Part V on the Income Tax:

The progressive tax is a tax that progressively increases based on your income. The lowest paid people pay the lowest tax rate and high income earner’s pay tax rates that increase incrementally.

Below is an example of one form of a progressive tax:

From $0 - $25,000: 15% tax rate
From $25,001 - $50,000: 20% tax rate
From $50,001 - $100,000: 25% tax rate
From $100,001 up: 30% tax rate

A $75,000 income earner would not pay a flat 25% tax. From $0 to $25,000, he would pay at 15%. From $25,001 to $50,000, he would pay at 20%. From $50,001 to $75,000, he would pay at 25%.

This is a fair method in an entitlement society. As you work your way up the income ladder, a higher percentage of your income is taken.

Robert Shapiro explains the following in his article "Why Fairness Matters: Progressive Versus Flat Taxes"
(http://www.ppionline.org/ppi_ci.cfm?knlgAreaID=125&subsecID=163&contentID=1398):

"liberals generally believe that progressive taxes protect individuals better than a flat tax, by curbing concentrations of economic power that threaten the opportunity of others, and by providing poor families with the resources they need to live independently. From this vantage, people's incomes reflect not only their own efforts but also a universe of circumstances they cannot affect; therefore the market's distribution of income is not the final word on economic justice. True equality of opportunity becomes a social achievement, one that tax progressivity advances by changing the market's distribution of income. This provides the fundamental measure of a progressive tax system: After paying their taxes, those at the top are left with a smaller share of all national income than before, and those at the bottom a larger share than before."

I am opposed to this model of taxation. The reasons include the tremendous amount of waste of taxpayer’s dollars and the entitlement society we create. Why should high earners pay a higher rate in taxes rather than using their money to invest in the economy, charity, and programs for the common good?

1. The Federal Government wastes tax dollars:

Tax increases are proposed as a way to keep up with federal spending. The US Government has branched out into providing so many services that are beyond the intended scope of the federal government (see 10^th Amendment) that it needs additional tax revenues to keep up. Raising the tax rates of the poor and middle class is not popular with the electorate. However, hiking up the tax rate for the wealthy is popular with the masses.

I might have been convinced that taxing the rich at a higher rate was a noble cause if the federal government did not have such a track record of waste and duplication.

According to Chris Edwards’ policy analysis “Downsizing the Federal Government” (http://www.cato.org/pubs/pas/pa515.pdf):

"Federal programs often have overlapping objectives. The GAO (Government Accountability Office) reports that there are 50 different programs for the homeless in eight different federal agencies, 23 programs for housing aid in four agencies, 26 programs for food and nutrition aid in six agencies, and 44 programs for employment and training services in nine agencies."

"The Senate Committee on Government Affairs also examined federal duplication. It found 27 different programs for teen pregnancy, 130 programs for at-risk youth, 19 programs for substance abuse prevention, 25 programs for rural development, 17 agencies that monitor international trade agreements, 10 agencies that are involved in export promotion, and 342 programs for economic development."

When the government proves itself to be an efficient machine, I will not complain about taxes.

2. Progressive taxation promotes an entitlement society:

Interestingly enough, Karl Marx’s Communist Manifesto states that in the most advanced countries, a heavy progressive or graduated income tax will apply (http://www.hartford-hwp.com/archives/26/manifesto/176-2.html#21). Now not all proponents of a progressive tax are communists (my name is not McCarthy), but I would assume that many proponents of the progressive tax also favor income redistribution for anti-poverty and social programs. In my view, many of these programs are beyond the intended scope of the federal government.

A classic argument between liberals and conservatives are the benefits of private versus public programs (charity, education, retirement, insurance, etc…). In my opinion, government programs are necessary to provide for those truly in need. However, many federal programs are not intended solely for those poor people requiring aid. Elected officials must keep in mind that there is a delicate balance between providing necessary aid and creating a general sense of entitlement.

Social Security is an example of a program that the federal government implemented because it has concluded that it knows what is best for its citizens. It has created the sense that the government should help provide for you in retirement rather than putting the responsibility on individuals. Current employer options, like the 401k, allow you to make retirement investments with pre-tax dollars. Why can’t citizens opt out of Social Security and use pre-tax money to make their own decisions? Those that want the government to make their decisions can stick with the program and those that want freedom can take what life gives them.

A progressive tax system provides the image of protecting poor and middle class families from bearing a higher burden than the wealthy. However, with the current waste and duplication in federal government programs, I believe it would be more beneficial to the economy not to punish high income earners. Some of the wealthy will horde their money, but lower taxes will also promote investment in growth (i.e. jobs), charity, and programs for the common good. Interestingly enough, with President Bush’s tax cuts in effect, tax revenues for 2005 were outstanding.