The role of taxes

As I write this the American government has been battered by some wealthy people who with the debt ceiling had a tool to force changes in the law that suit them.  Not sure how this particular battle will run out, but feel it is likely there will be future battles.

 With the Americans the discussion had been focused on cutting expenses and making the poor work to earn their welfare.  Assistance to the poor is to be cut.  All sorts of regulations were burdensome.  It is true you should not spend more than you take in.  There are painful results if individuals attempt to do it, but there are also consequences for governments.  One consequence might be inflation.  High interest rates.  Bankruptcy may seem impossible, but governments have faced that, just not the exceptional United States (so far).  Corruptions has overtaken some governments when the government can't provide services.

One part largely missing from the conversations is taxes.  Politicians treat taxes as almost a dirty word, to be avoided for fear of losing votes and the support of wealthy donations. Cutting taxes and bragging about it are normal.  Obviously most voters react negatively to increased taxes.

The Republicans have proven themselves to be hypocrites and working for the benefit of the wealthy.  A major cause of the increase in deficit came from the Trump administration's major tax reduction.  One proposal they rejected was to increase the number of tax collecting experts.  The one department that actually pays for itself and coincidentally mitigates inequality.  The subject of taxes is easily dismissed.

Progressive taxes are an attempt to be fair, but are resented by the very wealthy who have managed to reduce their high rates but still not enough.  In theory everyone pays at the same rate. When you earn more you pay more, but at established rates.  The wealthy also resent restrictions on their income.

Some commentators suggested that the poor could vote to get their way.  In truth there are attempts to bribe them and most politicians are careful not to increase their taxes.  The wealthy know they can swing the poor to their side; by appealing to their prejudices.

One sensible philosophy was provided by John Maynard Keynes who proposed in times of prosperity to build up surpluses and in times of need to use the surplus.  The wealthy feel rather than building up surpluses it is better to reduce their taxes.  

In a smaller simpler civilization the people had more real control.  As civilization became more complex, power becomes unequal and exploitation is normal-- check http://www.therealjohndavidson.com/2014/07/selected.html

A more rational plan to solve the many problems of Americans would include taxes.  Taxes are the price for civilization.  The government is not the source of all problems and in fact has been and certainly can be an engine for progress. Uneducated voters are easily manipulated. 

Even the wealthy overlook that they get infrastructure, a legal system, military protection, an educated labor force, and sometimes protection from pandemics.etc.

An earlier blog:  http://www.therealjohndavidson.com/2021/05/taxation-necessary-tool-for.html

Another blog:  http://www.therealjohndavidson.com/2012/07/price-of-civilization-book-review.html

Another perspective:  http://www.therealjohndavidson.com/2015/04/tax-collectors-dirty-job-frowned-upon.html  

Also following the Toronto Mayoral election where there seem to be all sorts spending programs proposed with any taxes ridiculed.  Olivia Chow is attacked for proposing increased taxes for one segment.  Rational people understand there is a cost to pretty much everything and fairness is the best way to win co-operation. 

The Great Leveler: Violence and Inequaltiy

Barack Obama thought, rising inequality "is the defining challenge of our time."  The future is intertwined with several concerns, climate change, pollution, nuclear tensions, but underlying them all is a feeling that the average person has no impact.

The rich get richer and the poor get poorer has long been a cliche, but like most cliches there is a base element.  Inequality is natural and if unchecked tends to increase.  Not all bad as the pursuit of wealth has motivated many to innovate and work harder to improve the lives of the rest of us.  Scheidel uses some of the material uncovered by Thomas Piketty, although does not agree with all his conclusions.  http://www.therealjohndavidson.com/2014/10/capital-in-twenty-first-century.html

Using a wide range of information Scheidel uses the Gini Co-Efficient to compare different societies at different times.  Obviously there is a limit imposed by the lack of numerical data for much of what he studies.  He improvises with such things as burial goods, size of housing, prices of different commodities.  His conclusions do not suffer.

