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Comment by matthewmcg | Hacker News Reader

"There is no ethical argument for taking money from billionaires in higher share than anyone else that doesn't come down to envy. "

What about diminishing marginal utility? The ethical argument would be that tax burden should be greater on those with a larger capacity to pay. (Usual caveats about taxing income vs. taxing wealth, etc. etc. etc.)

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Diminishing marginal utility? Well, it's not like billionaires spend most of their money on personal consumption. Many ways of spending money also generate utility for others. The real choice is whether to let the billionaire keep the marginal million dollars (which he might choose to invest or donate to charity), or give that million to the government to do as it sees fit (e.g. distribute it among poor people). Which choice yields greater expected total utility? Are there any numbers on that?

"What about diminishing marginal utility?"

The billionaire's money is not in some vault. It is invested and being loaned as capital to other people trying to start companies. Since our system relies on capital, that money will create a lot more jobs being in their hands. Not many factory workers fund the next round of startups.

"The ethical argument would be that tax burden should be greater on those with a larger capacity to pay."

Why? Government is a service we have agreed to pay for. It has no divinity beyond a contract. The same rate is fair and just, but different rates or caps on earnings aren't. If I have ten dimes and tell a child 2 go to government as taxes, then show the child 10 $1 bills and ask them same question, I will get a fairer and better answer than most progressives. We the people give power to government and stealing more from successful people is wrong.

I can see a base deduction to protect the poor, but the tax code now and any system that takes huge percentages from higher income is just wrong.

Stating your axioms will not convince someone who holds different axioms.

This is an overly simplistic analysis. Empirically, if you give a poor person $1, they will spend more and save less than if you gave a wealthy person $1, with the effect more pronounced the wealthier that person is. In other words, the poor have a higher marginal propensity to consume. As for why spending > saving, at least for GDP, the economy is driven more by demand and consumption, than by investment. Startups would be nothing in the absence of demand. Startups would still exist in the absence of investment. If you break down GDP into its constituent parts, the number 1 contributor (>50%) is consumption.

I also think it provides an interesting perspective to view the government from a political and demographic angle. The government is (theoretically) the will of the majority (or supermajority, in some circumstances), with some protection for minority interests. Consider then that the median US income is $52,762 per year. Consider then that 51% of the population is going to make between $0-54k. Since it is in their economic interest to "offload" their tax burden, it is inevitable that the tax system would be progressive. The tendency towards a progressive tax system is tempered only by the fact that most people do own some wealth, the low/middle-classes own desire to be wealthy, and the economic necessity of rewarding people to grow the economy. This does not always apply since people are not always rational. I'm only saying that this is the reality.

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