Consider, if you will, two identical twins, living identical lives. Each is given a piece of paper and a pencil, and each draws a picture.
The drawings are NOT identical. And so at auction one sells for $100, the other for $1million.
Why then, does one brother pay $10 in income tax, while the other pays $100,000?
Two identical members of society, living identical lives, using identical resources. But one owes considerably more than the other.
I guess at this point I should try to include the disclaimer that I am not anti-tax, or even anti-income tax. I’ve asked this question in various tax threads without response, so here it is, how do we justify the discrepancy in taxation?
You’re looking at it from the wrong end. We don’t impose taxes for fun.
Instead, there are certain functions of government that have to be paid for somehow. There are various ways this can be accomplished. We could assess everyone in the country a flat annual fee. Except this would mean that people with low incomes would owe more than they make in a year. How would my 4 year old daughter pay, for instance?
Oh, children wouldn’t pay? Why not? They consume government services just like adults, right? So why shouldn’t they pay their share?
The answer is that if we taxed the rich the same amount as the poor, we wouldn’t get enough tax money to fund the government that the voters, God Bless them, have asked for.
If the idea of an income tax offends you, we could switch to a sales tax (such as a value added tax). That way, Bob doesn’t pay taxes when he sells a drawing for $100, and Steve doesn’t pay taxes when he sells a drawing for $1,000,000, rather they pay sales tax whenever they purchase something. If Bob buys a can of soda for $1.00, he pays $0.10 in taxes, same as Steve.
So there we have a system where everyone pays exactly the same amount, except if you spend a lot of money you pay a lot more.
This shows up on my screen, but I’m using Firefox, maybe it doesn’t show up in IE.
I am aware we need tax revenue to fund government services. I like those services and am happy to pay for them through taxes. Income tax is fine for this purpose, but go back to the OP and look at the example. Two people making identical use of the system, but society values the product of one of them more than the other.
We’ve established that each person should pay at least $10 in tax, as exemplified by the first brother. But then we turn around and tell the other one to pay $100,000 in taxes.
How do we justify the discrepancy? Why at such a massive extreme?
We justify the discrepancy in two ways: first we point out that one person has more money, and can therefore afford to pay more: “from each according to his means” is not uncommon as one component of a definition of “justice,” as is the pragmatic principal, “you can’t get blood from a stone”; next, we question the proposition that people who are similarly situated in other ways (twins, drawings, etc.) should pay equal dollar amounts in tax: why should that be true? Why should any non-financial aspect of life be considered? How would that even work? Can you defend the definition of justice or fairness that such a practice implies?
perhaps you should be pondering instead why one pencil drawing sells for 10000 times the price of the other. answering that would probably be more socially useful in remedying problems of inequality.
to answer your quesiton, the tax bill is higher because the million dollar seller now has far more cheddar to spread around. they’re (in your example) being taxed at the same rates, after all.
We justify it by saying that the person who makes more money is getting more out of the system. It takes money to make sure that no one comes along and robs the rich twin, or that the Chinese don’t take over and turn us all into communists (somewhat of a joke, but you get my meaning).
But we also don’t necessarily tax the poor twin at all. We recognize that we, as a society, will help support the poorest members and not make them pay anything.
What we argue about mostly is where we draw the various lines between “rich” and “poor”, whether some things should be pay-for use, whether a “poor” person falls off the dole after a certain amount of time, etc.
The clear reason you may not have received a response is because the question is nonsensical and there is no discrepancy. Taxation is on income. The fact of identical twins or even identical efforts not being equally rewarded has nothing whatsoever to do with taxation. Your OP is really nothing more than a non sequitor.
Because after taxes, one brother has $90 and the other has $900,000. How do you justify that? Is the second brother still better off then the first if you double his tax rate so he winds up with $800,000?
Justification 1: If she sold a drawing for $1million she would also pay $100,000 in taxes.
Justification 2: As her parent you are responsible for her, she just represents you using more resources, its the same as you driving more or having a lot of fires.
Simply stated, you having a daughter is relevant, but if it helps pretend each brother has a 4 year old daughter.
Remember that even as a 4 year old she’s drawing from the system. Imagine for a second you had 100 4 year olds, all things being equal. How then will society pay for their education next fall? Would you propose we ask the brothers to contribute $15 and $150,000 respectively?
I’m not asking to get blood from a stone. I didn’t suggest that if the brother makes nothing he should still pay. Nor did I suggest that the lesser brother should pay $100, or even $100,000.
As a society (in this example), we decided that 10% income tax sounds good and gives the government enough revenue to have a balanced budget. That meant the lesser brother had to pay $10, and we were all okay with that. Right?
He still has $90 and we’re all okay with that too. Should we switch it around so that instead he more money after tax?
Should we make it so the other brother also has $90 after tax?
You can’t design a hypothetical and then challenge people to explain why it is fair. You came up with the 10% tax rate, so you should explain why that system is fair.
Personally, I’d have the poor guy pay a couple bucks and the better artist pay $300 grand or more. So no, I can’t defend the hypothetical tax system you invented.
You say it’s not fair that one brother pays $10, and the other pays $100,000. OK. But all that does is question the notion of an income tax. You seem to think it would be more fair if both brothers paid the same amount.
It’s not that it’s relevant that I have a daughter. What’s relevant is that there are plenty of people who have no incomes, and pay no taxes. But surely if everyone should pay the same amount, why shouldn’t kids and people in nursing homes pay the same amount too? Why does the fact that a newborn baby can’t earn any money exempt them from the responsibility to contribute their fair share? After all, I didn’t ask for that baby to be born, so they should pay the same amount as me.
Is it fair for the baby to pay the same amount as me?
Note that I’m explicitly pissing all over your attempted Socratic Method, and sending the plate back to the kitchen.
So answer the question. Should newborn babies pay the same dollar amount of taxes as adults, yes or no? ANSWER THE QUESTION, YES OR NO?
Are they making identical use of the system? Suppose the guy who bought the drawing for $1,000,000 takes it home and starts selling copies. Well, the twin who drew it doesn’t like that one bit; he’ll say he sold the drawing but not the rights to reproduce it. He can use the system to protect his right to make a million dollars for each drawing. Just the body of law and the threat of using the legal system may stop someone from trying to profit off his work, without a dime of court costs or legal fees. It’s much less likely that someone would take the trouble to copy a drawing that’s only worth $100.
No silly, a child is a beautiful and precious gift, so the parents get rewarded with a tax credit and then publicly funded schools, daycare, health care, etc. If each brother had a child, one would pay $2 in taxes, the other would pay $99,992.
Again, it’s not particularly relevant to this example, because again I did not ask for blood from a stone. It’s fine and noble to set a lower limit, like I said I’m okay with an income tax system, and I’m not advocating a flat rate.
Crap, gotta go. Insert some stuff about marginal utility.
Who do you think is getting the raw deal in the OP? You seem to be focusing on the amount paid in taxes rather than the amount actually received. This is the same bogus argument that many anti income tax people make. Do you think the guy who takes home 900k is envious of his brother who got only 90? Why?
Usually, people use this type of argument against progressive tax rates to argue for a flat rate. You seem to be arguing for a flat amount. How should that work? if the system of two we see needs $100,010 to function how should it be apportioned? Just split it down the middle? Give one a 5% rate and the other a 50000% rate. That sound much more equitable to me.
I would also think it next impossible to try and use worth to society to judge who should pay what. That is too subjective and transitory. It would be hard to do when talking about finance or engineering, and almost impossible when discussing art.