Violence has proved to be the most reliable leveler of inequality.  The author classifies what he called the "Four Horsemen" the factors that have leveled inequality:  1). mass mobilization warfare;  2). transformative revolution;  3). state failure and 4). lethal pandemics.

In the course of over 300 pages he recounts instances of these leveling factors.  Inequality first became a fact with the agricultural revolution which made possible specialization and the accumulation of surpluses that enabled some to increase wealth and power.  Before in a hunter foraging economy everyone was important for overall survival and although some people are more talented or hard working than others they could be kept in line.  Two tools enabling inequality were land/livestock ownership and the ability to transmit wealth to future generations.

Many minor events could have a very temporary effect on inequality, but it takes a massive event to really level inequality with some examples being World War II, the Black Plague (followed in quick succession with other pandemics), the Russian Revolution, European invasion of the Americas  and the American occupation of Japan.  Some major events actually increase inequality or the wealthy are replaced with other wealthy people.  In all cases inequality restarts significantly over time.

What about the future?  The author concludes that the four leveling factors will have less likely impact in the future, so it seems likely inequality will always be with us.  Modernisms work both ways.  Those in power have more tools to stay in power.   The masses of people have more effective communication and ability to organize. 

There have been many suggestions to rectify or moderate inequality.  Progressive taxation, estate taxes, wealth taxation, boosting unions, universal medical insurance.  Poorer people tend to vote less than their wealthier fellow citizens suggesting perhaps that education might make a difference.  There will be resistance and costs to any radical solutions.

An earlier blog gives the perspective of John Maynard Keynes who thought the only purpose of economics should  be that everyone could live better.  He understood about the pendulum of the ups and downs of the economy.  http://www.therealjohndavidson.com/2012/04/book-on-john-maynard-keynes.html

Although inequality has the advantage of offering incentives that generate innovation and hard work, there are disadvantages that become more evident as it becomes more extreme.  Number one is the inequality of opportunity that eventually hurts everyone when merit is secondary to connections.  Universal health care ensures that the poorest have an opportunity to receive preventive care that ensures the health of the rest.  A sense of fairness such as accepting that some people contribute more and deserve more is best achieved when the discrepancies are not too threatening.

My own thoughts on the inevitability of inequality.  If you took a random room of 100 people and were somehow able to redistribute the wealth to for example, $100,000 each, within minutes things would start to change.  Some would want to spend some to enjoy some of the things they had long wanted.  Others would see an opportunity to sell something, loan money so others could get what they want faster.  Some might be a bit fearful of the "rainy day" and keep their spending under (relative) control deferring gratification.  Some would steal from the others in the form of theft, intimidation, or fraud.  Of course some have more relevant talent than others.  It boils down to short term thinkers versus long term thinkers and yes a bit of luck, but essentially this has been our history.  

There is a lot of meat in the book provided by Walter Scheidel.  I found many of my thoughts debunked, but also gained a better understanding of the mechanisms that account for inequality.  The future is unpredictable, but many of the factors that will determine the life style of future generations are identified.

Confession.  I stumbled on this book because I had heard of a more recent book of the author, Walter Scheidel called "Escape from Rome."  Being cheap (and patient?) I just checked the library which had not yet ordered it, but had this other from the same author.  I have long concluded that there is more than one good book in any author and we often miss the early ones when they might have been more enthusiastic because they had not yet reached a tipping point.  I am on the look for "Escape from Rome" and for that matter other books by Walter Scheidel.

WHAT I LEARNED AS A TAX PREPARER

Are you dreading the upcoming tax return?  Not sure how to fill out the forms and what documents are needed?  You are not alone.  

It was a long time ago that I got paid to prepare tax returns,  but I have done tax returns for myself and family up to the present.   H and R Block offered a part time job (I already had a day job), but you had to take a course.  I thought I knew it all, but sadly didn't.

