Whenever politicians use words like "it's only fair," you need to automatically grab your wallet, because they are planning to take money from one person in order to buy the vote of others. Taxes should be based on very simple and objective measures, and calibrated so as to influence economic decisions as little as possible. That usually means that tax rates should be as low and as flat as possible, with few if any deductions, otherwise they create distortions, inefficiencies, and perverse outcomes. Unfortunately, our current tax system is extremely progressive and riddled with exemptions and loopholes—all in the name of fairness—rendering it extremely "unfair" to many, especially to those who can't afford to pay lobbyists to look after their interests. In his op-ed in yesterday's WSJ, the always-excellent Steve Moore poses "
A Fairness Quiz for the President" which merits wide distribution, because he lays bare the inequities that have accumulated in our economy that are unfair to so many of our citizens. Here are some excerpts, but do read the whole thing and pass it along:
Is it fair that the richest 1% of Americans pay nearly 40% of all federal income taxes, and the richest 10% pay two-thirds of the tax?
Is it fair that the richest 10% of Americans shoulder a higher share of their country's income-tax burden than do the richest 10% in every other industrialized nation, including socialist Sweden?
Is it fair that American corporations pay the highest statutory corporate tax rate of all other industrialized nations but Japan, which cuts its rate on April 1?
Is it fair that the three counties with America's highest median family income just happen to be located in the Washington, D.C., metro area?
Is it fair that soon almost half the federal budget will take income from young working people and redistribute it to old non-working people, even though those over age 65 are already among the wealthiest Americans?
Is it fair that wind, solar and ethanol producers get billions of dollars of subsidies each year and pay virtually no taxes, while the oil and gas industry—which provides at least 10 times as much energy—pays tens of billions of dollars of taxes while the president complains that it is "subsidized"?
Is it fair that in 27 states workers can be compelled to join a union in order to keep their jobs?
Income tax isn't based on what percentage of the population one makes up. It's based on income. If the top one percent are paying a lot of tax it is because they make a hell of a lot of money - often with the assistance of taxpayer backed government bailouts and procurements.
ReplyDeleteCorporations don't pay the statutory rate, they pay the effectictive rate after loopholes, credits, and exemptions.
Yeah Scott I've got questions too:
ReplyDeleteIs it fare that the top 10%, which control 75% of all wealth in America only pay 70% of all tax, after all if you have 75% of everything should you not pay 75% of all taxes
Should oil companies benefit from more than $10 billion in tax breaks
Got loads more of these. As usual, the nature of the question will often indicate the objectives of the one asking the questions.
Got another one, is it right that rich americans can buy election and hide their identity via Super-PAC
What more got dozen that will result in a very different outcome to what your questioner is trying to achieve. Also Scott, try to be a little less blatant -- otherwise you may end up with a Theocracy in America -- you think I jest look at Santorum...
Fair as defined by my dictionary: 6) A; marked by impartiality and honesty; free from self-interest, prejudice, or favoritism...
ReplyDeleteThe Leftocrats definition: Fair is how and when we define the word given a particular situation; subject to change to neatly fit all conditions..
Remember, the right is incapable of properly defining this word and is restricted in its use!
Frozen, what about the bottom 50%, which uses most if not all of government services, should they not be required to pay their FAIR share of taxes?
Sure thing, Frozen, take away all the tax credits from the goo companies and guess what will happen at the pump...
BTW, does your opinion fall within the definition of FAIR or redistribution?
Stephen Moore missed the big question. Is it fair to take one person's money through taxation to give to another in need. Congressman Davey Crockett (D-TN)called it an injustce from the floor of the House on giving government money to a war widow:
ReplyDelete"Mr. Speaker – I have as much respect for the memory of the deceased, and as much sympathy for the sufferings of the living, if suffering there be, as any man in this House, but we must not permit our respect for the dead or our sympathy for a part of the living to lead us into an act of injustice to the balance of the living. I will not go into an argument to prove that Congress has no power to appropriate this money as an act of charity. Every member upon this floor knows it. We have the right, as individuals, to give away as much of our own money as we please in charity; but as members of Congress we have no right so to appropriate a dollar of the public money. Some eloquent appeals have been made to us upon the ground that it is a debt due the deceased. Mr. Speaker, the deceased lived long after the close of the war; he was in office to the day of his death, and I have never heard that the government was in arrears to him. This government can owe no debts but for services rendered, and at a stipulated price. If it is a debt, how much is it? Has it been audited, and the amount due ascertained? If it is a debt, this is not the place to present it for payment, or to have its merits examined. If it is a debt, we owe more than we can ever hope to pay, for we owe the widow of every soldier who fought in the War of 1812 precisely the same amount. There is a woman in my neighborhood, the widow of as gallant a man as ever shouldered a musket. He fell in battle. She is as good in every respect as this lady, and is as poor. She is earning her daily bread by her daily labor; but if I were to introduce a bill to appropriate five or ten thousand dollars for her benefit, I should be laughed at, and my bill would not get five votes in this House. There are thousands of widows in the country just such as the one I have spoken of, but we never hear of any of these large debts to them. Sir, this is no debt. The government did not owe it to the deceased when he was alive; it could not contract it after he died. I do not wish to be rude, but I must be plain. Every man in this House knows it is not a debt. We cannot, without the grossest corruption, appropriate this money as the payment of a debt. We have not the semblance of authority to appropriate it as a charity. Mr. Speaker, I have said we have the right to give as much of our own money as we please. I am the poorest man on this floor. I cannot vote for this bill, but I will give one week's pay to the object, and if every member of Congress will do the same, it will amount to more than the bill asks."
