64 Pages Posted: 14 Oct 2012 Last revised: 27 Oct 2016
Date Written: 2012
The progressive tax and its soundness as the best tax structure has been the subject of extensive economic and political debate. A critical void, however, exists in the scholarship examining proposals in support of or against the progressive tax. The legislative and political rationales behind the progressive income tax have not been examined, including the reasons it was enacted and how (and whether) it has survived through so many administrations and political persuasions. Policymakers and analysts of the progressive tax cannot appropriately evaluate the consequences of a proposal regarding the progressive income tax without this analysis.
The purpose of this article is to identify the rationales for and against the progressive income tax, both at the time of its enactment and during subsequent challenges to and affirmations of the progressive income tax. This paper analyzes six fundamental reasons behind the enactment of the progressive income tax and their relevancy today. The American public is still supportive of a progressive income tax and, as a result, when opponents to the progressive income tax make alternative proposals these opponents often label the proposal or an aspect of the proposal as progressive to garner public support.
The progressive tax does not exist merely for economic reasons; there are more economically efficient systems. No matter how economically sound a proposal is, unless the proposal fulfills the rationales served by a progressive income tax, it will not be an appropriate replacement. Each of the six reasons, which have been consistently addressed in legislative history, need to be evaluated before any discussion surrounding the progressive income tax can take place.
(1) The ability to pay theory provides that those with higher-incomes should have a higher tax rate and burden because they have extra income (surplus) to fund the government. Today, however, lower-income taxpayers often pay a greater tax rate than wealthy high-income taxpayers. For example, President Obama pays a lower rate of tax than his secretary and Warren Buffett pays a lower rate of tax than his secretary. In addition, one of the major arguments in the Occupy Movement’s protests is that currently the tax burden is unfairly placed on the “99%” of the population whereas taxpayers in the highest “1%” of income share a lower tax burden.
(2) Enacting a progressive income tax preserves democracy. Today many argue that democracy has been threatened by the concentration of wealth in a few through the use of superpacs, wealthy individuals and corporations who are able to dominate the political discourse through influence, ads, and power.
(3) The progressive tax was enacted to appease labor groups and populists to prevent socialism, communism, or revolution. Recently the protests from the Occupy Movement have clearly illustrated that the lack of the progressive tax is threatening the stability of our government.
(4) The benefit theory states that the taxpayers who benefit the most from government services should bear the greatest burden to fund the government. The wealthiest and the poorest receive the most in benefits from the government, while the heaviest tax burden falls on the middle class.
(5) One argument is that a truly progressive tax has not really been enacted, rather the appearance of a progressive tax is used to pacify the general public. The illusion of a progressive tax serves to appease the public while the tax system really benefits high-income taxpayers and special interest groups. Recent polls show the illusion may be wearing thin because a majority of Americans think that the income tax actually benefits the wealthy.
(6) The progressive income tax can be used to redistribute income or wealth. Today, the disparity and inequality of income and wealth is at its greatest levels since the Great Depression.
This article identifies these six rationales, examines the entire legislative history of the progressive income tax, establishes that these rationales are firmly entrenched, and creates a foundation on which legislators, analysts, and policymakers can finally base their analysis and proposals.
* Pink Floyd, “Money” from the Dark Side of the Moon (Harvest/Capital Records) (1973)
Suggested Citation: Suggested Citation
Conway, Meredith R., 'Money, It's a Crime - Share It Fairly, but Don't Take a Slice of My Pie!':* The Legislative Case for the Progressive Income Tax (2012). Journal of Legislation, vol. 39, p. 119 (2015); Suffolk University Law School Research Paper No. 12-39. Available at SSRN: https://ssrn.com/abstract=2160543