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I highly recommend Jeffrey Winters' book "Oligarchy" to understand tax policy. Though an academic book Oligarchy is very easy to read and surprisingly neutral p

I highly recommend Jeffrey Winters' book "Oligarchy" to understand tax policy. Though an academic book Oligarchy is very easy to read and surprisingly neutral politically. Winters basically says that oligarchy is when a particular economic group has asymmetric power in a society, arguing that the main use of the power is wealth defense. He then outlines how this has four major forms: - Warring oligarchies where warlords fight each other to protect wealth - Ruling oligarchies similar to Italian city states - Sultanistic oligarchies were multiple oligarchs align to support a single oligarchical ruler - Civil oligarchies which are basically like the US and Singapore where oligarchs mostly use tax law and investment strategies for wealth defense. The main evolution between these oligarchies is how much energy needs to be expended in wealth defense, the earlier stages requires constant violence against both the lower class and competing oligarchs, evolving to more cooperation between oligarchs and finally when the wealth class agree to the civil law so long as it can still defend its wealth. In the case of civil oligarchy, Winters argues that nearly all of wealth defense and manipulation of the law is basically around tax codes and loop holes that allow wealth defense. The oligarchs in general are fine surrendering their military power (which is expensive anyway) so long as they can still defend their wealth. They agree to adhere to the rule of law, so long as the rule of law doesn't impact their ability to maintain wealth. The conclusion of course being that we will always have complex tax law because it is required by the ruling oligarchy.

barbarbar 6y ago
Thank you for this very useful summary.
germinalphrase 6y ago
I would be curious to understand how a flat tax would interact with this premise.
- notahacker 6y ago
  It's an alternative strategy for oligarchies to defend their wealth
  - tharne 6y ago
    Or for people to keep the money they earn.
    - orthecreedence 6y ago
      Yes, areed. Without taxes there would be no more state to defend private property, and the productive instruments could be managed by the people using them.
  - germinalphrase 6y ago
    That’s possible of any tax policy, but presumably a flat tax eliminates significant complexity from the tax code which reduces the possible avenues for wealth defense. What other thoughts do you have on the issue rather than a simple dismissal?
    - lotsofpulp 6y ago
      A flat tax means all income is taxed at the same percentage rate. Or I guess it could mean everyone pays the same flat dollar amount in taxes. A marginal income tax is just as simple, and not regressive.
      - AnthonyMouse 6y ago
        A marginal income tax is dramatically more complicated because the rate depends on your income from other sources. If you take a contract for $500, whether you pay 15% or 25% depends among other things on whether you take a totally different contract with an independent party which pushes you into a higher bracket. It makes every transaction depend on every other one rather than allowing them to be independent, and requires a corresponding invasion of privacy to ensure compliance. Compare this to where the taxes are deducted by the employer without even having to disclose who the employee is to the tax authority, and a total elimination of tax paperwork on the part of the employee. It also creates arbitrage opportunities to minimize the rate, e.g. hiring your nephew who is in a lower tax bracket and then deducting his wages as an expense from your own taxes even though the money remains in your family.
lotsofpulp 6y ago
This is why we need to get rid of all deductions/credits/exemptions. If the society wants to incentivize something, the government can pay cash for it and account for it properly.
- Meandering 6y ago
  Exactly, eliminate tax shelters too! Expose the true financial reality to the tax system and a more equitable taxation policy can emerge. Although you'll have to mitigate a subset of people passing their income through foreign banks.
  - clairity 6y ago
    > "you'll have to mitigate a subset of people passing their income through foreign banks." just tax it like any other income, which will likely allow the overall rate to be a bit lower. there's no moral or legal reason not to. the wealthy might threaten to leave (and take their tax payments with them), but it's largely a hollow threat, as people really want to live among their friends, peers, families, communities, their familiar amenities, and their accumulated stuff.
    - Nbox9 6y ago
      There are a ton of loopholes involving foreign banks. It’s more complex than “just tax it.” How do you tax income in a foreign bank if the bank doesn’t respond to IRS’s request for information?
      - clairity 6y ago
        you fine both bank and client for that behavior, and use the same might to pressure change that we've used against multiple small countries. it's not that hard policy-wise, but political will is certainly harder to muster.
        Nbox9 6y ago
Nasrudith 6y ago
Those frameworks sound a bit vapid and conspiracizing in taking mundane goals and trying to make them sound sinister as possible. Akin to racists taking immigrants and minorities having 3 or 4 kids on average instead of 2 as "planning long term white genocide". Whether something preserves a given group's wealth is utterly independent of it being good or bad for everybody else. Rule of law and not having bandits choking trade also help to preserve their wealth. So would a hypothetical vaccine for all diseases. The definition of oligarch is also very non-standard as it would not only mean college educated technically qualify as they use their disproportionate earning to earn more to build and preserve their own wealth but so would teotoller factory workers over their peers as they would spend less wealth by not drinking and with compound interest/average stock marker growth and time could become a shocking fund. To be frank in absense of other details in the summary the "framework" is so vaucous that he can conclude anything he wants including "the agricultural and food producers have ultimate control of the army, navy, and airforce" or "that dentists are the gatekeepers to being upper class".

