More Everyday Progressivity

Suppose you walk into your favorite restaurant and you suddenly discover all of the menu prices have been cut by 10%. Sweet! Then you turn the menu over and notice that the senior citizen prices have been cut by 20%. How nice, this price cut was progressive in favor of seniors. What a great restaurant policy.

But wait! You look closer and notice that 20% of the cheaper senior price is smaller in absolute value than 10% of the more expensive regular price. So, the menu change actually reduced the amount of the “senior discount”—the difference between the regular price and the senior citizen price. What the *&%$? Does that mean that this restaurant policy was regressive toward seniors? It must be that regular customers are gaining more at the expense of seniors! How unfair!

Of course, this is obviously ridiculous. Everyone benefitted from the price cuts. Seniors received the largest percentage reduction in their prices, but because they already paid a lower price, their prices are cut by a smaller amount. In the extreme, suppose seniors ate for free. Then if we cut prices, seniors wouldn’t be affected at all. Would anyone possibly suggest that policy was harmful toward seniors?

And yet, this is exactly the argument that is used to suggest tax cuts, even when they make the tax code more progressive, are unfairly benefitting the rich. When someone poses the argument it is hard to tell if they are completely confused or if they actually know what they are talking about and are intentionally demagoguing the issue to advance an agenda of bigger government and egalitarianism. If you prefer more government and less inequality then, by all means, argue that on its own merits. But don’t pretend a tax cut takes money from the pockets of the poor and gives it to the rich. The truth is quite, quite different.

I can’t decide which is misunderstood more by the public and mischaracterized more by populist political pandering: trade policy or tax policy?