4 ms·

I'll suck it up when the price I pay for civilization is the same as everyone else's. I don't pay 10x as much as my neighbor for the same candy bar or cell pho

I'll suck it up when the price I pay for civilization is the same as everyone else's. I don't pay 10x as much as my neighbor for the same candy bar or cell phone plan or pair of jeans. Why smart people consider it 'fair' for my neighbor to pay next-to-nothing for 'civilization' while I have to pay a substantial chunk of my income, I'll never understand. Same service, same price.

phillmv 15y ago
Because you would benefit disproportionately from those same services due to the diminishing marginal utility of income. In real terms, if you don't engage in progressive taxation you are being subsidized by those poorer than yourself and subsidizing those richer than yourself.
- gyardley 15y ago
  Is your belief in 'diminishing marginal utility of income' your real argument? The diminishing marginal utility of income is an assumption. In most cases it's a valid assumption, but not always. Let's say I could show you a situation where a certain individual's marginal utility of income increased with income - for a portion of the utility curve, the curve is convex, not concave. Such situations aren't typical, but they do exist - 'diminishing marginal utility' isn't a law of nature, it's just an assumption. In such a situation, maximizing utility means certain less well-off people (those on the concave portion of the utility curve) should be subsidizing the more well-off people (those on the convex portion of the utility curve). In other words, if the goal of taxation is simply to increase utility, in those situations the poor should be subsidizing the rich. If I can show you that for me, each additional dollar has increased utility, you should be willing to concede that that the poor should be subsidizing me. Yet I've never met a person who used the 'diminished marginal utility of income' argument who was willing to concede that. If you are, you'll be the first. In other words, arguing diminishing marginal utility's usually just a time-wasting distraction. While it sounds good, I suspect it's not the reason for your argument all.
  - phillmv 15y ago
    Okay. Who are these people? Show me these cases. You're describing "tax deductions", i.e. unusual cases where you extenuating circumstances have reduced their overal utility. How does this work against any aspect of my argument above? >I suspect it's not the reason for your argument all. You're right. I think non-progressive taxation is unfair, because there is a diminishing marginal utility of income and I believe that fairness and justice are necessary in society.
    - gyardley 15y ago
      >Okay. Who are these people? Show me these cases. Anyone putting their time and/or money to work on a risky enterprise where the expected value is negative - which includes most startup founders and angel investors. What we do for a living doesn't seem rational - typically, we get back far less than what we put in, especially if you consider opportunity costs. But yet we still do it. Why do we do this? Entrepreneurs don't strike me as irrational - as a group, I'd consider us more rational than average. Instead of dismissing risk-takers as nuts, you should listen to what our behavior is loudly telling you - our utility curve isn't concave, it's convex. Risk-taking behavior in the face of negative odds only makes economic sense if marginal utility of income increases, not decreases, with income. You know, it's not only entrepreneurs whose actions shout "hey, diminishing marginal utility of income isn't valid." Anyone who buys a lottery ticket does it too. People aren't stupid. Everyone knows they're on average only getting back a fraction of the money they put into a lottery. What their actions actually tell you is "hey, I value the incredibly small chance of getting rich so highly that I'm happily taking what would otherwise be considered a sucker's bet." If you really want to maximize utility in the tax code, you'd have to have all of those who behave in risk-adverse ways (with concave utility curves) subsidizing all of those who behave in risk-loving way (with convex utility curves). Which goes a fair bit beyond 'tax deductions'. Honestly, the way people actually behave makes me think diminishing marginal utility of income is completely questionable - instead, many of us believe and behave like there's an increasing marginal utility of income. But enough about economics - the argument we're having really hinges on the definition of concepts like 'fairness' and 'justice', which is what you should've started with, not some utility curve argument that's only tangentially relevant. No matter what the utility curve looks like, progressive taxation is repugnant because it's neither fair nor just. It clearly violates the principle of equality before the law - even though all men are created equal, progressive taxation makes the property rights of the wealthy less important than the property rights of the poor. If taxes are a necessary evil, and I suspect they are, they should be proportional, not progressive.
cameldrv 15y ago
The government is protecting 10x as much stuff from the state of nature for you. Also, the job that you have that pays 10x as much wouldn't even exist because there are many more links along the value chain of a high value job than a low value job. The government protects all of those links from theft in many, many ways. Seriously, suck it up -- in Mad Max world, you would be your neighbor's bitch.
- gyardley 15y ago
  This would be a real argument if the government's only function was to protect stuff from the state of nature, if the costs of protecting stuff were linear, and if the only alternative to the current way of doing things was a 'Mad Max world'. However, none of these are true.
lsc 15y ago
eh, if you live in a different neighborhood, (and you probably do, if you really earn 10x as much) you certainly are getting a vastly different level of police protection. I mean, sure, that's mostly local money, and it's a small portion of what you are paying in taxes, but people who live in good areas have a vastly different relationship with law enforcement than people who live in bad areas, and really, should be charged quite a lot more for that law enforcement, as they are getting vastly better service. (granted, law enforcement, and the federal oversight of law enforcement is a small amount of our taxation; but it is the most obvious place where the rich get vastly more out of the system than the poor.)

