THE BLOG
04/15/2007 05:38 pm ET Updated May 25, 2011

Progressive Taxation: Some Hidden Truths

At this time of year it seems there are only two things certain in
life, taxes and anxiety about taxes. Instead of the perennial talk of
a simplified tax form, how about a simplified understanding of the
progressive values that underlie our tradition of progressive
taxation?

Such an understanding won't move the tax deadline. But it might
eliminate some of the anxiety. Understanding the hidden truths behind
progressive taxation might also lead to more coherent--and more
just--tax policies.

Progressive taxation--taxing the wealthy at higher rates than the
poor--is a moral issue. Like many moral issues, it sparks heated
debate. The debate is borne of conflicting worldviews, values, and
understandings of values. But as we at the Rockridge Institute have
written, when progressives understand the values and ideas that
underlie their positions on issues, they can articulate arguments
authentically and with greater persuasive force. These arguments will
appeal to those whom we call biconceptuals--the great majority of
Americans whose worldviews borrow in various ways from both
progressive and conservative values.

America's government has at least two fundamental functions,
protection and empowerment. Protection includes the police,
firefighters, emergency services, public health, the military, and so
on. Empowerment includes the infrastructure needed for business and
everyday life: roads, communications systems, water supplies, public
education, the banking system for loans and economic stability, the
SEC for the stock market, the courts for enforcing contracts, air
traffic control, support for basic science, our national parks and
public buildings, and more. We are usually aware of protection. But
the empowerment infrastructure, provided by taxes, is usually taken
for granted, hidden, or ignored. Yet it is absolutely crucial, a
fundamental truth about America and why America provides opportunity.

This is a basic truth. That is what framing should be about: revealing
truths and allowing us to reason using them.

Taxes are part of our common wealth, what we all share. Protection and
empowerment serve the common good. Because of our common wealth, we
are all protected and America's empowering infrastructure is available
to all. That is a fundamental America value: the common wealth should
serve the common good. It benefits everyone.

Citizens are financially responsible to maintain this common wealth.
If we shirked this responsibility, we could not maintain our roads,
fund our schools, protect ourselves from military threats, enforce our
laws, and so on. Equally importantly, we could not create prosperity
for ourselves, because we would have no protection of our intellectual
property, no oversight of our markets, no means to enforce our
contracts, no way to educate most of our children.

Several main progressive values support the idea of progressive
taxation. One is the belief that the common wealth should be used for
the common good. Another is responsibility, the responsibility that
citizens have to pay for the benefits we receive from our common
wealth. And still another is fairness. These values intertwine on the
question of progressive taxation.

Few people dispute this responsibility at some level. Disagreements
generally arise over the amount and the relative apportionment of the
responsibility. Differing concepts of fairness drive this debate.
While many progressives say it is only fair that those who earn more
pay a higher percentage of their earnings as taxes compared to those
who have difficulty making ends meet, conservatives respond by
asserting that it is unfair to "punish" the financially successful by
making them pay more.

An important point often lost in this debate is an appreciation that
the common wealth, which our taxes create and sustain, empowers the
wealthy in myriad ways to create their wealth. We call this compound
empowerment -- the compounded use of the common wealth by corporations,
their investors, and other wealthy individuals.

Consider Bill Gates. He started Microsoft as a college dropout and has
become the world's richest person. Though he has undoubtedly benefited
from his unusual intelligence and business acumen, he could not have
created or sustained his personal wealth without the common wealth.
The legal system protected Microsoft's intellectual property and
contracts. The tax-supported financial infrastructure enabled him to
access capital markets and trade his stock in a market in which
investors have confidence. He built his company with many employees
educated in public schools and universities. Tax-funded research
helped develop computer science and the internet. Trade laws
negotiated and enforced by the government protect his ability to sell
his products abroad. These are but a few of the ways in which Mr.
Gates' accumulation of wealth was empowered by the common wealth and
by taxation.

As Warren Buffet famously observed, he likely couldn't have achieved
his financial success had he been born in Bangladesh instead of the
United States, because Bangladesh had no banking system and no stock
market.

Ordinary people just drive on the highways; corporations send fleets
of trucks. Ordinary people may get a bank loan for their mortgage;
corporations borrow money to buy whole companies. Ordinary people
rarely use the courts; most of the courts are used for corporate law
and contract disputes. Corporations and their investors -- those who
have accumulated enough money beyond basic needs so they can invest --
make much more use, compound use, of the empowering infrastructure
provided by everybody's tax money.

The wealthy have made greater use of the common good--they have been
empowered by it in creating their wealth--and thus they have a greater
moral obligation to sustain it. They are merely paying their debt to
society in arrears and investing in future empowerment.

This is the fundamental truth that motivates progressive taxation.

It is a truth that undercuts conservative arguments about taxation.
Taxes provide and maintain the protecting and empowering
infrastructure that makes our income possible.

Our tax forms hide this truth. They do not indicate the extent to
which taxes have created and sustained the common wealth so you could
earn what you have. They make it look like the empowering
infrastructure was just put there by magic and that the government is
taking money out of your pocket. The most likely truth is that,
through the common wealth, America put more money in your pocket than
it took out -- by far.

But this situation is threatened by conservative tax policy. Through
unfair cuts in taxes paid by the wealthy, through payment for the invasion
and occupation of Iraq, and through borrowing abroad to pay for the tax cuts
and Iraq, the common wealth is being drained and the infrastructure allowed to
fall apart. We need to return to a fair tax policy that recognizes financial
responsibility incurred by the compound use of America's empowering
infrastructure.

Note: This essay was inspired by a recent question submitted to the
Rockridge Institute. Learn how you can ask Rockridge.