It’s not fair — taxes and morality

“That’s not fair!” Every parent has heard it. And well they should. Fairness is one of the two ethical concepts that children are born with, the other being not to harm another without just cause.

“That’s not fair!” should be the cry as state houses around the nation prepare their budgets for the coming year.

Fairness isn’t an easy thing to decide. There are several ways to think about it, each legitimate. But as far as public budgets are concerned, I think fairness is much like a family in which each person is given what is appropriate. Parents don’t divide their time equally amongst their children nor do they spend the same amount on each. They figure out who needs what and why.  Fairness here isn’t equality but equity.

Fairness in the public sphere should the fairness of equity. Everyone is called upon to pay for those things we all we want and those who have more give more than those who have less.

Why does anyone think it’s fair to have the middle-class make sacrifices to balance budgets when the wealthy aren’t asked to make proportionate sacrifices? Cutting back on school budgets, bus routes, pension payouts and public hospitals won’t affect the wealthy. They can send their children to private schools, they don’t take buses in the first place, pension plans are so small in relation to their wealth that they are irrelevant and they can pay out-of-pocket for any medical procedure imaginable.

The one serious defense of cutting back public budgets to the bone and not increasing taxes on the wealthy—let’s set a figure of over a million dollars a year in income— is that if we were to increase taxes on them, they will leave the state, leaving those behind even poorer. Notice that this isn’t an argument about fairness. It is admittedly unfair, but fairness isn’t the issue but the general good. The system isn’t fair, they will admit, but at least it works.

There are historical and contemporary examples to test out the likelihood of the rich running away. They didn’t under the Eisenhower Administration, when their tax bracket reached as high as 92% in 1953, and remained at 91% and capital gains were treated the same as other income (it is 15% today). And the rich don’t leave New York or New Jersey today to live in a state with lower taxes. Objectively it makes no difference if millions of your multi-million income go to taxes; there is still so much left that you can still get whatever you want. Warren Buffett, Bill Gates and other billionaires have been saying this for a while.

The reasons for not pushing for higher taxes on the wealthy and willing to accept diminished services for the middle class and poor appear to be several-fold: there is the notion that people should keep what they earn; the smaller the government the better and the best way to get there is to starve governments by reducing revenues. These two reasons rest on placing the greatest value on personal freedom. They each neglect the idea of the common good and shared sacrifices.

Ideology aside, the middle class, I think, doesn’t support higher taxes on the rich because they already are over-burdened by taxes and believe that once taxes are increased it won’t stop with the wealthy. It is an understandable concern.

It is true that budgets need to be balanced. But it is unfair to look only on the expenditure side and not the income side. As Eisenhower said, “We cannot afford to reduce taxes, reduce income, until we have in sight a program of expenditure that shows that the factors of income and outgo will be balanced.” By focusing exclusively on expenditures, the middle class will bear the brunt of the burden. The gap between the rich and the rest of America will continue to grow. This disparity in wealth can be sustained only by force. Ironically, in the name of freedom there will be less for most.

President Obama has been curiously silent on this issue. It is a pity, for I think just as Ronald Reagan was able to convince Americans that government wasn’t the solution but the problem, only the president can convince Americans that we need each other to solve our problems and everyone needs to feel the pain equally.








4 thoughts on “It’s not fair — taxes and morality

  1. Robert Reich, in his 2010 book “Aftershock-The Next Economy and America’s Future” describes in considerable detail the parallels between the lopsided wealth and income distribution that existed prior to the Great Depression of 1929 and the similar lopsided distribution in 2007, just before the Great Recession of 2008.

    Although the issues certainly include fairness to ordinary people who are not wealthy, and the proximate causes of the recession include greed, gambling and gimickry, Reich points out a very cogent reason to redistribute wealth via the restructuring of societal supports and taxes:

    It is not possible to fully put our society’s productive capacity to use if so large a percentage of the wealth is sequestered to the top earners (top 1% gets 23.5% of GDP; top 10% gets 40% of GDP; top 20% gets 50%of GDP).

    The reason is that the wealthy are physically unable to spend most or all of their wages. Instead, they invest it to multiply their wealth. If wealth were distributed to people who would spend it, it would turn the wheels of our economy, which would generate employment and prosperity.

    Thus, his proposed basis for redistributing wealth is pragmatically sound, as well as morally sound since it makes fairness practical and profitable for all. The wealthy would benefit in the long run because, while the proportion of earnings would go down, the volume would eventually go up.

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  3. If you walked down a street, and saw someone who was hungry, you could choose to buy them a meal. Instead, we walk over to another person and demand that they pay for his meal. That’s what income redistribution is, theft at gunpoint. You take someone’s income, at gunpoint, and give it to someone else.

    The fact that taxesa act like sand in the gears of the economy just doubles the pain.

    The fact that Americans waste 6 billion hours a year complying with taxes quadruples the pain. That’s more labor spent than the entire US auto industry, a lot more.

    The Founders feared that the republic would devolve into a democracy that would result in “bread and circuses”. It has taken a couple of centuries, but that’s what we’re stuck with.

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