{"id":89,"date":"2012-09-26T04:54:47","date_gmt":"2012-09-26T04:54:47","guid":{"rendered":"http:\/\/www.themodestproposal.com\/?page_id=89"},"modified":"2012-11-09T13:04:43","modified_gmt":"2012-11-09T18:04:43","slug":"the-new-social-contract-and-the-case-for-progressive-taxation","status":"publish","type":"page","link":"http:\/\/www.themodestproposal.com\/?page_id=89","title":{"rendered":"The New Social Contract and the Case for Progressive Taxation"},"content":{"rendered":"
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Taxes have become one of the defining issues in the partisan divide that plagues our politics and has paralyzed our government.\u00a0 The loudest voices on the political Right make a number of arguments which are summarized below:<\/p>\n

1)\u00a0\u00a0\u00a0\u00a0\u00a0 Taxes are too high, are evil, and reduce productivity in the private sector.<\/p>\n

2)\u00a0\u00a0\u00a0\u00a0\u00a0 Taxing the rich is bad because they are the most productive members of society. \u00a0A progressive tax system is thus unfair and amounts to redistribution.<\/p>\n

3)\u00a0\u00a0\u00a0\u00a0\u00a0 The rich pay more than their share of taxes while many Americans don\u2019t pay taxes.<\/p>\n

4)\u00a0\u00a0\u00a0\u00a0\u00a0 The private sector is more efficient than government and should be relied upon to provide societal services currently provided by the government (this last point will be addressed at length in another post about economic theory and market failure).<\/p>\n

These arguments are the foundation of decades of conservative economic thought and policy and are the rallying cry behind the conservative Tea Party movement and to a great extent the Republican Party. \u00a0In this article, I seek to discuss and counter these Conservative arguments and to make the case for higher taxes, particularly on higher income earners (government spending is a closely related issue that will be addressed in a separate blog post).<\/p>\n

Progressive Taxation and the New Social Contract<\/strong><\/p>\n

For close to 100 years, the United States has operated under the tenants of a Social Contract between the government and its citizens.\u00a0 The New Social Contract works as follows:\u00a0 Work hard and you\u2019ll make a living. \u00a0Invest in your self and take entrepreneurial risk and you have a shot at historically epic prosperity. \u00a0Courts will enforce your contracts, patents, and property rights. \u00a0The government will defend your safety and property. Investment in research will facilitate innovation and entrepreneurship. \u00a0Reliable and safe roads and infrastructure will to deliver your products and services to market. \u00a0Schools and universities will ensure that you have access to great education, will have quality workers to hire, and cutting edge science to commercialize. \u00a0And if you fail, there will be a net to catch you.\u00a0 Pay taxes and the government will make sure the New Social Contract is fulfilled and will step in where the market fails (the concept of \u201cmarket failure\u201d is a very specific economic principle discussed in detail here<\/a>).<\/p>\n

The New Social Contract is the reason why the government invests in national defense, education, research and development, environmental quality, public health, and national security –\u00a0all areas where markets fail.\u00a0 The New Social Contract is the reason why we can take entrepreneurial risk without fear of starving in the streets if we fail. \u00a0The New Social Contract is why we have a middle class.\u00a0 The New Social Contract is the reason why we have progressive taxation.<\/p>\n

Progressive taxation supports the principle that there is no economic gain without civilization.\u00a0 The moral extension of that concept is that greater the economic gain one achieves from civilization, the greater his or her duty to maintain that civilization.\u00a0 In other words, it is both reasonable and\u00a0morally\u00a0right for those who benefit most from our society, those who prosper the greatest under the New Social Contract, to pay more into the system that made their prosperity possible. \u00a0\u00a0Even Adam Smith, father of free market capitalism,\u00a0said of progressive taxation<\/a>:<\/p>\n

\u201cIt is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion.”<\/em><\/p><\/blockquote>\n

Progressive taxation is important to the preservation of \u00a0the American Social Contract and \u00a0provides the context for the progressive argument in the debate about taxation.<\/p>\n

Watch Warren Buffet and Bill Gates discuss the issue of progressive taxation:<\/p>\n