I knew that we had a progressive tax system, but didn't really understand how it works.  The instructor was very good at explaining.  It starts with the premise that everyone has certain financial needs:  food, clothing and shelter.  The exact levels are difficult to determine fairly, but it is generally accepted that some people do not earn enough income to pay taxes.  Others earn enough to survive with more for other goods and they are expected to contribute, but the government realizes many can only spare so much.  At that level taxation is only calculated after they have been allowed the same maximum amount not taxed.  Still others, a minority make well more than needed to survive and in fact enjoy luxuries.  Usually they benefit more from government infrastructure than the rest and are able to pay more taxes.  Everyone pays the same rate at the different levels and the higher percentages only apply for amounts over each level.

Personally I owned a small amount of stocks and was pleased to learn about dividend tax credits.  The theory being that the country needed investors and many were of the widows and orphan types that needed encouragement and protection.  Many years later I learned that people who earn money through some investments pay a much lower tax rate, one American billionaire who thought this was a shame was Warren Buffet who paid a lower tax rate than his secretary.

My daytime job was selling office supplies and on one call to an accounting firm I boasted that I had taken the course.  The accounting company rep boasted back to me, "you learned the basic facts of how to fill out the form.  We figure how much you can get away with."  I always knew there were people in all income levels who bent the rules.

One memory-a client admitted that he had done flyer delivery for cash payments.  In another previous job I worked with flyer distribution.  I knew that his official income would not result in any taxes owed.  I shamed him into estimating his unofficial income.  We did it in such a way that he still didn't pay any taxes, but we both felt uncomfortable.  More on my circulation career which included a stint marketing flyer distribution:  http://www.therealjohndavidson.com/2012/08/my-career-in-circulation-part-3-winding.html

A common strategy I encountered with customers was to overpay taxes and get a nice rebate.  They hated the idea of having to pay extra taxes.  A better way to look at it is you do end up paying taxes that means you had the use of the money beforehand.  If you got a rebate that meant the government had the use of your money.  Forced savings such as buying mutual funds or bonds is a better way and if you register the investment plan you can save money on your taxes.

Another common practice was to buy a RRSP mostly around the month of February to get a tax deduction.  If enough people did this it would be enough to temporarily boost stock prices.  A better strategy would be to do monthly contributions such as to a mutual fund.  Dollar cost averaging helps to optimize fund growth and one overlooked fact is that earnings are protected from taxes until withdrawal.

If your income has any complications it may well pay to seek professional advice  If you income is simple such as wages and standard deductions it is not as difficult as too many people think and free advice is available.

What I had to say about tax collectors:  http://www.therealjohndavidson.com/2015/04/tax-collectors-dirty-job-frowned-upon.html

TAX COLLECTORS, A DIRTY JOB FROWNED UPON

If you think about it most of us in Canada and the United States have it pretty good compared to much of the rest of the world.  But we wouldn't be human if we couldn't find something to complain about.

Taxes are one of the favorite complaints we can all share.  Often there are legitimate gripes about how our money is spent or how some people seem to pay less than their fair share or how complicated the forms are.  One irony is that when government budgets need to be cut,  tax collectors are among those who suffer.

Ironic because they represent at least a partial solution to government budget problems.   Legislators have the option of raising or lowering taxes, or of adjusting spending, justifying their decisions on fairness and need.  Tax collectors, by definition are the ones who execute the actual transfer of money from the people to the government.

The politics of taxes is full of bluster and calculations.  To get elected politicians promise all sorts of things.  Most of what is promised involves spending money.  Other politicians have a different emphasis on lowering spending so they can lower taxes.  They all claim their way is the more fair way.

In feudal times the poor were taxed so that very few could hope to escape their lot in life.  The aristocrats lived relatively well and controlled the rules.  As time went on smart, hard workers helped create a system that gave more people a chance to improve their circumstances.  The Magna Carta occurred because the King wanted more money to maintain  his life style, but also to wage what he felt was a necessary (or at least desirable) war.  Forced to make concessions, this one development allowed for progress for some of the underlings  Many years later income tax was brought on for war expenses.