phillmv 15y ago

Because you would benefit disproportionately from those same services due to the diminishing marginal utility of income. In real terms, if you don't engage in progressive taxation you are being subsidized by those poorer than yourself and subsidizing those richer than yourself.

gyardley 15y ago
Is your belief in 'diminishing marginal utility of income' your real argument? The diminishing marginal utility of income is an assumption. In most cases it's a valid assumption, but not always. Let's say I could show you a situation where a certain individual's marginal utility of income increased with income - for a portion of the utility curve, the curve is convex, not concave. Such situations aren't typical, but they do exist - 'diminishing marginal utility' isn't a law of nature, it's just an assumption. In such a situation, maximizing utility means certain less well-off people (those on the concave portion of the utility curve) should be subsidizing the more well-off people (those on the convex portion of the utility curve). In other words, if the goal of taxation is simply to increase utility, in those situations the poor should be subsidizing the rich. If I can show you that for me, each additional dollar has increased utility, you should be willing to concede that that the poor should be subsidizing me. Yet I've never met a person who used the 'diminished marginal utility of income' argument who was willing to concede that. If you are, you'll be the first. In other words, arguing diminishing marginal utility's usually just a time-wasting distraction. While it sounds good, I suspect it's not the reason for your argument all.
- phillmv 15y ago
  Okay. Who are these people? Show me these cases. You're describing "tax deductions", i.e. unusual cases where you extenuating circumstances have reduced their overal utility. How does this work against any aspect of my argument above? >I suspect it's not the reason for your argument all. You're right. I think non-progressive taxation is unfair, because there is a diminishing marginal utility of income and I believe that fairness and justice are necessary in society.
  - gyardley 15y ago
    >Okay. Who are these people? Show me these cases. Anyone putting their time and/or money to work on a risky enterprise where the expected value is negative - which includes most startup founders and angel investors. What we do for a living doesn't seem rational - typically, we get back far less than what we put in, especially if you consider opportunity costs. But yet we still do it. Why do we do this? Entrepreneurs don't strike me as irrational - as a group, I'd consider us more rational than average. Instead of dismissing risk-takers as nuts, you should listen to what our behavior is loudly telling you - our utility curve isn't concave, it's convex. Risk-taking behavior in the face of negative odds only makes economic sense if marginal utility of income increases, not decreases, with income. You know, it's not only entrepreneurs whose actions shout "hey, diminishing marginal utility of income isn't valid." Anyone who buys a lottery ticket does it too. People aren't stupid. Everyone knows they're on average only getting back a fraction of the money they put into a lottery. What their actions actually tell you is "hey, I value the incredibly small chance of getting rich so highly that I'm happily taking what would otherwise be considered a sucker's bet." If you really want to maximize utility in the tax code, you'd have to have all of those who behave in risk-adverse ways (with concave utility curves) subsidizing all of those who behave in risk-loving way (with convex utility curves). Which goes a fair bit beyond 'tax deductions'. Honestly, the way people actually behave makes me think diminishing marginal utility of income is completely questionable - instead, many of us believe and behave like there's an increasing marginal utility of income. But enough about economics - the argument we're having really hinges on the definition of concepts like 'fairness' and 'justice', which is what you should've started with, not some utility curve argument that's only tangentially relevant. No matter what the utility curve looks like, progressive taxation is repugnant because it's neither fair nor just. It clearly violates the principle of equality before the law - even though all men are created equal, progressive taxation makes the property rights of the wealthy less important than the property rights of the poor. If taxes are a necessary evil, and I suspect they are, they should be proportional, not progressive.

cameldrv 15y ago

The government is protecting 10x as much stuff from the state of nature for you. Also, the job that you have that pays 10x as much wouldn't even exist because there are many more links along the value chain of a high value job than a low value job. The government protects all of those links from theft in many, many ways. Seriously, suck it up -- in Mad Max world, you would be your neighbor's bitch.

gyardley 15y ago
This would be a real argument if the government's only function was to protect stuff from the state of nature, if the costs of protecting stuff were linear, and if the only alternative to the current way of doing things was a 'Mad Max world'. However, none of these are true.

lsc 15y ago

eh, if you live in a different neighborhood, (and you probably do, if you really earn 10x as much) you certainly are getting a vastly different level of police protection. I mean, sure, that's mostly local money, and it's a small portion of what you are paying in taxes, but people who live in good areas have a vastly different relationship with law enforcement than people who live in bad areas, and really, should be charged quite a lot more for that law enforcement, as they are getting vastly better service. (granted, law enforcement, and the federal oversight of law enforcement is a small amount of our taxation; but it is the most obvious place where the rich get vastly more out of the system than the poor.)