*****back to taxes if anyone is still interested in discussing that.
I will give it a shot:
A Case for Progressive Taxes:
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The Two Island Scenario:
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There are two similar islands in the South Pacific.
The first island,
Molokai has a flat sales tax of 5% and no income tax.
The second island,
Maui, has a flat sales tax of 5% and a progressive income surtax system that applies to its citizens in certain special circumstances (a 10% surtax, when effective, is applied to income above $12,000 per year).
Each Island has two citizens, one quite rich, and the other who just gets by.
None of the four citizens living on the Islands actually directly voted for their Island's taxation structure, since each Island's taxation system was in place when they were all born, but all four citizens have remained citizens of their respective Islands because they generally like their Island's economy, Government and weather.
Molokai economy:
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The rich person has income of $2,012,000 per year from investments (previously inherited and/or earned), so he generally doesn't work, but he sometimes participates in marathon running.
The poor person, a professional runner, has income of $12,000 per, mostly earned by running in and winning various marathon races thru-out the year.
The rich person spends about $10k per year on food/clothing and stuff, so the Molokai Government collects $500 in taxes from him each year.
The poor person spends about $9k per year on food/clothing and stuff, so the Molokai Government collects $450 in taxes from him each year.
It so happens, that the roads on Molokai have been pretty rough on vehicles, so both the rich and poor citizen need new vehicles. The rich person buys a new Bugatti Veyron for $1.7million and pays the Government another $85,000 in taxes. The poor person buys a new Trek bicycle for $2,400 and pays the Government another $120 in taxes.
So the Molokai Government has tax collections this year of $86,070.
Maui economy:
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The rich person has income of $2,012,000 per year from investments (previously inherited and/or earned), so he generally doesn't work, but he sometimes participates in marathon running.
The poor person, a professional runner, has income of $12,000 per, mostly earned by running in and winning various marathon races thru-out the year.
The rich person spends about $10k per year on food/clothing and stuff, so the Maui Government collects $500 in taxes from him each year.
The poor person spends about $9k per year on food/clothing and stuff, so the Maui Government collects $450 in taxes from him each year.
It so happens, that the roads on Maui have been pretty rough on vehicles, so both the rich and poor citizen need new vehicles. The rich person buys a new Bugatti Veyron for $1.7million and pays the Government another $85,000 in taxes. The poor person buys a new Trek bicycle for $2,400 and pays the Government another $120 in taxes.
So the Maui Government has tax collections this year of $86,070, (since the progressive surtax was not invoked).
YEAR TWO on
Molokai:
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At the beginning of the year, the Island of
Molokai gets attacked by some nasties from the neighboring Big Island.
Both citizens of Molokai enlist in the Molokai navy to defend their island.
The Molokai navy buys two jet-skis, two assault-rifles and a bunch of ammunition for their two soldiers which costs $85,870.
Battles happen....................... Its tough, but working together, the Molokai navy defeats the invading Big Islanders, though both soldiers lose a leg during the battles.
Cyborg prosthetic legs cost $100,000
Wooden prosthetic legs cost $100
The
Molokai Government has $200 in its tax coffers, so it buys two wooden prosthetic legs and gives one to each soldier and sends them home, after giving them both a couple of well-earned medals.
Once back home, the poor person resumes marathon running, but usually finishes last due to his wooden leg, so his income is reduced to near zero.
The rich person, having some spare cash due to his investment earnings, buys a new cyborg leg for $100,000, paying $5k to the Molokai Government. The rich person, who can now run like Steve Austin, enters a number of marathon races, winning many of them.
YEAR TWO on
Maui:
------------------------
At the beginning of the year, the Island of
Maui also gets attacked by some nasties from the neighboring Big Island.
Both citizens of Maui enlist in the Maui navy to defend their island.
The Maui Government, knowing that wars can be expensive, invokes the progressive surtax for income over $12,000 (stating that wars meet the definition of "special circumstances").
The Maui navy buys two jet-skis, two assault-rifles and a bunch of ammunition for their two soldiers which costs $85,870.
Battles happen....................... Its tough, but working together, the Maui navy defeats the invading Big Islanders, though both soldiers lose a leg during the battles.
Cyborg prosthetic legs cost $100,000
Wooden prosthetic legs cost $100
The
Maui Government has $200,200 in its tax coffers, so it buys two cyborg prosthetic legs and gives one to each soldier and sends them home, after giving them both a couple of well-earned medals.
Once back home, the poor person resumes marathon running, winning most races on his new cyborg leg, so he continues to earn $12,000 per year.
The rich person also begins running a few more marathons, since he can now run like Steve Austin, sometimes winning, but often coming in 2nd to the other Maui citizen runner, who is still faster on the cyborg legs.
QUESTIONS:
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Which tax system seems fairer?
Going forward, which society is likely to be more sucessful in the future? Molokai or Maui?
I know that I've skimmed across some issues, but hopefully you can follow the set-up.
Respectfully,
GTsail