Taxes Are Not What You Think |
Few topics generate more moral outrage and less conceptual clarity than taxes.
“The rich don’t pay their fair share.”
“Make billionaires pay.”
“Tax the wealthy.”
These slogans dominate political discourse, yet they rest on a fundamental error: the assumption that all taxes are the same thing, serve the same purpose, and should therefore obey the same moral logic.
They are not.
And once we stop pretending otherwise, an uncomfortable conclusion emerges — one that many sense intuitively but refuse to articulate:
In a sovereign currency system, taxing the poor more than the rich can be economically necessary.
Not morally virtuous.
Not politically pleasant.
But functionally unavoidable.
To understand why, we must first step back and establish a framework — and dismantle the single biggest source of confusion.
Before going further, one clarification matters.
By “the rich” and “the poor,” I am not referring to moral archetypes, cultural identities, or fixed social classes. I am describing economic positions defined by income structure, asset ownership, and—most critically—money velocity. One group primarily holds capital and low-velocity assets; the other earns wages and spends most of what it receives. These are functional categories, not judgments of worth, virtue, or entitlement.
A Universal Framework
What follows is not an argument about American taxes per se. It is a framework for understanding any modern sovereign tax system. Whether the issuer is the United States, the United Kingdom, Israel, Japan, Canada, Australia, or any comparable nation, the underlying mechanics are the same.
The United States is used here because its structure makes these distinctions visible. Federal, state, and local taxes are clearly separated, and most Americans actively file tax returns, which forces some awareness of different tax categories. In many other countries, these lines are blurred—taxes are often calculated and withheld automatically, with little direct interaction from the taxpayer.
The administrative differences can obscure the logic, but the logic itself does not change. The same instruments are at work, even when hidden from view.
1. The Category Error: Calling Everything “Taxes”
The word tax is used to describe several fundamentally different instruments that operate at different levels of government and serve different purposes. Lumping them together creates moral and economic nonsense.
In the United States alone, we speak of: Federal taxes State taxes Local and municipal taxes Property (real estate) taxes
These are often discussed as if they were interchangeable. They are not. They function differently, signal different information, and obey different constraints.
The confusion does not stop there. Even within each level, taxes are subdivided by what they target: personal versus business income, wages versus investment returns, capital gains versus dividends, consumption versus savings, residential versus commercial property, and so on. These distinctions exist for a reason. Each category touches a different part of the economic system and influences behavior in a different way.
We will not descend into accounting detail here. This is not a tax manual. It is a conceptual framework. The point is simply this: when radically different instruments........