Skip to main content

View Diary: Senator wants to use gambling laws to regulate Wall Street (211 comments)

Comment Preferences

  •  It also reflects (5+ / 0-)

    that most people in high brackets weren't always there; they moved up to them. Part of the reason they were able to move up is that on the way up, they paid a much lower percentage of their income in tax, leaving more to invest in various ways. Specifically, they paid a lot less than they would have if everyone were taxed at the same rate. This promotes upward mobility.

    The theoretical justification for progressive taxation is the fact that money has a declining marginal value: the more money you have, the less a fixed increase (or even a fixed percentage increase) gains you. For example, if you were making $16,000/year and you had an opportunity to increase that to $17,600 (a 10% raise) you'd probably jump at it, even if it meant making some sacrifices like a longer commute or less enjoyable work. But if you were making $160,000, you probably wouldn't be willing to sacrifice very much in order to make $176,000 (also a 10% raise).

    That's because an extra $1,600 when you're making $16,000 would have a major impact on your standard of living; it could mean climbing out of the hole rather than sinking deeper. But if you're making $160,000, then an extra $16,000 would merely enable you to satisfy some of your lower-priority wants that are subject to tradeoffs.

    Thus even if all you want to do is keep the impact of taxes "flat" you need progressive rates. If you make the rates themselves flat then taxes will hurt the ability of people with lower incomes to participate in the economy a lot more than people with higher incomes.

    There is nothing so practical as a good theory—Kurt Lewin

    by ebohlman on Mon Nov 30, 2009 at 11:13:00 PM PST

    [ Parent ]

Subscribe or Donate to support Daily Kos.

Click here for the mobile view of the site