In a recent Hindsight blog, I argued that an income tax increase on high income households not only makes economic sense, but is justified on the grounds that high-income households in Minnesota pay a much smaller portion of their income in state and local taxes than do middle income Minnesotans. This led to a cry of “class warfare.”
The call for progressive taxation has nothing to do with a desire to make war on rich people or to persecute, cajole, or disparage them in any way. The ethical pursuit of wealth is a positive force in our society. The goal of progressive taxation is not based on hatred for or jealousy of the rich, but rather on two well-founded principals, one economic and the other based on tax fairness.
The economic argument for progressive taxation has been made in previous Minnesota 2020 articlesand will not be repeated here. However, those who are still not convinced may want to listen to a wealthy venture capitalist, Nick Hanauer, who made a well-reasoned appeal for progressive taxation in a 2011 Blomberg op-ed.
The tax fairness argument for progressive taxation is straightforward. Many state and local government expenditures benefit private citizens in proportion to their income and thus citizens should pay for them in proportion to their income. A legal system that protects property rights and enforces contracts, a transportation system that enables businesses to get goods and services to markets, an educational system that produces a well-trained workforce that businesses rely on—all of these public investments benefit rich people at least as much as they benefit low- and middle-income people and there is no reason why high-income households cannot pay for them at the same effective rate as their less well-off neighbors.
If someone making $50,000 a year can pay 12 cents per dollar of income for state and local government services, than someone making $5 million or $50 million can do the same. This is not class warfare, but common sense.