Progressive income tax seemed easily understandable at one time, but one sometimes hears wealthy people campaigning on the idea of a flat tax.  In fact some taxes such as a sales tax might already be described that way as every one pays the same rate.  When I was much younger,  Elvis Presley was reported as paying a 90% tax rate and it seemed a bit unfair.

What was really unfair was the way it was reported.  He and others only paid 90% of their income that was over a very high amount.  There wasn't much incentive to chase after more income, but again we overlooked accounting strategies such as deferring income, and certain investments or expenses.  I really should have been confident that Elvis managed to lead a much higher standard of living than the multitudes of the less fortunate.

It is generally recognized that some people barely make enough money to survive and up to a certain level they don't pay any income tax.  Other people can survive and contribute a small amount towards the general good and they are expected to.  At different levels people are able to contribute a larger share.  Rich people are in a position to pay more and most usually do.

Although there are more poor people who could if organized influence how the rules are set, it is really the rich that have the most influence.  It takes money to get elected and ambitious politicians go seeking money and all too often find they also get obligations towards their donators.

One concern is that the rich see themselves as different than the poor.  To them it is obvious that they are smarter, harder working and most importantly more deserving.  The smart poor realize they need the rich not only to provide jobs, but also money for the common good and should not be abused. Some rich people realize they need poor people to do things that need to be done, including buying goods and services the rich are selling. but other rich people just think it is a shame that so many poor people expect to be given money and treated equally.

Many of the rules of taxes and spending are set by the rich with little awareness from the many who don't realize they also have power to help set the rules.  Investment money is taxed differently than money earned from manual labour.  Tax rates have been adjusted more for the benefit of the wealthy. There are tax "breaks" for common people that in many cases were offered to win votes as well as an incentive for desirable behaviors.  All of these adjustments have some merit and all voters have a chance to influence.  A government budget is a very delicate operation trying to balance the common good against available resources.  Ideally educated voters realize they need to strive for an optimal balance that benefits everyone.

The rules certainly are complicated, but much of it is for good reasons.  It is difficult to be fair, but when understood, there have been some honest efforts.  There is plenty of "social engineering" where the legislators are trying to encourage behavior thought to be beneficial.  It could be simplified, but a lot of incentives would be lost and likely the wealthy would come out ahead anyway.  Accountants and software designers benefit from the complications and many would lose their educated work.

Aside from setting the rules it seems some of the rich are concerned that tax collectors are an unnecessary and unfair nuisance. They, the rich after all are "job creators" and their life style is an incentive for others to work harder.   If you have the money you can hire accountants to help steer your money so that the government doesn't take any more than necessary.  You can also hide some of your money.  Poor people can admittedly also hide some of their income and if enough do it, it becomes a problem.

Those who work in slaughter houses also have a pretty dirty job, but us carnivores are grateful someone is willing to do what needs to be done.  Tax collectors do not usually get as much gratitude. Fortunately a lot of it is done behind the scenes with automatic deductions from work sources and even some investment sources.  Once a year there is an accounting and many people qualify for a rebate making them feel pretty good and a few people curse that they have to pay extra.  My opinion is that if you have to pay money that means you have had the use of that money for a period of time and if you are getting a rebate the government had the use of your money for a period of time.

When the forms are filled out and sent to the tax authorities someone (computers obviously play a key role) goes through them determining if they are accurate or not and sometimes adjustments are made with resulting whoops and curses.  If you are unlucky you may be contacted for a tax audit.  Fortunately (?) the tax collectors do not have the people power to do everyone or many more of us might find further adjustments.  They are trained to look for triggers that indicate potential problems.  Actually they are pretty good at finding errors or omissions that benefit the taxpayer and rebates are common.  On the other hand they know (as most of us also know) that taxable money is hidden in phony tax deductions or in foreign bank accounts.

Some people feel sorry for the people who get caught, but most of us realize that one way or another every honest tax payer loses when someone else can cheat.  Either the money that was supposed to be spent on behalf of the taxpayers is not there or sooner or later other taxes are imposed to make up the loss.  Or the third option, money is borrowed which also costs the tax payer.