The top tax rate in the United States used to be 90 percent--in the 1960s, when we had robust growth and low inflation.
ReplyDeleteI am more concerned with the federal take as a percent of GDP, than who pays it. I would like to see federal taxes as percent of GDP cut to 16 percent, from the current 24 percent.
To be rich in the USA today is to live better than royalty of just a generation ago.
Additionally, Scott Grannis "unfairly" does not take note of the largest tax most Americans pay---the payroll tax. That is how our entitlement programs are funded.
If you want to cut income taxes on the very richest Americans, you will have to cut agency spending.
Below is list of largest federal agencies financed by income taxes. Where should we cut?
Defense 3,200,000
Veterans Affairs 240,000
Homeland Security 200,000
Treasury 162,119
Justice 124,870
USDA 100,000
DOT 100,000
Health and Human Services 62,999
Interior 57,232
Commerce 41,711
NASA 19,198
EPA 18,879
State 18,000
Labor 16,818
Energy 14,000
GSA 14,000
Sadly for a wanna-be conservative like me, the GOP is indulging in fantasies about federal spending and taxes, and monetary policy. We are to believe that cutting taxes on the wealthiest and going to a gold standard will fix everything.
The Dems are not offering any solutions either.
Taxes go to support a nation that provides a legal platform and enforcement that makes careers, property, and wealth possible.
ReplyDeleteIf you don't believe that, go set up shop in Somalia. No taxes or regulations there. It's a libertarian paradise.
John,
ReplyDeleteAccording to Wikipedia, the economic history of Somalia was colonialism followed by "scientific socialism," followed by a "socialist revolution" followed by "IMF-ism."
http://en.wikipedia.org/wiki/Economic_history_of_Somalia
More recently, the militants of Al-Shabab demand 50% of the farm output as a tax payment.
http://biggovernment.com/publius/2011/10/01/high-taxes-hastened-somalias-famine/
Hardly sounds libertarian to me.
Fair is irrelevant. I have a right to my property and the fruits of my labor. My ancestors instituted a form of government to protect those rights and do certain specific things. Should I disapprove of the way my government discharges its obligations, I have the right to seek to lower my obligations to fund the government's operation. Anybody can build a road, doesn't have to be government. If I want to produce Sesame Street for Pakistani kids, I will fund it privately.
ReplyDeleteThe government has no claim to my property under the claim of fairness, whatever the definition of that is. Such a claim is not anywhere codified and it is not the basis upon which I submit to the laws. I will seek, at every opportunity, to shield my property and deny the government my property if it claims a right to it in the name "fairness" because if it does so, it ceases to be legitimate in my eyes.
And when enough people feel as I do, tax receipts run about 15% of GDP versus the long term average of 18%. It is the economic equivalent of the "consent of the governed". Right now we are not consenting to having our property taken in the name of an illegitimate, amorphous, and dangerous notion.
Warning to the fairness mongers, push it too far and it is "Molon Labe". People with a stake in the system keep it running. When the system becomes the enemy, we can shut it down. What will you do then? How will you feed your families when I shut my factories down? Want my stocks and bonds? You can't eat them and who will buy them from you? How do you get what you need by targeting what I have? Answer: you can't. If you try, the abyss lies ahead.
I found some of the comments on this page quite interesting, and while I have many disagreements with what some folks said, it is their opinion, and I will respect it nonetheless. With that being said, I also took it upon myself to post an entry on my blog, which addressed the issue of fairness. I would like to pose the argument that there is no clear definition to the word "fair". As a matter of fact, I find the dictionary's definition to be just as vague in its meaning.
ReplyDeleteUltimately, people will define fairness based on how it will benefit them, not so much everyone else. In all reality, fairness is rather selfish if your think about it. Go ahead and read my entry on why fairness is just too complicated.