2011-08-02

Question

Suppose, all things being equal, someone earns $50 000 and the other $5 000 000 each being invested in the stock market. Suppose, further, the market drops 10%. One loses $5 000 the other $500 000. The former has $45 000 the other $4 500 000. Repeat the exercise with taxes.

In brut numbers the wealthier individual loses (and pays more), relatively, and this is where things get messy, someone may be tempted to "equalize" the terms. Someone may assert, well, true he too lost 10% but he can afford to lose another, say, 5%.

Who is better or worse off? Does it stand because the person with more money is perceivably still left with a more money doesn't feel the pinch? Does it mean, to extend the argument, the state has the "right" to take more through -otherwise known as progressive - taxes?

Expand and adjust this question if you must.

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