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Taxation must align with broader policies

Bert Fitzgerald | Sunday, February 12, 2012

I was disappointed to see Thursday’s articles on the flat tax address it as an isolated issue. If there was a roughly even playing field for generating income, a flat tax would be eminently reasonable.

If we lived in an agrarian society, for example, in which most families had a modest farm and some were more diligent in running them, we could identify merit as the operative principle of differentiation (simplifying, of course), and a flat, rather than progressive, taxation model would fit.

I think this has been born out in some societies historically. Did we recently forget the basic principles of fairness? No, but it didn’t start with progressive taxation. It started with, among other dynamics, government policies supporting an economic model that structurally embraces enormous income stratification.

For example, national investment in transportation infrastructure and communication technologies, as well as the colonization of resource-rich lands and the enactment of free-trade agreements, all create the possibility of businesses and economies with a wide-based, pyramid-like structures.

The sheer size of the resulting entities and wealth concentrations necessitates corporate laws and direct government interventions that socialize the resulting risks, while privatizing the enormous potential profits. These profits are on a scale created not by the powers of those riding the crest of these money waves, but by the structure of the economy itself. People are needed to operate the levers of the wealth channels and populate the penthouses on the top, and more people are needed to operate call centers and espresso machines at the base.

As long as corporate law and government policy build upon technological and other pressures that push towards unprecedented income stratification, tax policy must reflect the resulting structural inequalities and be progressive.

The ideal political platform will be realistic about the current need for progressive taxation, for both fairness and gathering adequate tax revenue, while looking to principles such as subsidiarity to create long-term policies that could chip away at the stultifying, pyramid-like contours of almost every structure in our economy.

If the vigor fiscal conservatives put into arguing for a flat tax could be channeled into imagining some conditions for its appropriateness, that would be quite a start.

Bert Fitzgerald

Class of ‘09

South Bend, IN

Feb. 10