How Much to Tax

Tax at a rate that is optimal.

Duh.

I know it seems pretty duh, but the rate at which to tax different income groups and corporations should be informed by the behavior of the taxed. Tax enough, but not too much.

Duh.

Many thoughtful people claim that higher tax rates reduce the capitalist will that is applied to creating opportunity and building growth. I assume that, to some extent, this is true. We just have to answer the question, “To what extent?” 

We need to do some surveys – some analysis of historical data, some economic game experiments. These could provide actionable data and answer the question of how much to tax. 

Once you know how different tax rates elicit different behaviors you make informed decisions about tax justice.

Take the idea of the Laffer Curve seriously, just not necessarily the shape of the curve.

Lower taxes will, to some extent, encourage productive investment. Higher tax rates will discourage investment. Once we answer “how low”, and “how high”, we’ll be able to create a tax rate that maximizes state revenue while minimizing productivity losses. We can run psychoeconomic experiments to analyze our way to an optimally effective tax policy.

I personally think that the capitalist profit motive is relatively independent of tax rates. That the urge to make more money persists when additional money is personally useless. Think of the wealthiest people in the world. Additional wealth will provide them with nothing they can use. It will not increase their quality and frequency of food. Their ability to have functional shelter. Their ability to attract mates and reproduce (or go through the motions of reproduction). A large portion of the wealthiest people in the world continue to seek greater wealth. These well healed folk want more money for its own sake – seeking a score-keeping abstraction. And that behavior, that motivation, is something that is very good for society as a whole. 

Tax rates should be based on how hard a captain of industry will work for the abstraction of profit – for the sport of the market, before the opression of taxation cuts off enough motive to be inhibitive. 

We can figure this out through experimentation and have a fully functional tax code.

Some ant species have workers who gather vast quantities of food in their large distended bellies then redistribute this food to hundreds of others. They are isolated in large, relatively opulent rooms, collecting and dispensing their ant honey, their value.

In effect, in our world, the wealthy serve this purpose.

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~ by bracketbracket on June 17, 2009.

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