“Progressive” Taxation

September 12, 2010

More like “reactionary” taxation! It shocks me to this day that the capitalist imperialists have succeeded in naming their favored tax scheme “progressive” taxation, when it serves only to entrench their interests and exploit the common worker, by depriving him of the product of his labor. Here’s how:

Take your average worker, Carl, who upon entering the job market has two choices. Option one is a “safe” job producing widgets at a widget factory with an established corporation, earning $25,000 per year. The corporation makes $75,000 in pure exploitative profit from this worker, capturing the product of his labor by owning and giving him only enough to subsist. There are of course many corporations, but they don’t compete with each other because it is against the interest of their class, the capital-owning class.

The worker’s second option is to start his own business, producing organic fair trade widgets at his own organic free trade factory. If his business succeeds, he’ll earn $150,000 because his products are in high demand after years of consumers being forced to purchase dangerous and low-quality widgets from the major corporations. The problem is, starting a business is so difficult and complicated that Carl has only a 20% chance of succeeding. There’s an 80% chance that his business will fail and he’ll earn nothing, despite all his hard work.

To decide between his two options, Carl makes a simple calculation. He’s not afraid of the risk per se but he wants to take the option with higher expected value. Option 1 has an expected value of $25,000 (25 thousand dollars with 100% probability). Option 2 has an expected value of $30,000 (150 thousand with 20% probability, 0 dollars with 80% probability). Carl sensibly decides to take option 2, starts his own factory, and the capitalist empire is destroyed.

Sadly, there’s a reason we haven’t yet achieved this state. Those capitalist swine have outmaneuvered the workers! Here’s how they did it: while at a meeting of their cigar and brandy club, they got to talking about Carl’s upstart factory. “We’ve got a sweet deal here,” they said. “People buy our products because they have no other choice. They need widgets, and we’ve got ’em. Since we’ve been in business so long, our profit is assured. So how can we stop these workers from getting around our system?”

After thinking about it for a while, a Mr. Galbraith has an idea. “I know,” he says. “We can arrange for the law to treat workers differently depending on the variance in their income. Our employees, with their low but consistent incomes, can be made to pay less in taxes than workers whose income fluctuates more.”

Intrigued but skeptical, his colleagues reply, “But how can we do that? Do we really want to make it so obvious that we’re trying to keep people in wage slavery and prevent them from starting their own businesses?”

Galbraith: “Come on, that’s why we rich people invented P.R. and advertising. Of course we’re not going to say it like that. No, what we’ll say is that you only ‘need’ so much money. Anything else you can afford to pay in taxes. So we’ll make the tax rate you pay depend on how much money you earn. For the first $25,000, we won’t charge much in taxes. But as you start to earn more, the rate will go up. The ignorant public won’t mind, they’ll think we’re just taxing ‘the rich,’ without bothering to think about how our workers might choose a different path if not for this ‘progressive’ system of taxation.”

The Capitalists cannot resist the force of Galbraith’s argument, and a 50% marginal tax rate is imposed on income above $50,000, with no tax on income up to $50,000. Carl makes his calculation again: option 1, $25,000 net income. But the net value of option 2 is now $20,000. (20% chance of $150,000, minus $50,000 in taxes, with a net income of $100,000; 80% chance of nothing). The choice is again clear, and Carl forgets his dreams of organic widgets and allows the factory work to deaden his soul.

Score another one for the Capitalists, and for rhetoric. What are you, a fan of regressive taxation?


2 Responses to ““Progressive” Taxation”

  1. It’s annoying to me that the conceit of this article became clear after like 8 seconds but I still couldn’t think of a way to make those middle paragraphs shorter.

  2. Tom Says:

    Very funny. Maybe we should hike up the tax rate for poor people so they will get off their lazy poor-asses and do something useful. Now that’s progressive!

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