US President Barack Obama”s administration & Congress are seeking greater progressivity in the taxation of earning of Americans. It has been proposed that income tax rates be raised on couples earning over $250,000 a year & single individuals earning over $200,000.
You would think that those in higher income taxes are already paying more than their “fair” share. According to the US Congressional Budget Office (CBO), the top 20% of all income earners in the US paid 86.3% of all income taxes in 2006. And taxes paid by the top 1% exceed what is paid by the bottom 95% of all taxpayers.
But it seems to be an article of faith that imposing a tax rates progressively linked to income is “just” and that governments do so to create a more “fair” distribution of income.
Economists, especially those teaching public finance, have provided intellectual cover for taxation with notions like “tax neutrality” and so-called optimal tax rates. And they offer support progressive taxation with arguments about “horizontal” equity (i.e., taxing equals in an equal manner) and “vertical” equity (taxing unequals differently). And they often refer to the “ability-to-pay” principle that implies that wealthier individuals should pay more simply because they can; a notion completely devoid of any moral logic.
Implicit to all these conceptualizations is that citizens do not have first claim to their earnings * that their rights to acquire property are contingent upon the requirements of the state. As such, the whims of the ruling class made up of politicians & bureaucrats are “privileged” over the rights of citizens that operate in the private sector as members of the productive class.
But progressive taxation violates various moral markers including Kant”s categorical imperative that specifies a rule is “just” if it is general & applies to every person in the same way. This also contradicts the “rule of law” that requires each be treated as all others without prejudice for or against those with unequal income, wealth, power or other attributes.
And taxes that aim to impose a progressive burden interfere with market-based rewards based on private agreements between an employer & employee. Such a system supports the politics of envy that contributes to a sense of entitlement by those at the receiving end of income redistribution.
If “fairness” is interpreted as equality of sacrifice, it is better served under proportional rather than progressive taxation. This is because unequal rates of tax can only generate equal rates of sacrifice if each unit of money is worth less to those with the most than to those with less. As it is, income tax progressivity discourages working hard, saving, investing & entrepreneurial initiatives.