The (non) logic of the income tax.
Income tax is supposed to make incomes more equal, but it does nothing of the sort.
I don’t want to rant about why income taxes are bad, I want you to have the tools to understand and analyze these issues for yourself.
Income is a form of societal recognition, which is both measured by accounting and created by it in the first place. Accounting is different from disciplines which study the natural world, because physics and chemistry, for example, only explain and measure natural phenomenon, they don’t create these phenomenon in the first place. Accounting is unique because it creates the things that it measures and describes.
Income is a form of social recognition, and social recognition always affords a certain amount of social power, usually constrained by expectations and conditions.
Our accounting logic emphasizes balancing reciprocity, give and take, but this is a moral goal, it is not an inherent feature of accounting. In general, the power afforded by recognition is not equivalent to the performance required to gain that recognition. The relationship between performance and power is a consequence of the accounting logic which is embraced by a society. Ironically, our attempt to enforce reciprocal fairness has the opposite effect, because our scorekeeping is based on competitive scarcity, and some people master the rules of competition much better than others.
Accounting is always established with some type of associated logic, which asserts a relationship between a course of social action and achieving a desired outcome. An argument is sound if the premises support the conclusion. Similarly, I would define accounting rules as sound if observing those rules is the correct way to directly create the intended effect.
It is not enough if the intended effect is a side effect of the accounting rules, or even if it is “usually” the main effect of those rules. If an accounting rule is sound, it will exactly describe the required course of action to achieve a desired result, as a social group.
Now, accounting rules are usually not “complete”, because our knowledge is limited. We can’t always perfectly know all the effects and outcomes of our choices. But being sound or complete are two different issues. Sound accounting rules account for the limited knowledge of the performer, and always describe the correct course of action given the particular knowledge the performer has.
Sound accounting rules precisely describe a required course of action to achieve a desired result. If the rules are overly specific, they unnecessarily restrict freedom, sometimes making the desired result unattainable when it would otherwise not be difficult.
But What Do We Really Want?
Perhaps the biggest challenge in describing sound accounting logic is understanding the “desired outcome”, both visualizing and conceptualizing what we really want and need. Our desires tend to be primal programs oriented toward personal or social survival. However, “desired outcomes” can only be described correctly through thorough exposition of the moral relationships of life.
Scaling Accounting and Making It More Accurate Exposes Its Flawed Logic
When the sandbox where accounting is developed is small, its mistakes often don’t show significant problems. But as you apply these same rules to a larger context, both more rigorously and accurately, any flaws will begin to manifest. This is why we may be surprised to find that our societal rules are creating more problems, even as we are getting better at organizing ourselves and performing our rules more consistently. The limits of our capabilities actually protect us from the errors in our logic.
As we become more capable, that comes with incredible risks and it challenges us to change our way of thinking and acting, or suffer dramatic unanticipated catastrophes and other failures.
Losing Flawed Religions
Religions and ideologies are vehicles for living ideas, which ultimately express themselves as accounting rules. Often, these movements build themselves up until the point that their moral equivocations become an existential threat.
We tend to reject such established traditions by highlighting their broken and problematic explanatory logic, but at the same time dismiss the great value of their practical logic, which was only developed through a lot of experience at great cost.
This simultaneous rejection of the explanatory and practical logic of flawed religions is understandable, because where they intersect, it creates a nexus of conflict around a moral failure. But we won’t do any better ourselves, unless we recognize the important moral principles these religions discovered and exemplified that made them successful in the first place.
In regards to our original topic, the income tax is only useful because it induces careful political accounting, proportional to the scale of the resource endeavor. Specifically, it is not effective as a tool for rationing and managing the distribution of resource claims, or ensuring private interests are subject to proper and sufficient public obligations, which is its supposed logic.