Conservatives have always claimed that slashes in taxation, government spending, and regulation are what stimulate the economy (trickle down economics.). But it’s always been a pile of BS because in reality it just serves for rich people to hold onto “their” money. If you really want a vibrant and healthy economy you need to amass capital in the middle class. This gives the majority of American’s real buying power which then fuels the economy. The key tool in doing this is a progressive tax.
A progressive tax serves to increase government revenue which is then reinvested into the country primarily with social services, infrastructure improvements, education, and private sector regulation. Social services increase the quality of life for the majority of Americans and empowers them to be more vibrant workers in the economy. Better infrastructure might be the most important aspect of this as it quite literally drives business. Investing into educating our society is a no brainer. However, under “trickle down economics” over the last 30 years we’ve seen college tuition rates sky-rocket and public k-12 schools performance rates slide. Finally, wrestling back regulative powers from the private sector will safe guard our nation from environmental degradation, protect us from unsafe food and products, and reign in unfair business practices. All of these aspects directly contribute to job creation and growth which leads to more wealth for the middle class.
With higher revenues the government can also provide more robust economic incentives to the private sector to further stimulate economic growth. For instance consider our drive for renewable energy. If there were an increase in government revenue, there would be more money available for R&D grants and subsidies for projects building and selling renewable energy systems. As a matter of fact government grants and subsidies could serve to ramp up sustainable development across all industry sectors. Whats that spell, higher wages and new jobs for the middle class.
It also acts as incentive for the very rich to reinvest “their” money back into their businesses as opposed to claiming it as income. That means higher wages, job creation, and more business development for everyone. Think about it, if you were über rich and had a choice of paying say 5 million in income tax or putting it back into your business (or starting a new one for that matter) what would you rather do? Right now, the incentive is to simply take money in as income and stash it into the bank. This is why we see billionaires thriving with huge paychecks and bonuses and something like 1.5 trillion in capital sitting stagnant in our economy.
The attack by the wealthy against a progressive tax has always been two-fold. First, the assertion that 
government cannot do anything effectively and its inherently corrupt and wasteful. This is why capital needs to stay with the rich so that they can then be the catalyst for everything I’ve outlined above. They’ve got a point here as there is always some wasteful spending and corruption in government. But it’s not any different in the private sector! More importantly ineptitude and corruption in government are publicly accountable and can be made a moot point with sound laws, policy, and elections. Furthermore, I reject the claim that government can’t get anything accomplished as there is a rich abundance of incredibly successful government services and programs throughout our nation’s history.
The second argument against a progressive tax is that it stifles business (primarily small business) by putting too much of a financial burden on them. What this fails to acknowledge is that this nation had a progressive tax for a large part of the 20th century and we did just fine with it. Actually, we grew into the financial world power that we are under a progressive tax. Industry grew and thrived, rich people got richer, but most importantly so did everyone else. When people talk about the good old days when a single income could provide for a home and a family, they’re talking about America with a progressive tax.
Finally, its of utmost importance to note that a progressive tax is NOT socialism and it’s NOT robbing the rich to feed the poor. Its primary structure calls for high tax rates on income past a certain amount earned. If you have to pay 70% tax on income after the 5 million you’ve already banked does that make you poor? NO. It actually makes you the rich industrialist beacon of society that the American Dream calls for as opposed to the vilified robber baron of today. So lets stop being so damned greedy already and re-institute a Progressive Tax in America!
I’d like to thank Paul Krugman for his usual well written arguments on economics which although are very technical still seem to boil down to common sense which largely serves as inspiration for my economic beliefs. Read his article about The Mellon Doctrine here which is relevant to my arguments above.
Also much more intricate and intelligent arguments are given for a Progressive Tax by our former Labor Secretary Robert Reich. Check out his blog here
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