a progressive tax system is inherently more fair

Great Debates
21

Yep. There really is no debate here, other than what the word “fair” means, and the OP is going to be correct for some definitions of that word and incorrect for others. I think the only way to actually reach consensus on this is through the ballot box, and we’ve more or less done that in our convoluted way.

However, it should be noted that once you open the tax code up to deliberate tinkering (eg, home mortgage interest deduction) you open up the system to what almost anyone would consider to be unfair influence-- wealthy, powerful, or just highly organized people or groups can get their pet deduction included into the tax code while your average person cannot. This is only human nature, so it should come as no surprise when it happens.

I think most of us can agree that any “fair” system will not confer a financial advantage on one economic transaction over another unless there is an overwhelming need to do so. Things like the mortgage interest deduction fail that test, especially since it serves to raise the price of housing to account for the tax savings obtained by buying the house. I hope that none of us will deny that if we eliminated the mortgage interest deduction, the price of housing would decline.

N.B. That is not to say that I favor the immediate elimination of that deduction, but it should be slowly phased out over time. And that’s just one example out of hundreds (maybe thousands).

Would it be too much to ask to wait until people actually do this before accusing them of such behavior? That type of argument is simply a logical fallacy, and cannot be accepted as a valid argument in the debate. Yeah, you put it in (), but better to just leave it out of the record altogether.

22

No, I’m not trying to achieve equal outcomes for everybody. I’m saying the effect of taxation should be equal. Obviously, a CEO will have a better life than a janitor (at least in terms of things that money can buy), but the amount by which the janitor’s life is made worse by having to pay taxes should be no more than the amount by which the CEO’s life is made worse by having to pay taxes.

23

Indeed. I’m trying to debate what the appropriate interpretation of “fairness” is, as it regards taxation. I think that’s a legitimate debate to have.

24

The problem is that you and I paying $100 is felt more than Bill Gates paying $1 billion. Or $10 billion. Hell, what could he do with $50b that he couldn’t do with $40b? Rich people have more and can spend or lose more. That’s just life. What seems would be fair from your standpoint would be abolishing the income tax and just charging a sales tax, which was on everything excluding food. The poor guy would pay tax on clothes and other basics, as well as other things he might want, like a TV. Rich guy would pay tax on his homes, cars, all the furniture he needs to furnish them, his jet, his yacht, his &800 cashmere sweaters, closet full of $6,000 suits and $700 shoes, wine cellar, art, media room equipment, etc.

Does that work for you. Seems fair to me, as what one pays is proportionate with what can can afford to spend. No?

25

I never said, nor intended to suggest, that fairness should be the only goal of the tax system. Obviously the purpose of the tax system is to fund the government*, but I think it ought to do so in the fairest way possible. A tax of zero fails to fund the government, so at that point fairness is irrelevant. But likewise a tax that, say, is applied to everyone except Bill Gates and Warren Buffet, while it might be perfectly adequate at funding the government, would be unacceptably unfair. Clearly fairness is also a concern that deserves some consideration.

  • How much funding the government should require, and how it ought to spend it, is of course another highly contentious question.

I agree that a progressive tax should be employed, and I agree that this is another good argument for it.

But I’m actually trying to have a more “meta” debate than that, arguing about the merits of different claims about fairness as it pertains to the tax structure. I’ve seen a lot of people argue that a flat tax would be more fair (whether or not they agree that it’s impractical, or poor policy for other reasons). And I’ve seen relatively few people argue that a progressive tax is inherently more fair. I’m bothered by that, because I think it shows people are defining fairness in what, in my opinion, is the wrong way.

26

I didn’t say it wasn’t legitimate.

27

I think it’s a fine debate. Going back to my other post, we both have to work for our selves and work to contribute to society, right. If there’s a tax rate of 20%, that means that each week, I’d be working four days for me and one day for the government. Let’s now say that your one day of work for the government generates $5,000 and my one day generates $500. While you contribute ten times more, I can at least see the fairness of each of us giving one day to the government. But if I want to then penalize you for being more productive and have you work 2 days for the government and only 3 for you and your family, that gets LESS fair, not more fair.

28

Sorry, I was reading hastily, and I think I read a tone into your post that wasn’t actually intended.

29

I feel that this has the same flaw as the line of reasoning I’m arguing against above, only you’ve replaced money with time. That is, it assumes that a day of my time is worth the same as a day of your time.

The thing is, if a poor person works all week just to barely make enough to feed their family and keep a roof over their heads, then losing a day of work to the government would be a devastating blow to them. Where as if a rich person could afford everything they need on only a tiny fraction of their salary, losing a day of work has far less impact.

If working two days for the government causes less suffering for the high earner than working one day causes for the low earner (in terms of utility or the impact on their quality of life), then the government is actually imposing a greater burden on the low earner.

30

For defining fairness, I agree with using the time one devotes to supporting the government, rather than amount of money or percentage of income. The amount of time each person has in life is more similar from person to person than income, and is essentially what we are trading for income. Some people choose to spend their time training to increase their wages while others choose more leisure time. Some prefer to work longer hours than others, or take on less enjoyable work for more income.

Many people, such as myself, do not get time and half for overtime. Don’t forget the value of benefits, such as health care and vacation, which come with regular hours, but do not scale up with additional overtime worked.

31

So you would be OK with a tax structure in which all citizens work January through, say, March for the state, no matter how small or large their income (with perhaps an exception for those with so little income that they would not be able to stay fed and clothed if taxed). Works for me! Very progressive!

