26
Jul
12

1600s France versus the U.S. today

In the 1600s, and predominantly under Louis XIV, the nobles hardly paid taxes. Because Louis was wary of angering them, taxes were levied on exactly the people who could least afford to pay. this is an example of how political power creates very oppressive results. In our society, we do not face injustice like that on a large scale, as a huge portion of taxes in the U.S. are paid by those who are wealthy. This is not surprising because our tax code is meant to be (loosely) progressive.

However, you still see many instances of how our legal regime benefits those who already have all the power. What I mean is that wealthy people can pay more to exploit loopholes in various tax requirements. GE pays very little taxes even though statutorily, they are supposed to owe a lot. Mitt Romney (not making a moral judgment on his behavior here) also pays taxes that are shockingly low for his earnings because it is worth his while to structure things carefully.

To give just one example, my dad is a lawyer and explained how he saved a client 65,000 dollars by having the money from a sale of one of his properties come in two payments, one December 31, and the other on January 2. This had the effect of spreading the income of this sale over two years. I’m happy this guy saved money, but beliefs about a “burden” that various citizens are bearing in terms of taxes are bound to be false as long as the system has series of possible exploitations that can be used. We will have an ENDEMIC prevalence of average middle class people paying taxes on their home equity, when savvier people know that there are ways to trade up homes at crucial times so that they start with fresh, untaxable equity on a new home (Texas has something like this for sure).

In a subdued way, America is still like 17th century France, and this says a lot about how political power operates over time.

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