Proactive Taxation for Progressives
Wealth concentration is the central issue to many of the social, political, and economic problems facing the United States in the present day. It negatively impacts our health, happiness, [1] and our shared ability to transform the world. Popular ideas such as a wealth tax [2], a more progressive taxation system[3], and a Universal Basic Income are growing more popular but may fall short of making the genuine systemic change needed to redefine the human experience. To successfully address poverty, we need to approach wealth distribution proactively from a structural perspective.
A central challenge facing the most commonly supported equality agendas is that they attempt to address inequality through reactive redistribution, continuously trying to fix problems perpetually generated by the system itself. The single market structure capitalism the U.S. subscribes to is a method of exchange originated with scarcity in mind and rewards those who own the highest concentrations of capital the most. Reactively approaching inequality via taxation resigns us to dealing with the inequity after-the-fact and limits our ability to create change in real time.
Some argue for radical redistribution, a sudden and dramatic allocation of existing wealth. This idea is not a viable option as it would severely disrupt the entire economic order and is unlikely to ever to be politically feasible given our present circumstances. That isn’t to say that redistribution isn’t a part of the solution, it is. But the methods we choose must be implemented in a long term strategic approach that is applied in a step-by-step manner to maximize both effectiveness and agility of the programs.
Why Should We Pay More?
Successfully transforming society into a more pluralistic set of arrangements requires us to increase our total tax take. Simply put, more resources are needed to fund social investments. The United States has one of the most progressive tax systems in the world, meaning that rates increase as people earn more, yet still suffers from the highest wealth inequality. [4] We need to be careful not to rely too much on progressive taxation as it can also be framed as a class issue. If expressed in the language of propaganda, pitting one class against another, the potential exists to create opposition from sources that would benefit from a more progressive tax organization.
Increasing taxes doesn’t make us Socialists. The United States citizens pay less in taxes than most western democracies. [4] European countries also implement a Value-Added Tax (VAT) (https://en.wikipedia.org/wiki/Value_added_tax) Much of that money is spent on redistributive efforts. You can think of a VAT as a fair form of taxation that essentially pulls a little bit from every time something is created. Implementing a VAT here in the United States would allow us to maximize our revenues while minimizing the impact on our economy.
Using taxes to invest in programs to support pluralistic arrangements and services will be an incredible net benefit to all of society. The greatest resource humanity has ever had and will ever have is our imagination. The Progressive project is about giving every person the ability to channel that imagination into experimentation and innovation. If maximizing our individual and shared potential is the goal then it is a primary objective to increase revenue flows to fund projects and pay down debts.
Examining Alternatives
All taxation intends to accomplish the same goal in different directions. We use our redistributive programs to enhance our shared standard of living. A Progressive approach to taxation learns from history without dogmatically committing to a specific method. Fortunately for us, history is full of imaginative scholars who created tax structures that could address some of our most systemic problems today.
In 1879 Henry George published Progress & Poverty. It was incredibly popular in its time and is still taught by numerous non-profit organizations. The central theme of Georgism is that land speculation is central to the boom/bust cycle that is a fixture of capitalist economies. Because available land is of fixed supply and needed for all production land values will always rise faster than economic growth, separating much of the people from accessing ownership.
His solution is the Land Value Tax. It’s a tax that considers the value of the land, ignoring improvements. It would remove the incentive from creating a livelihood whose primary income is rent seeking from multiple properties. It’s been implemented in numerous locations across the world including Pennsylvania [5] where it helped communities adapt to the changing economic situations they found themselves in after the 2008 recession. George believes that all people own the land and in many respects he is correct. A Land Value Tax strategy could be a pillar of a more access based society and help to stabilize more people in a permanent residence.
Nicholas Kaldor argued for the tax of individual consumption. “It is only by spending, not by earning or saving, that an individual imposes a burden on the rest of the community in attaining his own ends” [6] His method would tax the difference between a person’s total income (including capital gains) and investment savings, or what a person spends on themselves.
What I appreciate about Kaldor’s method is that we could structure it in such a way to significantly benefit our most disenfranchised while also using it to better redistribute from the top wealth hoarders. We could imagine that those at the bottom of the economic order would pay nothing and likely even be supplemented by a Universal Basic Income. In the middle we could have a progressive tax structure as we do presently, increasing along with income rates. At the top very we can set the number to whatever we want it to be. As an example, a consumption tax on people earning over $10,000,000 a year could be a ratio to $5.00 tax for every $1.00 spent. Because there are few feasible ways for people with such excess capital to spend more than they earn this tax is unlikely to have any impact on their consumption.
In his third lecture in the 2018 Progressive Alternatives series, Roberto Mangabeira Unger supports Kaldor and suggests that the law states that all income that cannot be shown as saved or invested counts as spending — nullifying evasion within the law itself. Unger supports Kaldor’s taxation and suggests that it is the tax most qualified to create wealth distribution for the greater good.
What I like most about these alternative tax structures is that they are a proactive approach towards the necessary redistributive efforts to fund social transformation. Both Land Value Tax and a consumption tax eliminate the burden of taxation from the poor, ensure that the highest earners pay more, and address numerous other issues facing our present tax arrangements.
Thinking about the long term trajectory of society we understand that change is both needed and inevitable. Progressives must answer the question of how we will fuel the growth of a culture that maximizes access and agency for all individuals. Our present arrangements won’t get us there, but a more proactive approach to taxation is a significant step in the right direction.
[1] Inequality and Health Inequality.org https://inequality.org/facts/inequality-and-health/
[2] Elizabeth Warren’s Tax Proposal Aims at Assets of Wealthiest Americans By Sahil
[3] For a Real-World Example of Ocasio-Cortez’s Tax Proposal, Look to Sweden By Jonas O
[4] America’s taxes are the most progressive in the world. Its government is among the least. By Dylan Matthews Washington Post https://www.washingtonpost.com/news/wonk/wp/2013/04/05/americas-taxes-are-the-most-progressive-in-the-world-its-government-is-among-the-least/?utm_term=.ca45f238d9d8
[5] Land Value in Pennsylvania: A Practical Application By Patrick Coate, PhD American Institute for Economic Research https://www.aier.org/article/land-value-pennsylvania-practical-application
[6] An Expenditure Tax by Nicholas Kaldor (p. 53) https://www.amazon.com/Expenditure-Tax-Nicholas-Kaldor/dp/0415314003