Why do we have progressive taxes?
The despised Marxist slogan “From each according to his ability, to each according to his need” is frequently used to criticize progressive tax programs. Anything with communist overtones is anathema to many capitalists, who believe the idea behind progressive taxes is to redistribute wealth. This is a staple of anti-government politicos. But, conspiracy theories aside, it seems unlikely that the United States Government has taken inspiration from Karl Marx for it’s tax policy.
In truth, progressive taxes were conceived as a way to support public structures in proportion to how much one benefits from them. Meaning that if you are successful, it is partially due to the environment in which you operate, and so you pay more. Conversely, when you do not thrive, you pay less. Put another way, there is a basic level of public service to which all citizens are entitled. But beyond some threshold of success, one is expected to foot more of the bill.
So Who Needs Government? Some people claim they don’t use government services. Coincidentally, many of these same people feel government is bad, and that less government is always better. When asked how many government services one uses, many of us come up with one or two. But when you start to list government services, its clear we use a lot more than we think. For example, if you drive on roads, attend public schools, call the police or the fire department when needed, or get a driver’s license, collect unemployment, walk through TSA screening at the airport, enjoy safe commercial air travel (courtesy of the FAA), or appreciate an environment that is free of terrorists (thanks to the military and Dept. of Homeland Security), then you are utilizing government services. And we haven’t even mentioned programs like social security or socialized healthcare (aka. medicare).
You see, this is what it means to be born in America. We have the greatest society in history in which to raise a family and conduct business. We’ve heard that freedom isn’t free, but neither is the collection of government services which combine to make it so. We have a safe, healthy, educated populace, and a marketplace that is secured by institutions of law protecting property, copyrights, and the rights of private citizens to pursue their own personal vision of happiness. This only happens with a government committed to providing these entitlements. Our government is supported by taxes, and it very effectively (if not always efficiently) creates an environment where someone with ambition, work ethic, and an idea can thrive.
So, what about the self-made man? The one who raised himself by his bootstraps, who exerted great force of will to overcome odds and make his own fortune? Is it fair to ask him to pay more taxes than the rest of us? Yes, it is. If his fortune is made in America then he is not self-made. If he attended a public school, relies on the authorities to enforce laws that make it safe to live and do business, or if he benefits from living in a country with a strong military, protecting his rights in such ways that enable the making or keeping of his fortune, then his tax burden should reflect it. Taken one step further, if in the making of a fortune, one benefits from the inputs of a society of educated workers, who also live in safety and security, and who contribute to the earning of another’s fortune, then the self-made man benefits from this as well. Financial success is rarely a lone endeavor. It tends to resemble a pyramid, where the fellow on top benefits from the contributions of others. And the magnified benefits at the top mirror one’s obligations, since without those contributions, his benefit would be less. There is an additional obligation to support the community for this, too.
Alternatively, one could try being ‘self-made’ elsewhere – where costs would surely be higher in countries that do not provide similar benefits. There, he might have to build the roads to transport his goods, educate his workforce, ensure the safety of transactions for his customers, arrange for the safety of his suppliers, and hire a private army to protect his family and community. Nothing makes a self-made man more pro-government than having to foot these (and many other) costs himself. In fact, throughout the world, aspiring self-making men and women flock to the USA where citizens take these services for granted.