Man I have to swallow hard here (well not really)and agree with Daniel. Even Warren Buffet says the Tax rate (percentage of tax vs. earned income) is the lower for the upper earners and that in terms of percentage the lower earners pay the most in taxes.
Appreciate the agreement (it wasn't that hard, was it?
). But I'd go further: it would be a real problem if the effective tax rate on high income earners were the same as for everyone else. Warren Buffett shouldn't pay the same rate as his secretary; he should pay a somewhat higher rate (and he'd agree with that statement).
The example I use is two people, one making $20,000 and the other making $200,000. Assume a flat income tax rate of 15%. Who has to sacrifice more: the person making $20,000 who has to pay $3,000 in taxes, or the person making $200,000 who has to pay $30,000 in taxes? I'd say the former person has the greater burden, even though that person pays less in nominal terms.
There are few people who think that a "flat" rate should apply to everyone; nearly everyone, including Steve Forbes, believes that there should be some kind of initial exemption for those who aren't making much because it would be unfair to ask those who are barely scraping by to give anything. But then it's not a flat system; it's a 0% rate up to the exemption, and X% thereafter. That's a progressive system. So is Steve Forbes a socialist?
And if it's too much to ask of the poor to pay income tax until they reach a certain threshold, why is it considered fair to require the full rate as soon as that threshold is met? Why not ease people into to the full rate as income increases? And therein is a justification for progressivity.
We had a slightly more progressive income tax system in the 1990s. Surely we were not a socialist nation during that period. The rich still were more than able to get richer. I didn't see anyone running away from getting into the highest tax brackets. People had plenty of incentives to be more productive. So I don't buy the notion that advocating a slightly more progressive income tax system than we have today is somehow socialist.
As Smike pointed out, the special treatment given to certain kinds of income--generally the kind available only to the very wealthy (capital gains, dividends)--means that people of great means can pay lower effective income tax rates that those who work for them. Plus when you add in all the other taxes that are flat or regressive, such as capital gains taxes and taxes on dividends (which can be far lower than for earned income), sales taxes (usually regressive), property taxes, wage taxes, etc., the overall system isn't very progressive at all, even excluding what may be special cases such as Mr. Buffett.
Taxes aren't some burden imposed on us by an alien entity. They're the way we decide to pay for projects, programs, and services that we say we want. We can argue about the level of government spending, but whatever that level is, we have to collectively decide a fair way of contributing to that level. And at the moment, every dollar not paid by the very wealthy is a dollar that will have to be paid by the less wealthy, unless we want to run up our debt still further. A flat tax that cuts taxes on the wealthy would require huge tax increases on the middle class (not much stomach for that) or huge decreases in spending (not much stomach for that either, especially when the non-military discretionary part of the budget accounts for only 1/3 of total government expenditures).