Maggie's Farm

Seems to me, the concept that tax 'incentives' tend to accrue to the middle and upper classes is just wrong. In other words, it's wrong if it were true (it's not, exactly, since the middle and upper classes still pay the lion's share of revenues which head to the government) and it's wrong to think it's somehow "wrong" for this to happen.

This mindset of 'benefit' for the middle and upper classes ignores many things.
First, that these are the income groups which create jobs. Money which is added to their coffers doesn't just sit on the sidelines or pay for yachts, vacations and $10,000 meals. It's invested or saved, for the most part - and both of these actions create jobs. More importantly, even if it was spent on vacations, yachts and $10,000 meals, it still creates jobs. The only way it doesn't create jobs is if the money is stacked into a warehouse somewhere and just sits there.

Second, it presumes that the lower income groups aren't somehow benefiting. Well, if the income is low enough, you're not paying a dime. So that's a benefit, and a pretty big one. In fact, with our current system you're also getting other food/income/health benefits for no cost or reduced cost.

The reality is, even with our outdated tax and redistribution schemes (and they are schemes, they haven't been properly reviewed and updated in years - Obama's work was just to give shit to people he liked and knew would vote for him - pretty much standard machine politics), the lower income groups have all improved their position in life.

I recently met with members of my own extended family who are not as well off as I am. As several complained about their income and their state of affairs, I pointed out a few things to them. They all had smartphones and were spending time texting or posting on Facebook and using apps of various kinds. This is an astounding thing, not even available 10 years ago to as many people as today. 20 years ago, the cost of having all that in your hand (music, phone, computer, etc) would have exceeded thousands of dollars - assuming you could actually FIND any of it that fit in your hand outside of the phone itself. They all arrived in new, or relatively new, cars. Several had recently had work done on their homes to improve them.

This isn't to say that my family represents the poorest of the poor. They don't. But they certainly are (and every one of them knows this) in lower middle income categories.

I'm also not saying I don't feel bad for people who aren't as well off as I am - or even if they aren't as well off as others in my family. I do. But I don't believe we benefit these people at all by giving them things. They need assistance, but they also need incentive.

Finally, when it comes to taxes, one thing is clear. Income taxes are not working and are broken. It's too easy to hide, it's too easy to move, to shift, to otherwise reduce your income. We all find ways to do it. A low, flat, tax would be preferable, but it should impact everyone.

However, I'd prefer a very low tax on each purchase or sale of financial instruments. Commodities, bonds, stocks, currencies, etc. If you applied a .3% tax on the purchase or sale of all of these things (low enough to not radically change investment strategies outside of making short term investments slightly less lucrative), you'd raise more than enough money to finance the current federal budget without borrowing money. And you'd only impact the very wealthiest.

The other key point is that because it happens at the point of transaction, it's not taking money directly from 'someone' but rather it is taking money from the transaction itself, during a shift in ownership on either side. This is a purely philosophical concept, but it's one which is pretty well established to reduce the view that a person is being 'taxed', and it avoids the 'pass along' costs which typically come with standard sales taxes, because both sides of the transaction are taxed.

Obviously, something like this will never be employed. But it would be in line with our current economic structure, in which inflation is created, the soaked up by asset markets and the Fed through the expansion of its balance sheet. It's a modified version of the Tobin Tax with a mix of Chartalism (though I specifically eschew Chartalism since it's a false premise).

I don't believe we can ever design a system which all will love and believe "works" - that's just too much wishful thinking. But I do believe we can design systems which are more effective at achieving realistic goals.