture. Another might well be what I get in return for my taxes. The job of a government is to facilitate an environment in which its citizens can thrive. Money in versus value out is a real equation.

Regressive Tax (Because it will set you back)

In this system, the same rate is applied to all taxpayers, regardless of income. As a result, lower-income individuals pay a higher proportion of their income compared to higher-income individuals. You’d think it’s an either/or – as in – a country chooses to be progressive or regressive. But by now you know they are all greedy bastards, and they often apply both. Your income tax might be progressive, and then your sales taxes and excise taxes might be regressive.

It’s simple to administer and has low compliance burdens, and because they apply to everyone can generate a lot of dough. Thing is, aside from exemptions for basic goods or services, the lower income groups pay more as a proportion of what they earn. Also, once consumption becomes too pricey, economic growth itself might slow.

Proportional Tax (Because you know we’ll get ours)

Proportional taxation, aka the Flat Tax, applies the same tax rate to all taxpayers, regardless of income. Everyone pays the same proportion. Easy to understand, easy to administer, and it sounds pretty fair (considering tax is never fair and no one is ever happy paying it). But ten percent of my income may not be the same proportion if I’m on the breadline than it is if I’m buying a private jet. Down here, I might starve. Again, basic things can be exempted (which negates the criticisms, but people pretend they don’t so they can either keep complaining or demand more of your hard-earned cash for their pet projects). Opponents of the Flat Tax argue that it won’t generate enough revenue to cover essential public services. Factually, it will more than cover essential public services alright, it just won’t fund all the pork-stuffed fatcat big bureaucracy programmes required by welfare or expansionist states. Not a drawback, argues its proponents, at all. You’ll have to decide where you fall.