So, what is a progressive income tax? It’s basically a tax rate schedule, or setup, where the higher your income, the higher your tax rates, meaning the higher percentage of your income gets taken from you and given to the government. The highest-earning taxpayers pay the highest tax rates, whereas the lowest-income taxpayers pay the lowest tax rates.
For example, back in 2019, if you made less than $9,525, you’d only have to pay 10%. If you made $50,000 per year, then you’d pay 22%. And if you made more than $500,000, or half a million dollars, per year, or more, then you’d be in the highest tax bracket, which is presently set at 37%. So, if you’re a millionaire or billionaire, you’d be paying that 37%. Back in 2019, there were seven tax brackets, based on your income level, and each bracket had a higher tax rate than the tax bracket before it – this is the essence of a progressive income tax.
The philosophy behind the progressive income tax is that the higher taxes paid by people with higher incomes can be used to pay for social welfare programs that help people with lower incomes, or, in many cases, prefer not to work because they can get taken care of by these social welfare programs, and in so doing can help to bring about greater social and economic equality, thus making society better. At least that’s what promoters of progressive income tax schemes like to tell you. In other words, progressive income taxes are about trying to create greater “equality” by treating and taxing people unequally, which, in itself, is a contradiction.
The History of the Progressive Income Tax in the United States
Here in the United States, the progressive income tax begins in 1913, when the 16th Amendment to our Constitution was passed. At the time, politicians promised that the tax rates, even for the top income-earners, would stay low. At the time the 16th Amendment was passed, the highest rate was just 7% for those who made over $500,000. But then we got involved in World War 1, which necessitated raising more taxes to pay for our war needs. Just a mere five years after the tax was instituted, in 1918, the highest income tax rate had been dramatically raised to a whopping 77%. It didn’t go down after the Great War, but stayed steady for decades, until 1944, a year or so before the end of World War 2, when it was raised again to 88%. But it didn’t stop there. The highest the top rate got was between 1950 and 1963, when it got bumped up, yet again, to an extremely high 91%. It was at this time, in 1963, that the top rate was cut to 70% by Kennedy, a Democrat, and that remained the top rate until Reagan, a Republican, entered office as US President in 1980 and helped lower the top rate down to 28%. Since then, the top rate has gone up somewhat so that it’s presently 37%.
Paying for Social Welfare Programs
So, like I said, the higher tax rates paid by those who make higher incomes are supposed to be used to fund social welfare programs that, in the mind of people on the left, the progressives, will help to improve the lives of people at the economic bottom, helping to bring more economic and social equality to the nation.
It all sounds good, and progressives like to claim that these programs are about showing “compassion” to those in need. There’s just one big problem: these programs don’t work that way in real life. What do I mean? Here’s a few things for you to consider:
- These programs don’t actually help bring economic prosperity to those at the economic bottom. They would more accurately be described as “bait and trap” programs that lure people in, make them dependent on the government, and as long as they stay dependent on the government, keep them from going out and doing the things they need to do (e.g. get regular work, handling their finances, staying out of trouble) to become prosperous; instead, it’s designed to keep people chronically dependent on the government, where they stay chronically poor. In fact, government writes them off in their statistical manuals as poor. We find that the number of people living in poverty, from the 1950’s to the late 1960’s, because the economy was booming at the time, dropped by about a third. Then this “bait and trap” program of social welfare came into existence, and you find that from 1968, when there was a massive increase in welfare benefits, to the time Reagan entered presidential office in 1980, that the latent poverty rate went up by 22%, which means that it helped make more people poor, rather than helping to bring prosperity. And what group of people has taken more advantage of these programs, as a percentage of their whole, than any other group of people in our country? Black people, who then get written off in government statistical manuals as poor. Then the political left likes to show the fact that black people are more likely to be poor as proof that racism is still really bad in our country, and that it’s pandemic, even though in reality it’s receded to all-time lows, but still, they like to say racism is still rampant, all in order to convince the blacks that they should continue supporting the same government programs that created this disparity, and made large swaths of the black community chronically poor, in the first place.
