Friday, September 24, 2010

Progressive taxes = Redistribution of wealth?

Here's an interesting quote from James Kwak today:
Most people think that a progressive tax system is redistributive. I’m not sure. The issue is who you think benefits more from government spending–the rich or the poor. The conventional answer is that the poor do, because they get “handouts.” But imagine a world without government. Who would lose more? Assuredly the rich, who would no longer have the armed forces, the police, and the courts (and the FDIC) to protect their property. I guess you could have a private security market, but how could you maintain, say, a financial system where most of your wealth is bits on a computer somewhere without a government to back it up?