Why Greater Equality Makes Society Stronger.

[ArmorPierce]

Of course, if you assume that leisure is a superior good, while income is a inferior good, them regressive taxes will make poor people work harder for two reasons: They will pay taxes, and due to the wealth effect they will work harder with smaller incomes due to these taxes, and taxes that decrease with the amount of work made (regressive taxes), will increase total working hours by marginal effect.

Still over-simplifying. You are assuming that people can simply work harder and thus income will go up. Couple of problems, people are humans. They sleep, they eat, they need rest, they have families to take care of, they can only work so many hours in the day and there is only a limited amount of hours a day.

Usually, inequality levels naturally decrease with the process of development. That's because first some people get better off while the others are behind (see the Kuznets curve). Then development spreads and the entire population gets better off. Since progressive taxation is not conductive for development, its implementation in developing countries will slow down development and hence, slow down the natural reduction of inequality. In the long run, progressive taxation can increased inequality!

THIS IS ABSOLUTELY FALSE. In the United states, the divide in income between the rich and poor has been growing dramatically, not shrinking, over the past few decades. As for progressive taxation not working, you shift the tax burden to the poor which I already pointed out why it's bad above. They have high fixed costs (necessary spending) and low variable spending (discretionary spending).

In Brazil inequality increased greatly between 1940 and 1980. Now it is decreasing since ~2000. Between 1980 and 2000 inequality and GDP stagnated. In 1940, 80% of the population was made by illiterate farmers, with ate what they grow. By 1980, 70% of the population lived in the cities, but there was a large proportion of people that still lived as subsistence farmers. Hence, social inequality increased brutally between 1940 and 1980, by 1980 there were two Brazil's, a richer city dwelling country, concentrated in the southern and central regions and a poorer country dwelling population, concentrated in the northeast region. Now, in the last 10 years, inequality is decreasing while the poorer regions in Brazil are being developed.

In the US, between 1975 and 2010 incomes didn't increase much. Also, in 1975 the US was already a fully developed country.[/quote]

So you state that inequality increases, then decreases, then increases as a country becomes 'fully developed'? That's what it looks like you are stating here by accepting that US incomes have stagnated.

You are making a lot of assertions and giving it out as fact and building from there without quantifying it nor providing evidence for it. Please provide actual evidence supporting you assertions.

You too.[/quote]

yeah? Like what? You are making an assertion, you have to back it up. I don't have to provide anything to back up my reply to your assertion until you do, but if you insist:

http://www.cbsnews.com/stories/2008/10/ ... 5488.shtml

In a 20-year study of its member countries, the Paris-based Organization for Economic Cooperation and Development said wealthy households are not only widening the gap with the poor, but in countries such as the U.S., Canada and Germany they are also leaving middle-income earners further behind, with potentially ominous consequences if the global financial crisis sparks a long recession.

[K. A. Pital]

If course if the effect of the regressive tax is not continuous, them it's results doesn't always hold. Also, I am assuming that the supply of labor is continuous: you can chose how many seconds you will work per day.

You're an idiot if you think you can choose how much time to work per day continously as opposed to having fixed time brackets and schemes (full-day / 40 hour week, half-day, etc.).

In that case people will always work a little harder than with flat taxes!

And yet, flat-tax Russia has a lower productivity of labour than some nations with progressive tax. Your model can't survive even a cursory comparison with reality.

Of course, if you assume that workers can chose to accumulate human capital to increase their hourly productivity, well, in that case regressive taxes will have an even larger effect.

How? A regressive tax will make it harder to make savings which are required to increase your human capital (pay for education, etc.). Which means less money spent on his education, health, etc. - and effectively thus, a poverty trap.

What you propose is a huge poverty trap for people of lower income. And it will be harder to escape the poverty trap. You're being wilfully ignorant of the effects of a regressive tax.

[ArmorPierce]

An additional point to my post. If they have to work all these extra hours in order to make ends meet due to this regressive tax, how are they expected to improve themselves through things such as getting an education? They are not going to have the money nor time. A janitor's promotion potential is only so high.

Basically they would be stuck perpetually in their current positions with no opportunity for economic mobility.

[K. A. Pital]

Iosef Cross assumes that a person's income is solely the result of his effort (as a linear function, maybe), and also that there's an indefinite supply of higher-income positions relative to a person's current income, which means if he works "harder", he'll always "earn more".

[Patrick Degan]

Mr. Cross also completely fails to take into account employers who impose eccentric schedules on their workers (i.e. changing rotations of early/late shifts among the employees) which makes it impossible to get a secondary job due to the relative unpredictability of scheduling through the month. Nobody's going to hire you if you can't guarantee that you won't be working late Tuesday/Wednesday/Thursday one week, late Monday/Friday another, or early Wednesday and late Monday/Tuesday/Thursday/Friday another. Which means your supplemental employment possibilities are nullified and you can't secure a secondary income. Nor does he take into account employers who have forbidden overtime by policy. "Working harder" isn't in the cards in that sort of environment. So what roads to advancement are available for workers in that situation who'd also be facing a disproportionate taxation burden under Cross' system, the object of which essentially subsidises the rich on the backs of the working class and poor?

[PeZook]

And you are what?

I don't understand the question. Could you rephrase it?

If course if the effect of the regressive tax is not continuous, them it's results doesn't always hold. Also, I am assuming that the supply of labor is continuous: you can chose how many seconds you will work per day.

And both of these assumptions turn out to be false after even a cursory comparison with reality: it's not practical to model the income tax as a continuous function,and no employee can chose how many seconds he works in a day. Some workers can chose the amount of overtime they work, but not in an unlimited capacity, either. After a certain level, you can get no more overtime because as other people pointed out, at the very least you still need to sleep, eat, clean yourself and take care of your family and home. So the only option is promotion into a higher pay grade, but that requires time and effort of its own, which in turn means expenditure of resources, which you need to painstakingly accumulate if your income is only slightly higher than your costs of living. A regressive tax makes this accumulation harder.

Also, as a nitpick, you're misusing economic terms: the supply of labor doesn't come from the employers, it's generated by the potential work force. The demand for labor comes from the potential employers. Either way, it's not infinite nor continous.

I am assuming that there aren't tax brakes: That the total amount of tax you pay is a strictly concave function of your income. While your income is and identity function of your income, so that for every penny you make by working a second more with flat tax, you will make more with regressive. In that case people will always work a little harder than with flat taxes!

Why do you assume that? It has no connection to reality at all. Nobody models their taxes in this way, nor is it practical to do so. Do you expect working-class people filing their income tax forms to properly integrate those functions?

I expect that someone with has some competence to judge whether this is a mistake or not should have understood that I was assuming a continuous set of choices in the part of the worker.

Didn't you notice that this was exactly what I was criticizing? No worker in the world has the kind of choice you were assuming. There are limits, and harsh ones, to how hard he/she can work.

I am assuming fixed wages per hour.

Of course, if you assume that workers can chose to accumulate human capital to increase their hourly productivity, well, in that case regressive taxes will have an even larger effect.

Jesus christ, did you even read my point?

In this case, your apparent objection actually strengthens my argument. Even if it may be more difficult for people with lower initial incomes to accumulate human capital. If it is impossible for low income people to accumulate human capital, them my argument stands on its original (simpler) basis.

I may just be stupid, but what the hell are you talking about? What "simpler" basis?