Is progressive taxation fair?

Yes, because money also obeys the law of diminishing marginal benefits.

What does that mean?Well, the theory (which everyone can easily check in reality) is that the more you have, the less valuable a thing has for you.

The example from the textbook is always the man who walks through the desert and finds a drink stand just before thirst.He will of course storm in immediately and will order a glass of water. Even if the landlord asks for 100 € for this, the man will hardly give up the water. Of course, even after this first glass of water, the man is still thirsty and he will order more glasses. But with each additional glass of water, his thirst will be more satisfied. Accordingly, he will no longer accept every price of the landlord. Perhaps the fifth glass of water would be worth 50 € to him, the sixth only 40 €, etc., until the man has drunk so much water at some point that he would not even drink another glass if the landlord gave it to him. This is the decreasing marginal benefits of water.

Transferred to the money, the bill would look like this: the first 1,000 € are absolutely essential for housing, food, clothing.You can’t do without them under any circumstances. With the second 1,000 € you pay your car, meetings with friends, hobbies, the big new TV, brand clothes, the weekend trip to Berlin.Anything that would undoubtedly hurt you if you didn’t have them anymore, but it wouldn’t kill you either. The third €1,000 is for longer holidays, a chic apartment in a central location, a smartphone from the high end category, less have to cook yourself and go out for food more often.You don’t necessarily need these things, but they certainly make a lot more enjoyable. With the fourth 1,000 € you let it crash: Clothes like to be made by the designer, at the end of the day a shampoo with the colleagues in the oyster bar, as a second car a convertible for the weekend, a holiday cottage by the sea.You know yourself that you don’t really need all this, but it just gives you a good feeling.

This is the diminishing marginal benefit of money and therefore progressive taxation is also fair: the absolute renunciation of benefits through a tax of, for example, 10%, would be immense for someone who only has the first €1,000, but those who have the full €4,000 would have to only forgo some of the amenities that the last 1,000 € bring him.

That is why it is fair to tax people on higher incomes higher, because it is fair for everyone to make a similar ‘benefit sacrifice’ for the community.

P.S.: The figures given are of course only for illustrative purposes, I understand that few people with a net income of €4,000 spend their days drinking shampoo and sitting in the sun in prada dresses and waiting for them to Ferrari is taken out of the washing machine.;)

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