The Danger of Imagination

Why do democracies not apply higher taxes to the wealthy? One might suppose that the majority who would fall well below the threshold of a higher tax would support such a fiscal programme as it implicitly reduces their tax contribution or increases government spending from which they benefit.

One reason lies in the prescriptions of government economists. But different liberal democracies have very different tax regimes and flatter tax economies are not necessarily more effecient (but that I know is a whole debate in itself).

Another factor is the disproportionate influence the wealthy have in democratic elections. Not only do they vote in greater numbers but in most countries the personal contributions of the wealthy to major political parties are essential to election campaigning.

I believe there is another overlooked explanation. A cultural one. Aspirational indivualistic cultures will have lower taxes for the rich. Why? Because one day we all plan to be rich and when we are we don't want to give up too much of our hard earned cash. Similarly we resent paying taxes to fund social security and health provision because we like to imagine that we ourselves will not need them. No one likes to think about losing their job or their home or suffering an incurable disease. It is much more fun to plan the size of our yacht or the location of second and third homes.

But of course most of us will not be rich. We cannot all be rich otherwise who will clean our carpets and serve us coffee. But we do not imagine that we ourselves will fail. We are the protagonists in our narrative and the good guy always wins.Right?