If you shy away from talking about tax policy because you think it is complicated, I’m happy to tell you it is really quite simple. While calculating one’s taxes is not simple enough to put on a postcard, understanding tax policy is. Here’s what it would say:
Taxes structure relationships.
If you arrange people on a spectrum according to their wealth or income from low to high, tax policy is one of the key tools we can use through our government to move people closer together or farther apart — and not just in terms of money. It can be used to create equality or inequality which impacts where we live, who we have as neighbors and who we get to know in our local community — literally our relationships with other people. It sets the stage for us to have competitive relationships with each other or cooperative ones. It can promote or discourage civil discourse by creating favorable conditions for common ground or stark difference and animosity.
It’s really that simple. From this perspective, taxes have just three types of effects:
1) they can move us further apart (regressive)
2) they can leave us in the same place (flat)
3) they can move us closer together (progressive)
These effects are not inherently good or bad, despite the fact that different political ideologies will assign them as such. Rather, they each need to be used judiciously and applied thoughtfully to a particular situation.
More importantly, since tax policy is really a means to an ends, we need to know the ends or what we are aiming for. Are we aimed at creating a society where there is a wide gap between the haves and the have nots or a much narrower range of disparity? Are we aimed at creating a vibrant, broad middle class? From there we can choose the kind of taxes would create the favorable conditions we need to have in our economy at this moment in time.
Where we aim makes a big difference in making sure we choose the right kinds of taxes and in the right combinations, because we will achieve that at which we are aimed — whether we consciously choose to aim or not.
During this month and April the blog posts will be all about tax policy — the much maligned, but powerful tool we collectively have to shape our democracy. My hope is that this series gives you a different perspective than what you find in current tax debates and offers some of the positive potential that tax policy can offer.