barbarbar 6y ago

Thank you for this very useful summary.

germinalphrase 6y ago

I would be curious to understand how a flat tax would interact with this premise.

notahacker 6y ago
It's an alternative strategy for oligarchies to defend their wealth
- tharne 6y ago
  Or for people to keep the money they earn.
  - orthecreedence 6y ago
    Yes, areed. Without taxes there would be no more state to defend private property, and the productive instruments could be managed by the people using them.
- germinalphrase 6y ago
  That’s possible of any tax policy, but presumably a flat tax eliminates significant complexity from the tax code which reduces the possible avenues for wealth defense. What other thoughts do you have on the issue rather than a simple dismissal?
  - lotsofpulp 6y ago
    A flat tax means all income is taxed at the same percentage rate. Or I guess it could mean everyone pays the same flat dollar amount in taxes. A marginal income tax is just as simple, and not regressive.
    - AnthonyMouse 6y ago
      A marginal income tax is dramatically more complicated because the rate depends on your income from other sources. If you take a contract for $500, whether you pay 15% or 25% depends among other things on whether you take a totally different contract with an independent party which pushes you into a higher bracket. It makes every transaction depend on every other one rather than allowing them to be independent, and requires a corresponding invasion of privacy to ensure compliance. Compare this to where the taxes are deducted by the employer without even having to disclose who the employee is to the tax authority, and a total elimination of tax paperwork on the part of the employee. It also creates arbitrage opportunities to minimize the rate, e.g. hiring your nephew who is in a lower tax bracket and then deducting his wages as an expense from your own taxes even though the money remains in your family.

lotsofpulp 6y ago

This is why we need to get rid of all deductions/credits/exemptions. If the society wants to incentivize something, the government can pay cash for it and account for it properly.

Meandering 6y ago
Exactly, eliminate tax shelters too! Expose the true financial reality to the tax system and a more equitable taxation policy can emerge. Although you'll have to mitigate a subset of people passing their income through foreign banks.
- clairity 6y ago
  > "you'll have to mitigate a subset of people passing their income through foreign banks." just tax it like any other income, which will likely allow the overall rate to be a bit lower. there's no moral or legal reason not to. the wealthy might threaten to leave (and take their tax payments with them), but it's largely a hollow threat, as people really want to live among their friends, peers, families, communities, their familiar amenities, and their accumulated stuff.
  - Nbox9 6y ago
    There are a ton of loopholes involving foreign banks. It’s more complex than “just tax it.” How do you tax income in a foreign bank if the bank doesn’t respond to IRS’s request for information?
    - clairity 6y ago
      you fine both bank and client for that behavior, and use the same might to pressure change that we've used against multiple small countries. it's not that hard policy-wise, but political will is certainly harder to muster.
      - Nbox9 6y ago

Nasrudith 6y ago

Those frameworks sound a bit vapid and conspiracizing in taking mundane goals and trying to make them sound sinister as possible. Akin to racists taking immigrants and minorities having 3 or 4 kids on average instead of 2 as "planning long term white genocide". Whether something preserves a given group's wealth is utterly independent of it being good or bad for everybody else. Rule of law and not having bandits choking trade also help to preserve their wealth. So would a hypothetical vaccine for all diseases. The definition of oligarch is also very non-standard as it would not only mean college educated technically qualify as they use their disproportionate earning to earn more to build and preserve their own wealth but so would teotoller factory workers over their peers as they would spend less wealth by not drinking and with compound interest/average stock marker growth and time could become a shocking fund. To be frank in absense of other details in the summary the "framework" is so vaucous that he can conclude anything he wants including "the agricultural and food producers have ultimate control of the army, navy, and airforce" or "that dentists are the gatekeepers to being upper class".