Progressive tax rates have always puzzled me because they assume that government has different value for citizens based on their incomes.
Break government down to the basics and it is essentially a provider of services — defense, transportation, the legal system, schools, etc. — that customers want or need and are willing to pay a price to obtain.
In that way, it's little different than a private sector business.
Except in the private sector, goods and services have a set value; all customers pay the same. You don't have to scan your 1040 at the gasoline pump to set the price per gallon.
Only in government does every customer pay a different price for the same thing.
Reader Jon Taub sent me a note last week putting the difference between government and private sector pricing in perspective.
Taub, a corporate lawyer for a Detroit business, notes that the top 1 percent of earners pay for 38 percent of the general fund services delivered by the federal government.
Forty-seven percent of earners pay nothing for these services. And the bottom 40 percent actually get a reverse payment from the federal government in the form of a refund on taxes they don't pay.
Taub applies that same formula to a purchase of a gallon of milk, which currently sells for $2.49 at Kroger, to see what would happen.
"If every U.S. taxpayer purchased a gallon of milk, each person would pay $2.49, and the total cost would be 140.5 million times $2.49 — or $349 million.
Read the full story here.