The issue seems to be determining a fair share.
Economists use the term marginal propensity to spend. A person on a low income will have to spend 100% of that income just to survive. But as income increases the percentage spent decreases. Like a person with a 100 million income may only spend 10 million so have 90 million saving or money they can invest. When they invest that 90 million they get even more income. That is not so for the low income person. So is it fair that they both get taxed the same %?
Assume the low income person gets taxed 1% and the 100 million person 50%. Because the low income person is still spending all ther income they have no money to invest. But at the same spending amount the 100 million person still has 40 million savings to invest to make more income. If the tax rate for the 100 million person was 99%, they would not have 10 million to spend but they may still have some savings from the 1 million after tax income to be able to make more income.
This is why there is or has been progressive taxation. The higher the income the higher rate of tax. Years ago I understand tax rates were as high as 90% I think because more people started having higher incomes, the political pressure caused tax rates to decrease.
I read about some physicists, not economists, creating a computer model of a fictional economy were certain profits and tax rates were used, and the model was run millions of time for multiple fictional people. The result was that eventually one person would end up with all the money with all the others having no money. The physicists say that economics is all mathematics and no matter how the model is set up, eventually one person will have all money and everyone else will have no money. These physicists are saying that because of mathematics out present economic systems will never be fair.
I have thought that if the income of all people in an economy were added together and then divided by the number of people, to get the average income and then tax all those that earn more that the average and give it to those that have less that average, so everyone has the same income. I'm sure many would not think that was fair for multiple reasons .Also ther would be the same problems that presently exist in determining what is income.
My utopian solution to fairness is to have a non economic non barter society. No money and no bartering. Basically no economy. Most people I mention this to, have extreme trouble understanding how it would work, so I'm not going to try and explain it.
Any other ideas?pBold Text
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