Alone On A Limb: October 2024

I want to politely give some opinions with some facts to, I hope, back them up. I am no economist but I have lived 77 years and I’ve thought about this a lot.

First of all let’s get some side tax issues out of the way; there are lots of taxes. ALL income brackets with some variation from state to state and community to community, pay sales taxes, gas taxes, property taxes, and (indirectly) tariffs, etc. Those taxes are a much larger proportion of the expenses of po’ folks than of the wealthy, of course. If there are tax freeloaders, in my opinion, they are mostly people who are privileged to keep paying income taxes after they have earned their first eleven thousand dollars of the year.

But this post is intended to address just income taxes.

Here’s my opinion:

-------------------

The progressive income tax system is the fairest tax system in the world.

-------------------

The income tax was never meant to tax the first part of income that an American earns the same as what they earn past that amount. It is, well, progressive.

Elon Musk and Terrell Shaw (see our photos above) -- ignoring complicating factors like various write-offs and deductions -- are expected to pay exactly the same amount of income tax on the first $11,000 we each earn in a year. It takes him a few seconds, if that long, on January First each year to earn that much. It takes me much longer. Under the ideal progressive system (again ours is complicated by deductions and write-offs) Elon will pay exactly the same amount as me on his next $33,000 (or so), and his next $66,000 (or so). Somewhere in there we can no longer compare because this retired teacher doesn’t make a huge amount. But I would LOVE to move into those higher brackets that would require me to pay higher percentages of income later in the year.

There are seven brackets. Once Mr. Musk has reached earnings of a bit more than half a million dollars, still on the first day of the year likely, he must pay 37% ONLY on any money he “earns” after lunch on January First (Okay, I don’t have solid info on how long it takes him to “earn” half a million, but it ain’t long.) and the rest of the year. Of course he can find write-offs and deductions to lessen that. This is just on income, so he can shield his real wealth from taxation in various ways like letting his investments just stay in stocks that will grow in worth while he pays for hamburgers (and his trips to space and assorted homes and yachts, etc.) from dividends and such. Oh his political donations, he doesn’t have to sell any stock to make those. (I donate a much higher proportion of my “wealth” than he does, by the way.)

Gouverneur Morris, author of the Preamble, was not yet 40 during the Constitutional Convention. Despite his eloquent definition of government of "We the People", he was not as trustful of the people as I wish he were.

In my opinion Gouverneur Morris’s Preamble to our Constitution is the greatest (and briefest I imagine) statement of the ideal purposes of government. It balances individual liberty and the common good. It is eminently moderate, as I believe myself to be. How do we achieve maximum liberty for the most people?

We have seen that “pure” socialism has usually meant anything but liberty.

I contend that “pure” capitalism leads to tyranny just as surely.

I have been an entrepreneur in my life. I loved being free to try to make some money and do some good through two business efforts. I don’t begrudge anyone that! I want there to be strong incentives for innovation. But I don’t want another Gilded Age. I don’t want lords and serfs.

Since 1980 our nation has been redistributing the wealth of America more and more toward the already wealthy. As of today, world leaders are having to negotiate with Elon Musk (even on national defense!!!) as if he were a pretty powerful nation-state within himself.

My question to my friends who object to progressive income tax: Where do you draw the line?

At what point is wealth so concentrated that many of us become serfs?

Folks were asked in one study (2019) to estimate the proportion of American wealth held by each fifth of the American population from the wealthiest 20% down to the poorest 20%. (middle bar in the chart) Then they were asked to say what they thought the ideal distribution should be. (bottom bar in the chart) This chart compares those two averages with the actual wealth distribution in 2019, (top bar in the chart).

There were many problems in the fifties and sixties and seventies, in those days of much higher taxation on the money the gazillionaires made as they earned themselves into higher brackets as the year passed. I would contend, though, that the wealthy were doing just fine, and that the average factory worker, teacher, salesperson, clerk was doing (relative to the economy of that time) better too.

Did you notice in the "Actual" chart above for 2019 that the bottom 40% of Americans combined only posses three tenths of one percent of America's wealth? There may be some no accounts among those folks but I know a mighty lot of fine folks numbered in that group. That is just wrong. I don't begrudge Elon a very nice living based on his wits and creativity and industry, but he "earns" more than he could ever spend and wields power way beyond what any person in a republic should wield. His wealth would be impossible without the sacrifices my preacher Daddy and his generation made in World War II (by the way while Elon's South African forebears were practically enslaving their fellow South Africans of a darker hue.) His wealth would be impossible without the infrastructure of our great nation built by millions of common folk and paid for out of a higher percentage of their wealth than his. His wealth would be impossible without the billions of small purchases by ordinary Americans that made his businesses. And so on. No man is an island, even smart talented but also lucky fellows like Elon.

The Preamble is a wonderful guide. There will, as long as the Constitution stands, be great tension between those who want to push the weight toward the common good side of the balance and those who want to tug it toward the individual liberty end. Fine. Always has been; always will be.

Another opinion:

-------------------