A tax collector does not make the law, they only execute it on behalf of the government which most of us get to vote on.  They also represent an expense of the government that is paid for by tax payers. Like any other job some tax collectors are better than others, but each can only do so much.  There should be a calculation about where the optimal point for efficiency is.  Actually I believe there is and for the most part tax collectors and auditors are able to generate more revenue than they cost.

Anyone complaining about government deficits should want a more efficient tax collection system, but all too often they don't.  In fact it is common for governments to cut the budget of the tax collection department so that in the end they are less efficient.  It is actually in the interests of both rich and poor to encourages greater honesty.

In the United States there has been a "scandal" about the IRS (Internal Revenue Services) to do with tax deductions.  Laws have been enacted that allow deductions for charitable purposes that are in fact being used for illegal political causes.  The concerns raised suggested that the government was unfairly picking on one political party.  It is common knowledge that there is in fact abuse.  It is possible that both major American parties are guilty, but investigations have determined that the tax department is not partisan in this matter, but in fact trying to do their duty.  Ironically it is their job to make sure there is no political bias in tax collecting, but they had their budget slashed.

The tax collectors do more than just chase after money.  Millions of people are confused about how to fill out the forms and want to avoid making mistakes.   The tax department will answer questions and explain concerns tax payers might have, in practice lessening the need for accounting advice.  With budget cuts many tax payers remain confused, do make mistakes and often miss out on deductions they are entitled to.  Tax services benefit from the confusion.  While they are doing their best to handle taxpayer concerns of workers, unemployed and  retirees they are not able to pursue every suspected criminal avoidance.

As a youngster I was fascinated by gangsters and was surprised to learn that Al Capone was not imprisoned for the many violent deeds he was accused of, but by the Treasury Department who was able to prove he didn't pay his fair share of taxes.

I have had a vested interest in the topic as not only have I been paying income tax for over 40 years in Canada I have also filled out many tax forms for other people some for pay and a few voluntary efforts.  The forms are complicated, but logical if you have the time.  There are many steps one can take to minimize their taxes and with a little effort they can be learned.  Some taxes are more complicated than others and do require expert help to avoid trouble.  Read about my experience as tax preparer:  http://www.therealjohndavidson.com/2019/01/what-i-learned-as-tax-preparer.html

Photo:  From the tropical room at the Gage Park Greenhouse in Hamilton.  I hope it counter balances the topic.

Hurricanes, Taxes and Elections

Hurricanes don't usually reach up to Canada, but when they do they can be very disruptive.  Tied as we are to the States we are also very conscious of the damage inflicted on Americans, particularly in the south.  As we like to travel to the US, buy American products and enjoy American culture we are concerned.

It is unusual that such damaging weather can impose itself on the electoral process.  Many have already voted and their opinion will be reflected in who attains office.  They are missing the opportunity to see how both the president and the Republican candidate handle the challenge.  It is an opportunity for the President to look "presidential" while Mr.  Romney can look thoughtful and supportive.  At the moment both campaigns have to move away from the east coast, even though it contains a few swing states.

It is also an opportunity for the voters to reflect on the role of government, including how it can work for everybody and how it is paid for.

Working for everybody includes adding a seriousness to being prepared, supporting evacuation efforts of states and municipalities, providing timely financial support and communication when needed and being available.

The destruction of a major weather event affects everybody and we should all help to restore things back to a healthy normal.  When you go back to scratch or nearly scratch, it illustrates who all benefits from infrastructure.  As part of the 99% we need to get back to normal as quickly as possible to amongst other things restore our income and get our living structures viable.  We want to travel around to get to work or school, for medical attention, shop and visit friends.  The 1% wants us to get to work and to shop and of course they want to get around themselves.

A question might be how do we pay for this?  We all benefit from a restoration, but do we benefit the same?  If workers can't get to work, things don't get made or services don't get performed.  If consumers can't get out to shop or delivery trucks can't stick to their schedule some budgeted projections won't be met.  If workers don't get paid for the disrupted time some bills won't get paid.

In some ways a weather disaster just brings us down to the core basics.   Just like the first settlers to North America or becoming an independent country.  Everyone is in it together.  If we use our resources wisely the damage can be managed, but if we fail to be wise everyone will suffer, although not necessarily equally.

All that is to illustrate some of the logic behind a progressive tax system that some people want to flatten.  In aristocracies, those at the top didn't pay any taxes, but society as a whole did not benefit from this arrangement.  When we work together and pool our resources smartly everyone benefits including at both ends of the spectrum.  When those at the very top contribute their fair share they enjoy greater opportunities and security.  Those at the bottom survive and some of them will go on to not only improve their lot in life, but also contribute to the rest of us.

It is human nature to justify whatever you do (of course you wouldn't do anything immoral) and many of us assume those at the top earned it and those at the bottom deserve their lot in life.  Probably there is some truth to those assumptions, but not everyone got the same opportunity or has the same talent.  Many of us abuse others to either maintain our position or to improve it.  None of us has much control over such things as the weather, the stock market, traffic, disease and many other factors that impact our lives.

A weather disaster is of course unique both in consequences and in causes.  Emergency measures will be taken to mitigate the effects.  The weather is natural and for most of history not always predictable.  A common notion is we all need a "rainy day fund" to help us deal with any emergency.

Weather is still unpredictable, although we have gotten much more sophisticated it still seems a long term forecast has to be changed occasionally.  Scientists  have gradually understood how weather works and are able to measure changes to affect its predictability.  Some developments include the effects of carbon dioxide, methane and other gases on our atmosphere.  Increasing heat affects ice at the poles and water temperatures in hurricane forming waters like the Caribbean.  Some types of pollution actually counter the heat retaining gases while at the same time causing their own problems.  Is any specific weather event proof of climate change--not necessarily, but more likely a factor.

All of us (100%) are part of the problem.  Everyone affects the atmosphere mostly in ways that are relatively insignificant.  Using energy derived from fossil fuels or buying products that are processed through fossil fuel energy is obvious.  Eating meat also adds to the problem.  With an increasing population there is even more pressure.  Thousands of years to reach where we are today, but most scientists who have studied the matter have concluded that we are finally getting close to a tipping point.

The average person is at the mercy of those in power.  We also to some extent are at the mercy of those who claim to be experts on climate change that include those who vote on legislation, corporate powers, scientists, and our friends, neighbours and relatives.  Who do you trust?  How much can you ignore or belittle so you can go about your life the way you have gotten used to?

The good thing is that we have developed better expertise to understand how our planet operates.  The bad news is that some people have entrenched interests that flow against what needs to be done.  I should be honest and recognize that all of us have entrenched interests.  I don't want to change my mode of transport, especially if it will cost more and cut into my standard of living--how about you?  I also realize that most of us with some sort of pension investment are tied into fossil fuels one way or another.  Imagine how someone who has made literally billions from fossil fuel feels about the issues.  Then there are those in the corporate structure who depend on avoiding disruption.

Elections are very much affected by money.  The average voter (really all of us) has limited knowledge of all the factors involved and frankly we would rather spend our time doing what we like doing and what we feel we have to do.  In the meantime those with large piles of money do recognize a threat to their power and will fight back.  From Watergate a popular saying was "follow the money."  It is true that some people do recognize a problem as an opportunity by adopting green energy and a more sustainable life style and can even make a lot of money by these efforts.  Some fossil fuel brokers see an opportunity to join this bandwagon.  However many of those tied up in fossil fuels clearly feel they need to fight back anyway they can.  You can be sure that a good hunk of the $2 billion raised for the two major campaigns is to help maintain the role of fossil fuels.  Canadians and Mexicans also have vested interests in fossil fuels.