- Young people that come from healthy, intact families, with two adults that get along, and work together for the financial and social benefit of the entire family, have a distinct advantage, and a level of privilege, compared to their counterparts that are being raised by single parents, that allows them to be, oh so much more likely to be prosperous and well-off and have a better life when they get to the age of adulthood. The difference between the two groups is striking and profound. Now think about this: right now more than 65% of young African Americans are being raised in a home by a single parent, meaning they are unprivileged and disadvantaged compared to their counterparts that come from healthy, intact families with two adults. Compare this to only about 25% of white youth, and 15% of Asian-American youth. Can you imagine how much better our world and our nation would be if we lived in a society where three out of every four black youth were raised in households where there were two adults in a healthy relationship that made for an intact family structure? The distinct advantages and level of privilege they would have to be prosperous and have a good life would be roughly the same as the level of advantages youth from white and Asians-American homes enjoy right now. The disparity between different racial groups would mostly disappear. Why am I bringing this up? Because back before the 1960’s, before Lyndon B. Johnson signed the Great Society social welfare programs into law, back in the 1950’s, 77% of black families consisted of husband-and-wife household, which means that back then most black youth came from intact two-adult families. Our welfare programs basically incentivized single women to have more children so they could get more government benefits. This perverse incentive setup (think: Cobra Effect), over time, effectively worked to change the ratio so that two out of every three black youth are disadvantaged today. The political left today uses the fact that two out of every three black youth is disadvantaged as reason to push these very social welfare programs on us, claiming they help the poor, especially the black poor, even though they do the exact opposite, and then tell us that we need to support these programs as white people, or we’re just racist (Because apparently good white people will want blacks to stay poor and disadvantaged? Ummm…if you think that, you’re just crazy. -my opinion)
- What helps bring prosperity to the masses? Having a thriving economy that is growing by leaps and bounds. And what does that do? It creates new jobs that put people on the right path to achieve prosperity. It causes the level of wealth-creation in society to increase, which means our collective prosperity increases. And when the demand for workers is higher than the supply of workers, market mechanisms drive up their wages, allowing them to be more prosperous. So, how do you create the kind of environment that causes the economy to grow by leaps and bounds? By allowing businesses to keep more of their profits, because with those profits, a good portion of them are fed back into the business to help it grow, which, when done on a massive scale, causes the economy to grow, creates new jobs, and drives up wages, allowing for more widespread prosperity. And how do we allow businesses to become more profitable? By lowering the amount of taxes they have to pay, allowing businesses to keep that money instead – money that increases their profit margins, helps businesses grow, and helps bring untold prosperity to hundreds of millions of people. In other words the higher taxes that businesses and people have to pay when their incomes are growing, in our progressive income tax structure, reduces profit margins, hinders businesses reinvesting back in themselves, and reduces our prosperity, all in order to pay for social welfare programs that don’t work, but keep people, especially blacks, poor.
Who Else is Hurt?
So, having a progressive income tax rate system to raise more money from taxpayers so that we can afford to pay for social welfare programs, in the hopes of bringing more social and economic equality, doesn’t work the way it’s planned. Instead, these programs hurt the people listed above instead of helping them. But those aren’t the only group of people hurt by this way of doing things. You see, the progressive income tax not only is used as a way to keep poor people poor, it is also basically a discriminatory tax on those poor people, those of lower income, who are aspiring to become middle class.
Why would I say that? Because in societies that practice capitalism, income tends to be distributed in a diamond-shape. There are some billionaires at the top and some poor people at the bottom, at least in comparison to the large numbers of people in the middle of the diamond – the middle class. That means a progressive income tax effects the most those people entering the middle – the widest part of the diamond. It punishes those who have advanced economically through their own hard work, perseverance, and education, and are leaving lower-incomes for higher middle-class incomes, only to effectively be punished for their achievement by having to pay a higher tax rate.
And this, in my opinion, is detrimental to our collective well-being, because it’s the motivation to have a better life that drives people to go and work hard, learn new skills, and get a higher education, and in so doing, allow people to become upwardly mobile in terms of their income level. It also means that those things increase their production of goods and services that have value, which, when you have this in abundance, is the essence of prosperity.
SIDE NOTE:
This is also why, in reality, capitalism brings prosperity to a nation, whereas socialism destroys that prosperity by taking away all the tools, resources, motivations, rewards, and incentives that cause people to create those things of value that are, in reality, the essence of wealth and prosperity. For example, capitalism encourages upward economic mobility. It’s why, in a capitalistic society people hone their work skills, continue their education, develop good work habits, and try to become more productive, all because their productivity is rewarded.
Compare this to socialism and the welfare state which keeps people chronically stuck in poverty and punishes those that work to bring more wealth and prosperity to the country, all while the political elite, who convince those welfare dependents that they are entitled to such programs, enjoy lives of privilege (thus creating another disparity between the “haves” and “have nots” – in this case the “haves” are the political leaders, whereas the welfare recipients are the “have nots”). Socialism, in reality, impoverishes the working class while taking away all the tools, motivations, and incentives society needs to create the wealth that brings more widespread prosperity, all in the claim that by doing so they’ll make our society more prosperous.
So, besides those who partake in social welfare benefits, and those trying to move upwards into the middle class, who else do progressive taxes hurt? The answer is that they hurt members of our society that are making our society better in some way or another, by creating things of value that benefit us all, and are helping to bring more prosperity to our nation, and we’re basically “punishing” them for doing so. Who am I talking about? Let me give you a couple of examples.
Let’s say you’re an entrepreneur, and you’ve been struggling and working hard for years trying to get your business off the ground and up and running. You live for years on the verge of bankruptcy. You basically run your business with very little income because you’re throwing that money back into your business to keep it afloat. Finally, your business starts to really take off, you start to prosper, and your business provides many jobs that allow all those people you hire to take care of themselves and their families. But now, because you’re finally making much more income, you’re getting penalized with a high tax rate. Way to get rewarded for all your hard work and effort!
