Written by Guest Blogger, Greg Hopely
I am a consumer in a free market society.
I’m free to buy stuff, of all cost and variety.
But when the government taxes me, they take away my freedom
To buy the things that I want, even if I don’t need ‘em.
They also argue that by taxing the wealthy, the “job creators”, they will not have the incentive to altruistically invest in the productive capabilities of the economy. They won’t “create jobs” if you tax them too much. It is not only a falsehood, it’s economically dangerous. However, they know that even though the American people can stomach a lot of terrible things, they wouldn’t be too happy about people openly flaunting their wealth and their greed. So the Right needs to come up with a “frame” to create moral, in addition to practical, aversion to the “burden” of taxes. They do this by framing it as a freedom issue.
One should not let this go unchallenged. Does progressive taxation really create a burden on the spending habits of the wealthy? Would a progressive redistribution of tax investments really compromise freedom? Or could it enhance freedom? Here we can look at a very interesting economic principle: the Law of Diminishing Marginal Utility of Income (or Wealth). What it means, essentially, is that the more income one amasses the less satisfaction they get from receiving more money. It is based on the concept of utility. Utility is the satisfaction one gets from consuming a product or service. So if I get money, I am happy. However, utility eventually hits a ceiling. The more money one has, the less utility there is for collecting more money. This is the Law of Diminishing Marginal Utility of Income. If a person is a millionaire and receives $100, it is not a big deal for them. What’s another $100? But if I am making minimum wage, trying to pay rent and buy food, an extra $100 could make all the difference in the world. Therefore, the poorer one is –the more utility they get from an increase in income. The richer one is –the less utility.
The rich can only spend so much money. Beyond material satisfaction, one cannot realistically spend more without severely diminishing utility. This means that progressively taxing the surplus wealth of the rich will not seriously affect their spending habits. It will not hurt society. The contrary is actually true. The amount of utility gained when a poor person receives an extra dollar far outweighs the utility lost when a rich person loses a dollar. Ultimately, the overall utility of the society increases. More equality = more happiness. It is interesting to note, that the richest countries in the world are not the happiest countries in the world. The happiest countries in the world happen to be a handful of European and Scandinavian countries, which have the highest degree of income equality.
Nor does progressive taxation inhibit freedom. Indeed, it enhances freedom. The greater “utility” the poor and working classes have, the greater access they have to power resources. They would have greater access to education, have a higher degree of social cohesion, have increased freedom to bargain for higher standards of life and work, and, most importantly, would not be in such dire straits that they are forced to throw themselves at the whim of the undemocratic world of corporate capitalism without just recompense. Society as a whole would have more to invest into the country to ensure a stable quality of life for all (with free, high-quality healthcare, education, clean air, food, and water, labor rights and safety standards, etc.). Individuals would be free to live the lives they choose. The economic conditions that hold back so much potential and waste so many resources would no longer have a hold over the people.
I recommend everyone look into the Law of Diminishing Marginal Utility of Income, don’t just take my word for it (I’m not an economist after all!) You may find that it makes practical sense. Beyond practicality, however, there is potential to create a new framework for thinking about freedom. No longer would the Right be able to monopolize (which they love to do) the word for their own purposes. It is time to increase the utility of freedom for all.