32

On further consideration this whole debate is pointless. As it stands now, the wealthy can simply buy Congressmen to write the tax code with the loopholes and exemptions that will allow them to escape taxation, no matter the “official” rate. (See: Mitt Romney). Until our political system stops being pure legalized bribery, the rules will simply be changed on the fly to eliminate the wealthy from the tax burden … only the middle class and the poor will bear it.

33

So, what you are saying is that the rich want to pay taxes, since if they could simply buy congress-critters to write whatever they want it makes no sense for them to pay anything…correct?

34

I’ve actually proposed this sort of concept in other taxation threads, I even worked out some rough formulae for it. I never seemed to get much traction with the idea though. My proposal was essentially determining a formula to more or less adjust people’s income based on utility, and then having a “flat” percentage based on that. And that percentage would be tied directly to the operating cost of government, so as costs go up or down, taxes would follow with.

The reasons I support this concept is several fold. First, I see some discussion about fairness, but the point is taxes need to be fair. Yes, it’s difficult to define fair in a way that is accurate for everyone, but we should make a reasonable effort to do so. I absolutely agree that the only point of taxes should be to fund the government. But I think it follows as a corrolary from that, knowing that taxes serve, intentionally or not, as a means of social engineering through incentivizing untaxed activities and disincentivizing taxed ones, then it should be as neutral as possible on all activities to avoid it serving those other purposes. Thus, it NEEDS to be fair.

Second, to that extent, this means vast simplifications are in order. If taxes should only serve to fund the government, why are their exemptions and penalties for so many other things. Sure, some of these things may arguably be worth incentivizing or disincentivizing, but I don’t think we should use taxation as the vehicle for that. So, for instance, rather than giving a tax break for owning a home, remove the tax break, create a program to provide that incentivization, then that cost gets built into the cost of government and we can have a debate about whether or not that cost is worth the benefit.

Third, in taxation serving the purpose of only funding the government, it should be as minimally intrusive as possible. That so many people have to spend so much time, money, and effort and reveal so much personal information is unnecessary and a waste of resources. If we went with this sort of proposal, I can figure out pretty quickly how adjustments in the cost of government affect my tax situation. Whether I own my home, how many kids I have, what my medical expenses are, all of that, it really shouldn’t have anything to do with making sure the government has the money it needs to operate. Instead, I should have the choice of whether or not I reveal that sort of information based on whatever program I do or don’t want to take part in.

Fourth, it removes the disconnect from revenue and spending. Everyone always seems to want the government to do more and at the same time reduce taxes. If we can fairly simply tie the cost of the government to a number that runs through a simple formula to say what I owe, then we can have real discussion. For instance, a new bill will cost so many billions of dollars over so many years. It means we HAVE to have a balanced budget, and it also means the public can then see that number broken down to a number that’s meaningful to them. When we hear a number like $500B that means nothing to me as an individual, but if it can be discussed in terms of individual share, and all I have to keep in mind is what my personal utility adjustment is, now I can relate to that number and have an understanding of what the real cost of it is and compare it to the perceived benefit.

Finally, in keeping in mind that it should be fair, the relative “pain” that we all feel in supporting the cost of the goverment should be similar. Obviously, this is difficult to meaningfully qualify, but I think we can get reasonably close fairly easily jsut by considering marginal utility and cost of living. But the whole idea, as mentioned upthread, that generally everyone pays around the same percentage of their income flies in the face of this fairness concept precisely because, in general, marginal utility decreases with greater wealth, so to maintain roughly the same “pain” that percentage should increase. Yes, it will be impossible to be perfect, but we shouldn’t let the perfect be the enemy of the good, certainly if that good will be more fair than the current system.

35

Many people, such as me, don’t make a penny more for overtime. Not directly, anyway. There are lots of reasons people work overtime beyond the cash. People lower in the hierarchy are more unlikely to benefit indirectly, and thus get the extra cash.

36

I’m not within shouting distance of Bill Gates, but my losing $100 is nowhere near as painful as him losing $10 billion. At a certain point it is not putting food on the table, it is what you could do with the money. He’d see it as not being able to do the charity work he has dedicated himself to.
Someone on the brink of starvation on the other hand might find this more painful, but you guys haven’t driven us all there - yet.

Rich people don’t spend nearly as much of their income on buying stuff as poorer people - as you guys admit with your cut taxes on the rich so they’ll invest argument.

In fact the incremental salary a poor person makes working overtime is far more important to them than the incremental salary a better off person would make. We know this, because if it weren’t true there would be a movement by professionals to get overtime.

37

I think Gates would give up ALL of his luxuries in exchange for providing adequate food or medicine to his family, but if that’s the definition of how to create equal marginal utility, now we’re in the land of socialism. There is just no way to make it equal, so we have to balance it as best we can. I think once rich people start leaving the country to protect their income, it’s too high. (of course perception plays a role in this, as well as career mobility – bah, there’s no easy answer)

38

If the “land of socialism” is just a place where we don’t start taxing income until there is enough to provide for basic necessities then I don’t think that’s a scary place to live at all. Thereafter the marginal differences aren’t so sharp I think.

Nor is progressive taxation unequal. Everyone is taxed equally on the first million dollars they earn each year. And on the next and the next and so on. And if rich people want to leave, let them go. Just don’t let them come back. I bet there would be fewer tax exiles if they were truly exiled.

39

Whose metric do we use to measure “suffering”?

40

We agree. Move to a Flat Tax with no loopholes. :wink: