[SUP]
1[/SUP] The tax figures were calculated by The Shapiro Group, a Los Angeles tax accounting firm. The marginal rates and brackets are those applicable for the 2010 tax year. These figures are for illustration purposes only. They do not include the effect of certain tax credits (which some would consider transfer payments) that exist in the law. If these credits were included, Harry would pay a tax of $22,600, Dick would pay a tax of $3,700 and Tom would receive a refund of $7,100.
[SUP]
2[/SUP] There are several other types of taxes levied by federal, state, and city governments, including taxes on capital gains, dividends, estates, sales, and property. These tax systems are outside the scope of this essay.
[SUP]
3[/SUP] As defined here, the term aptitude is similar to but distinct from other terms used in the literature to describe capacity to earn: 1) “endowment,” which, in this context, is synonymous with genetic inheritance and is, therefore, too limiting; 2) “faculty,” which, like aptitude connotes capacity to earn, but is also used in the literature to describe financial wherewithal; and 3) “ability,” which, like faculty, is used to describe either capacity to earn or financial wherewithal.
[SUP]
4[/SUP] Edward Blum and Harry Kalven, The Uneasy Case of Progressive Taxation (University of Chicago Press, 1953.
[SUP]
5[/SUP] Edwin R.A. Seligman, Progressive Taxation in Theory and Practice (Princeton University Press, 1908).
[SUP]
6[/SUP] Blum and Kalven, 14.
[SUP]
7[/SUP] Some advocates of progression argue that a progressive income tax is needed to offset the putatively regressive nature of the payroll “taxes” that fund Social Security and Medicare. The conflation of these revenue streams is ill-conceived, inasmuch as each has a different purpose. Income taxes are used to fund a broad range of government services as described above, while payroll levies are collected for the express purpose of providing income supplements and medical care during retirement. More specifically, Social Security levies are a form of forced savings, and Medicare levies are effectively prepaid medical insurance premiums. Neither of them finances government services per se. Since Social Security benefits when paid out are tied to the aggregate amount paid into the system by each beneficiary, it is inaccurate to call the levies regressive. In the case of Medicare, the amount paid into the system is proportionate to income while the benefits (paid health care) are essentially the same for each beneficiary; consequently, the system is redistributive.
[SUP]
8[/SUP] Blum and Kalven, 38.
[SUP]
9[/SUP] Blum and Kalven, 37.
[SUP]
10[/SUP] Arthur C. Pigou, A Study in Public Finance (Macmillan, 1951), 85-86.
[SUP]
11[/SUP] Seligman, 219. *An earlier version of this piece incorrectly stated that Seligman was quoting Cohen-Stuart when he was in fact summarizing Cohen-Stuart’s arguments.
[SUP]
12[/SUP] Seligman, 222-223.
[SUP]
13[/SUP] Blum and Kalven, 63.
[SUP]
14[/SUP] John Stuart Mill, Principles of Political Economy with some of their applications to social philosophy, Vol. II (D. Appleton and Company, 1894), 99, 401.
[SUP]
15[/SUP] Blum and Kalven, 72.
[SUP]
16[/SUP] Gini coefficients cited herein come from The CIA World Fact Book 2010, the Census Bureau report on Income, Poverty, and Health Insurance Coverage in the United States: 2009 and other U.S. government publications, and Eurostat, the official statistical office of the European Union.
[SUP]
17[/SUP] Bureau of Labor Statistics, “Employer Costs for Employee Compensation: December 2010.”
[SUP]
18[/SUP] David S. Johnson, Timothy Smeeding, and Barbara Boyle Toney, “Economic Inequality Through the Prisms of Income and Consumption,” Monthly Labor Review (Bureau of Labor Statistics, April 2006), available at
http://www.bls.gov/opub/mlr/2005/04/art2full.pdf.
[SUP]
19[/SUP] Johnson, et al., “Economic Inequality.”
[SUP]
20[/SUP] Bruce D. Meyer and James X. Sullivan, “Consumption and income inequality in the U.S. since the 1960s” (2010) working paper, available at
http://harrisschool.uchicago.edu/faculty/ web-pages/Inequality60s.pdf
[SUP]
21[/SUP] Blum and Kalven, 75.
[SUP]
22[/SUP] To be sure, there are people in America who are needy or disadvantaged, in some instances grievously so. For such people the most effective remedy would be through direct spending programs. But the funding for such programs should come from a tax system that is equitable.
[SUP]
23[/SUP] Mark Robyn and Gerald Prante, “Summary of Latest Federal Income Tax Data,” Fiscal Fact 249 (Tax Foundation, October 6, 2010),
http://www.taxfoundation.org/ news/show/250.html
[SUP]
24[/SUP] Roberton Williams, “Who pays no income tax?,” Tax Notes (June 29, 2009), available at
http://www.taxpolicycenter.org/UploadedPDF /1001289_who_pays.pdf
[SUP]
25[/SUP] J. R. McCullough, A Treatise on the Principles and Practical Influence of Taxation, or the Funding System (The Lawbook Exchange Ltd., 2007), 143-145.