Monday, July 11, 2011

Paying a fair share

Definition of being fair (summarized): of pleasing appearance; in accordance of merit; consistent with logic/ethics.
'The rich need to pay their fair share' has been a saying for decades, so that many politicians and their constituents today repeat it is nothing new. But, let's look at what is fair.
The definition of 'pleasing appearance,' by its definition is that which pleases the senses; that is subjective. Pleasing appearance is based on appetite, and varies as much as how a pleasing meal looks when contrasted between a steak-lover and a vegetarian. This definition cannot be objectively fair.
That which is 'in accordance of merit' is based on a value system. The questions that follow are what, and whose values? The question that follows the former is whether those values are objective or subjective. This definition is not sufficient to be objectively fair.
The last part of 'being consistent with logic/ethics' implies an objective standard. Logic and ethics are not ambiguous; they are objective. This is where fairness can be examined.
To return to the calls of the rich needing to pay their fair share, that call is made to justify higher (existing and proposed) taxes on those who are considered rich. We first need a line of demarcation: at what amount of wealth is one considered wealthy? Though those labeled as 'millionaires' are the figureheads, those (households) who make $250k+ a year make that demarcation line (some say only $200k+) to be considered rich.
A look at the progressive tax system shows that the lower incomes pay as little as 10%, while the upper incomes may pay 35%+ of their incomes to the federal government. With all the deductions available, however, the amount of those who actually pay federal income tax changes drastically. In 2006, the number was around 41% of the population who didn't pay any federal income tax; recently, that number has increased to around 50% of the population. With lower estimates, after deductions the average taxpayer pays 18%, while the average rich taxpayer pays 27%; higher estimates show those who earn more may pay more than 60% of their income. As for the highest wage-earners of the top 1%, some liberal estimates show they pay 25%, while conservative estimates show they pay 40% of federal income tax. Either 25% or 40%, from only 1% of all wage-earners... how is that fair?
Now, without a detailed examination of how that tax revenue is spent (a whole other article), let us look at how 'fair' the tax system is for the people who pay into it. This won't be based off a pleasing appearance, for that is appetitive; this won't be based on an accordance of merit, for that alone doesn't describe the system the merit is to be based upon; it will be based on consistency with logic and ethics.
Logically and ethically, when one has a value and they trade away that value it is because of the nature of a trade that the traders receive something in return. With the progressive tax system, it is not a trade on either side: those who pay more have paid more into a system they do not receive as much from, and those who receive more paid less (if any) into a system they receive more from. If one has a value and they want to give it away, it is charity and charitable giving is a value to the giver; if one has a value taken away without permission, it is theft. A corollary of that is as a value to be exchanges amongst traders, the values are wanted. Just because a value was taken from a vegetarian, he will not be receiving something of value if he is given a steak in return.
Regardless of the level of income, there are things that each individual wants and needs as part of living as a man, and in a commonwealth; among these are food, housing, liberty among numerous other things. Some are goods; some are rights. A good is created by someone; a right is inherent in the life of man. In assessing these goods and rights, we can see where the line of demarcation may exist between positive and negative laws.
A positive law is where the State is to give, or guarantee something; a negative law is where the State is restricted from acting against an individual who is acting on his own behalf. Positive laws seek to give goods; negative laws protect individual rights. One cannot make a good a right, for to make a good a right is to mandate that it has to be made, and that is made by someone who loses his right to choose how to live his own life. There is the crux: positive and negative laws cannot coexist, so one must be chosen.
To bring this back to a 'fair share' we can see that in order for one who cannot afford to receive a good, another who has the resources has those resources taken away by legal force. The system created to ensure the redistribution is the current tax system. Those who the system is designed to help may not pay any income taxes; those who do not receive any benefit from the system of redistribution pay a higher percentage of their income. How is that 'fair?' Even with a positive law in place, fairness (only in terms of paying for it, not in an actual goal of fairness - again, taxes on their own is another article) could be met by making sure everyone paid an equal percentage of their income, with no deductions (deductions only go to the selected/eligible and are not fair for all). The rich would still pay more in amounts, but not in percentage: that is how percentages work. If there was only a 10% tax (wishful thinking), it would take 1,000 men who earned $20,000 a year to equal one who earned $20,000,000 - a thousand to one. Now, add to that figure the current system and it becomes nonsensical for the 1,000 are no longer paying anything, while the rich one actually pays more - multiplying by 0 cannot be done. To return to our rich line demarcation, those who receive the most while paying the least may make less that $50,000 a year. There is $150k-$200k left before one is considered rich; these people still pay and don't receive as much, though not to the level of those beyond the rich line. Shall we again look at what is fair?
Returning to positive and negative laws, the Constitution is a charter of negative liberties on what the State cannot do to an individual. Imagine how much each individual would still have if the State wasn't perpetrating injustice by violating its highest law, and violating it in a most egregious way by taxing productivity.
This faulty system hasn't changed for the better, yet. But that doesn't mean it can't be changed. "The Delusion of the day is to enrich all classes at the expense of each other; it is to generate plunder under the pretense of organizing it." -Frederic Bastiat

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