I originally thought your problem was when you started measuring, as even measuring since 1950 is too short of a time to analyze the effect of taxes. But then I looked at wolfram alpha, and it's just plain wrong. Wages have not been stagnant since 1980. Check it out here:
http://www.wolframalpha.com/input/?i=average+wages+since+1980
Wolfram Alpha is not adjusting for inflation in that graph. (
Bureau of Labor inflation calculator) When you adjust for inflation, the average wage of $34,000 in 2001 would have the same purchasing power as $41,100 in 2009. That graph looks like it reached $43,500 in 2009. The average wage, measured by the purchasing power of 2009 dollars, only increased $1,400/year in 8 years.
Now that was not a very honest characterization of what he said. To stop him from putting an industrial waste line into your backyard, make a law that forbids him from doing so. That has absolutely nothing to do with taxes. Hey, even better, figure out a system that makes it more worthwhile to use an alternative. Perhaps we force companies to pay for cleanup, or perhaps we invent a newer technology that makes the old one obsolete. Think in terms of inventing compact florescent lights, rather than taxing or fining those that use incandescent light bulbs.
You've made my point for me. My entire point is that when someone causes damage, they should be obliged to fix it. If I pump sewage into your backyard, I have to pay for it. If I turn the sky black with smoke, and make you sick, I have to pay for it. As a responsible person, I should clean up after myself, and if I don't do it, I should pay for someone else to clean up after me. If I refuse to do that, I shouldn't be allowed to make messes in the first place.
For example, we could have taxed incandescent light bulbs, and used the money to develop fluorescent lights. We can tax coal and oil, and use the money to develop renewable and clean energy sources.
I think the example I used is perfectly fair because I recently had a neighbor build a new home on top of the apartment building I'm living in. This is totally okay in China. It's probably illegal, but the police don't care, so it doesn't matter. I think it's fair because the water I drink is so full of pollutants that I need to replace my water filter every month because it gets clogged. If I had a backyard, I'm absolutely certain that people would be throwing their trash, including leftover cement, paint, and used oil into it. It happens everywhere here. People just do not care, and they treat the ground like a giant trash can. It's just one step further to adding a pipe and pumping it in from a factory. Based on what he's said, he would love to live in China.
You can smoke in buildings. Children can buy alcohol and cigarettes, and they can smoke and drink, though they usually don't. You can pee on the street and nobody cares. There are places where you need to walk on the road because the sidewalk is too smelly. You can refuse to slow down when someone wants to cross the street. You can drive on the wrong side of the road. I was nearly run over by a bus driving on the wrong side of the road while I walked across a crosswalk. You can drive drunk (or you could, but I heard they started cracking down on that). It's a right-libertarian's paradise, there's no moral busybodies to tell you what to do.
So back to one of my original questions, how do we limit government? Government often becomes beyond the control of a single vote among millions. How could we set it up so that minority opinions are protected, while still being capable enough to get laws passed?
I think the best way to limit the government is to make it opt-in. Something like a combination of the police system of the
Icelandic commonwealth, the economic system of the
CNT-
FAI of Spain, and the court system of the
Athenian democracy. You choose the police force you want. If you like, you can start your own police force. Everyone has equal rights, police are the same as everyone else except for how they make a living.
Economically, the country would be founded on federations of unions. You can choose what union you want to join, or if you want to join one at all, or if you want to start your own. The federations would deal with currency, banking, investment, taxes, and so forth.
Where there is a disagreement between two parties, you could always fall back on the Athenian-style court system I described earlier.
The way to deal with the problem you've stated is actually fairly simple. You only need to have one legal principle - harm to society should be taxed, and should be taxed promptly. Allow companies and people to settle out of court, and encourage it. Let anyone take a company or person to court for causing harm to them or society at large, and have the government hire investigators to watch out for those situations where the harm is difficult to spot and potentially huge. Have a big jury, maybe 300-500 people to make sure you have a fairly representative sample of the population. Allow the jury to vote on whether someone or some company is causing harm to society and not adequately compensating for it in taxes, philanthropy, community service or whatever. If so, allow the prosecutor to propose one fine (or other form of compensation), and allow the defendant to make a counter-offer. Let the jury vote on which offer they prefer.
In this way, the prosecutor and the defendant will have to come to a compromise. If the prosecutor is unreasonable, the jury won't agree so easily, unless the defendant is even more unreasonable. They will both have to come as close as they can to an acceptable form of compensation for the defendant to repay society.
The defendant should have to pay the court fees according to the percentage of the jury that voted against him. If 90% of the jury say he's guilty, then he pays 90% of the court fees (not including any fees for lawyers). Likewise, the prosecutor pays court fees according to how much of the court thinks the defendant is innocent, so, in the above example, the prosecutor would pay 10% of the court fees. This encourages both parties to keep the trial short, and to settle out of court, or go to a third-party court if they can.
You could also add on a limit where defendants or prosecutors don't need to pay. For example, if 25% or less of the jury say the defendant is guilty, the prosecutor pays for everything. If 75% or more say the defendant is guilty, then the defendant pays for everything.
It would essentially mean that, provided no one else is bothered by you, you could do whatever you want. If other people are bothered, you'd still be able to fall back on a trial by jury, and any compensation you would have to provide would be arrived at through compromise.