The result is a lot of hypocrisy and exploiting other people's ignorance (again that is most of us).  The only defense is to become as knowledgeable as practical and identify core problems and discard prejudices and biases as much as feasible.  You make decisions on an hourly basis that have tiny effects, but that accumulate with other people's decisions and perhaps more importantly set an example.  In the free world, adults have a vote and certainly there are many factors involved to determine the wisest vote, but we need to prioritize what is most crucial.  It is easy to vote for those things that have a perceived positive benefit to us, but more difficult to think long term not only for ourselves, but for future generations.

TAXATION--A CURSE?

I just finished sending off a cheque to the Receiver-General so I am little more conscious of taxes than usual. Ordinarily taxes are quietly deducted from my pay before I get to spend anything.

There is a lot of criticism of taxes. How they rob hardworking citizens so others can waste our money, re-distribute wealth thereby causing laziness and that it kills business. I hear some people say the best way is to have a flat tax rate. Others complain that the free market can handle much of what government does better.

To all that I say--BALONEY! (I have been told to watch my words).

There undoubtedly is a lot of waste and it is true that decisions how to calculate it, collect it and spend are political.

I subscribe to a viewpoint I first read through Steven Covey. When we are born we are totally dependent on others to survive and as we get older we gradually become more independent until at some stage we are independent. In truth we are really always inter- dependent and that is our strength. Certainly some people are more commercially talented, more hard working and in some cases more lucky and although I am envious of some of these people I do not begrudge them their success.

We take a lot of our fortunate circumstances for granted, but we all in very basic ways are dependent on others. The person with the great idea, willing to work hard and take a risk needs one thing above all else--customers willing to pay. Some people focus on what effort will result in the biggest payoff--actually almost all of us do, but some people are cleverer than others. Is it wrong to try to figure out how you can get the most money for the least effort? Society admires those who take a longer view to find the most worthy results, however the biggest rewards often go to those who can manipulate the most number of people or the largest amounts of money.

From the top to the bottom we are all dependent on others. We thrive in atmosphere where talent (and basic skills) are developed in a safe, environment.  We thrive when communication flows easily. We thrive when our environment encourages health. We all thrive when positive talent is discovered and developed. If the bottom is hurting the top is missing something although no one can be sure just what.

We have a progressive tax system that is under assault. Although the bottom 90% by definition have more votes it seems the top 10% by definition with more money have a louder voice. They supposedly create the jobs, they supposedly work the hardest, they take the necessary risks and they are hard done by.

A progressive system actually does treat everyone the same, unlike a flat tax system. An arbitrary standard is set at a point where nobody pays any tax to an income level.  It is like an acknowledgement that those at this income level need what little income they have to survive in food, clothing and shelter.  Another higher standard is set where income earners pay the lowest tax rate. This acknowledges that people in this income bracket have achieved basic necessities, can afford to eat, have reasonable housing and have some choice in clothing and have some disposable income. At different income levels people have more disposable income and thus can contribute more money to the overall benefit of the country. On the first level we all pay exactly the same--zero. At the next level we all pay the same taxes. At each successive income level everyone pays the same tax rate, but only the higher rate for income above the lower income bracket. Those who have more disposable income after admittedly arbitrary calculations pay more taxes. For all income levels no matter what the total taxable income, the taxpayer pays the same.

Tax loopholes are also political decisions. Intended to encourage investments that benefit the whole country. Sometimes they accomplish something worthwhile, other times it is questionable.

Why should poor people be allowed to take advantage of the good fortune, hard work, bright ideas and risk taking of the rich? The rich actually benefit more from the government--they benefit from the transportation and communication infrastructure--they benefit from a safe financial environment--they benefit from an educated consumer (or should) and from a healthy labour force (or should)--the armed forces of a country are protecting their larger stack of goods. Too much income inequality is bad for everyone.

It all goes back to the fact that we as humans prosper best when we recognize our inter-dependence and optimize it. As Oliver Wendal Holmes said, taxes are the price paid for civilization. There is much to be grateful for what a government has done and what it can do. But yes, it is our money that we have consented to be put to good use and we are entitled to supervise that use and argue over how it is calculated, collected and spent.

Being able to pay taxes makes you more fortunate than others. Being able to pay more taxes makes you more fortunate than many others.