Here’s another example – you’re a novelist, and you’ve been struggling for years to hone and improve your writing skills and come up with a great work of fiction. After many years of struggling and being impoverished, you finally succeed and have a best-selling book, and are subsequently penalized with a high tax rate as a “reward” for your finally-achieved success.
People who finally, after years of hardship, achieve some semblance of success, and provide something of value to society, those are the people that get screwed over by progressive tax schemes. We basically say, “Hey there! Thanks so much for working hard by providing something of value that makes our society better and more prosperous. Because you did that, now we’re going to punish you by taking more of your money away. That way, we can have the money to pay for the social welfare programs we’ve created, which don’t actually work, but, boy, do they get us a bunch of loyal voters – you know, people that have become so dependent on us that they’re afraid to go out and work and do the things that will actually bring themselves prosperity, so they keep voting for us!”
Who Really Gets Helped?
Those politicians that endorse a progressive income tax usually do so by claiming that the revenue received by those progressive income taxes will be used to help the poor. They say that if you don’t support higher taxes for those with higher incomes, then you don’t care about those in need, and that you have no “compassion.” But, as I’ve already made clear, this is not the case. The “laws of politics” stipulate that the most influential people and groups will receive the most benefits from those tax dollars. Poor people rarely receive any benefit from those tax dollars (not even our social welfare programs benefit the poor because they keep them poor) because they are the least influential of all voters. So, who benefits the most? Middle class people – this includes middle class farmers who receive farm subsidies, college students from middle class homes, as well as school teachers and government employees, all of whom get paid a middle-class income from these taxes, not the poor.
Not only that, but many of these tax dollars go to provide subsidies for the wealthy and affluent. There’s a lot of corporate welfare that goes on with your tax dollars. For example, government bail-outs of large banks and large automobile manufacturing corporations, or farm subsidies to large agricultural corporations. And since the middle class pays the largest share of our taxes, that, in essence, means that it is the middle class that is helping to support the rich.
Should We Raise the Top Tax Rates?
There are people on the political left who, because they identify as democratic socialists, think that the wealthiest among us have too low of a tax rate. They want to raise their tax rates to 70%, almost double what it is today, or even higher, like it was in the 1970’s and before. But there’s a big problem with this plan. If you do your research, you’ll discover stories from the 1970’s and before where highly educated people would not work all year long but would stop before they hit the top tax brackets. It didn’t make sense to them to keep working if 3/4th of their income after that point would be taken away from them. They would opt out of the workforce for a few months and take an extended vacation. This may sound nice, but the end result was that products and services and jobs and wealth that could have been created and could have been of benefit to society simply weren’t. This included doctors, lawyers, small business owners, architects, and numerous other high-income earners. In other words, democratic socialists think that they can make our country more prosperous by reducing the amount of wealth that gets created. Unfortunately, the math doesn’t check out.
You’ll also find that raising the tax rates on the rich doesn’t pay off for the government in terms of increasing revenues. Why? Because people who make high incomes will find ways around these high progressive income taxes. They will hire attorneys to find loopholes. They will stop working to avoid the higher tax brackets, as noted in the paragraph above. Or, they will move themselves, or their businesses, or their money, to lower tax havens. For example, in 2007, the state of Maryland imposed a special tax on millionaires that they hoped would bring them more tax revenues. But, the policy failed, and backfired miserably, as more than 30 thousand high-income residents left the state, causing the state to lose more than $1.7 billion in taxes over the next three years.
And there’s also the fact that higher tax rates tend to hinder the economic growth which helps to bring in more tax revenues, which means that those higher tax rates can actually hurt the economy enough to cause the economy to shrink, which causes a reduction in tax revenues.
What Are the Alternatives?
So, in the end, there’s nothing beneficial to having a progressive tax rate scheme where the more money you make means a higher and higher tax rate. So, if, in reality, this way of collecting taxes is no good for society, what would be the alternatives?
One alternative would be to have a flat tax rate that’s the same for everyone, regardless of whether they make a low income, are middle class, or wealthy. The benefit of going this route would be that it wouldn’t matter how much money you make, or a business or corporation makes, your tax rate would be the same. No more disincentive to move upward into the middle class, or to go even higher and become wealthy. No more people on the high end taking a months-long sabbatical to stay out of the next tax bracket – meaning more wealth being created, and more prosperity for us all.
The other alternative is to not have any income tax at all, but for government to raise its needed funds using a different avenue, such as through sales taxes. In other words, all the money you make would be yours – you would no longer have to worry about government taking some of your hard-earned money away. In a sales tax, you only pay when you choose to buy something.
Personally, in my opinion, a progressive income tax is bad for our country, a flat income tax is so much better than a progressive income tax, but having no income tax at all, and then raising funds to run government through a sales tax would be the best way to go.
