>Should the rich help the poor?

>In todays culture we assume yes. But consider this example:

“Consider Joe Smith and his identical twin brother, Jim, who have identical abilities and education. Joe decides to take a job as a high school teacher of economics. He teaches six hours a day and the rest of the time he spends fishing, swimming and sailing. He is very happy. Not surprisingly [Stiglitz never experienced high school teaching], his pay is very low. Jim becomes an economic consultant. He works seventy hours a week and has no time for fishing, swimming, or sailing. […] One has a high income, one a low income. Is it fair that Jim should pay far higher taxes than Joe?”
Joseph Stiglitz illustrating problems of taxation in Economics of the Public Sector, Pg 472.

4 comments

  • >Leaving aside the asnishingly ignorant view of high school teachers, whose job, if one takes into account time for planning, preparation and assessment and meetings, easily consumes 60 hours of the good and diligent teacher's week (I should know) and is, actually, not that low paid either, the answer is, yes, he who earns more through employment should pay more in taxation.At the root of this is society (and, indeed, your other debate on the State of Nature). Jim has benefited more from society and can enjoy its security and opportunities more than others and so should contribute more to it. Without society (and I'm aware that this is another debate and in that debate I am very much a Hobbesian and Rob, for one, doesn't agree with me) the world is not a pleasant place and society is what, to paraphrase Mark from Peep Show, stops most of us from dying aged 40 with no teeth and in a pool of our own waste. We all have an equal need for society and stake in it, but some benefit (especially in a free market) more than others. Those who benefit more and have more ability to pay for for society's upkeep should pay more.In addition, Stiglitz, doesn't mention the utilitarian value of various employments. There is a strong argument that, although these people are paid considerably less, the teacher, nurse and social worker are far more important to society than the stockbroker or economics consultant (I'm aware that financial services is the most important industry in the UK as of 2010, but look where that's got us and even the Economist considers the need to restimulate UK manufacture is a crucial element of the economic recovery), regardless of relative pay. Those who, many through choice, decided to undertake lower paid public service work and decline the opportunities of lucrative salaries (and, I think, the point of Stiglitz's little problem that the identically-educated and able Joe could have easily attained such salaries) should suffer the same tax burden as those that do, which in effect means a real terms handicap on their living standards. For example, Jim would be far more able to sustain and shoulder an additional tax burden of 80% on income above, say £300,000, resulting in more money for the treasury, than Joe would be able to afford a median taxation of, say, 25% on income over £10,000. Again, it all links back to fundamental fairness, but it's also a case of encouraging able people to undertake vital public service work. You drive the best out of public services through an unequitable tax system and everyone suffers.So, income tax should be progressive and graduated, both morally and for the good of society. It is, in my opinion, the great flaw at the heart of libertarianism and neo-conservatism, the truth that there IS such a thing as society and individual liberty and wealth should be balanced with the equally important need to protect, preserve and improve the public sector for the good of anyone. Society is the harness that holds us all together and those who benefit most from it financially should pay most towards its upkeep, without disinctivising hard work.Now, this last point is key. As I made clear in an earlier debate, I am not a big fan of income tax as it is illiberal – it essentially limits what people can and cannot do with the fruits of their own labour in their own lifetimes – and a disincentive to hard work. The best kind of taxation (although I accept that it is not viable on its own) is taxation on unearnt wealth – inheritance in particular. In this case, both Joe's and Jim's estates should each be taxed at 90%.This is probably a right mess but I have to go now. Will come back later.

  • >should NOT* suffer the same tax burden as those that do (Obviously).

  • >Interesting that you say Jim has benefited more from society when Joe is the happiest of the two.I strongly agree with your point about the contributions made by those who provide us with public goods and services. This work is necessary, and you simply cannot afford to pay everyone at a very high rate, or tax them at a very high rate.I disagree with you in that I do not think that Jim has benefited more (unless you mean simply in the financial realm) and should therefore pay more. I do however think that he should still pay more. I think it likely that there are a great deal of people who get higher pay for more work. Hence I do not think it entirely fair that they get taxed more, as you yourself hint at. The thing is we do not live in an ideal, fair world. It is not fair that the poor are poor, or that those who work as hard as teachers aren't credited with their work.We need to tax on ability simply because that is how it must be done in order to help those who are worst off. I find a useful analogy is to think of everyone drawing a/series of circles about themselves. The homeless person finds it hard to draw a complete circle. Some people manage to draw a complete circle around themselves and look after themselves, but find it hard to embrace others within that circle. Others manage to embrace their families, and the most able become leaders of much wider groups. Taxation works in a similar way, but financially. Those who earn £1million a year can draw a wide circle, and should do not because it is fair, but because they can, and because they see that there are others who struggle to draw any kind of circle at all.

  • >I did mean 'financially' when I talked about benefits from society; I should have been clearer about that.

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