Tax Analysts Blog

Just Too Damn Rich

Posted on Apr 27, 2010

In a fiery little blog post, Matt Yglesias musters some genuine moral outrage about inequality. Some people are "just too damn rich," he writes. "It’s greedy, absurd, and morally indefensible for talented people born in favorable circumstances to be dedicating their lives to accumulating huge sums of money in order to engage in lavish consumption." I'm sympathetic. But what's it mean for tax policy?

A lot, probably. But not too much.

Yglesias follows his outburst with a sort of half-apology: "I normally try to talk about policy ideas, but there’s more to life than policy." In fact, though, moral outrage is a key ingredient in the policy process, at least when it comes to taxes. Almost every major exercise in fundamental tax reform has been driven by issues of fairness and social equity. To be sure, inequality has not always been the driving force, at least not directly. Sometimes the moral outrage has been rooted in issues of sacrifice and civic responsibility: the tax reforms of World War II come to mind. But other reforms -- including the most creative ones, like the introduction of the income tax in 1913 -- have been deeply influenced by issues of distributional equity.

But not all distributional issues are created equal (so to speak). Policy debates often hinge on distribution of the tax burden, not wealth. Consider the most influential argument offered for the estate tax when Congress was debating its creation in 1916.

"An irrepressible conflict has been waged for thousands of years between the strong and the weak, the former always striving to heap the chief tax burdens upon the latter," declared Rep. Cordell Hull, one of the levy's chief proponents. "Shall the masses be mulcted for the remainder of the taxes needed? Or shall the additional taxes required be equitably imposed upon the larger owners of income-producing property, and from a small graduated estate tax, and a tax upon the profits from the sale of munitions? The latter course will square with every principle of justice and equity in taxation." Rep. William Cox agreed: "It is the first successful attempt to make wealth bear its just and proportionate burden of taxation."

The moral of this story? Americans respond better to accusations of civic slacking than they do worries about wealth inequality.

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