[vezzy-fnord]

Taxes only go so far. Higher wealth elasticities of demand among those of higher income means less sensitivity to it, and the greater purchasing power means a lower opportunity cost to avoiding those taxes. Then, once the taxed income is retrieved, you must rely that the state apparatus will properly allocate it without pork-barreling, corrupting or shoving some omnibus legislation on transit until it finally becomes executive procedure.

This means that, at some point, all forms of taxation eventually boomerang and become regressive. Even when you introduce tax credits for lower income citizens, the bureaucratic and personal costs to managing them also tend to become regressive since third-parties will usually be paid for consulting and navigating across the labyrinthian tax code. This creates a situation where you open up for rent-seeking players whose business models depend on the aforementioned labyrinth, and who as a result get to redistribute income via wasteful inefficiency, lobbying and then offset the gains from tax credits by the losses of navigating them.

"Big government" inevitably leads either to totalitarianism, or to "kludgeocracy" as in the United States [1].

[1] http://www.nationalaffairs.com/publications/detail/kludgeocr...