The Unfairness Doctrine
Income distribution is a hot topic these days. The two major political parties want us to believe that our problems in America stem from an improper allocation of income between the “haves” and the “have nots.” I have spent many hours thinking about what is “fair” in terms of who gets what and I have come to an inescapable conclusion. Our current tax system is unfair … to the rich.
First of all, I must point out that I am not rich. I have never been rich in my entire life. My parents are not rich either. I grew up in a middle class neighborhood, went to middle class schools and drove middle class cars. I do not “know” what its like to be rich, so I will not purport to speak for that segment of society.
My definition of rich and your definition of rich are immaterial for this discussion. You are free to define someone as rich by whatever metrics you so desire.
Let’s discuss what the purpose of government is for all citizens. Government is there to uphold the values found in the Constitution. It is also there to ensure that our rights are not infringed upon and it itself cannot infringe upon those rights either. Government must protect us from internal and external threats. Government provides us laws and regulations that set up a framework for how a civilized society operates.
Each citizen is entitled to his/her segment of government provided resources. We can find numerous examples of these resources such as military and police protection, emergency services, education for our children, a legal system, roads, the post office, and so on.
In exchange for these services, government demands that we pay for their costs. We call these payments taxes. Each citizen must surrender a portion of his/her income to government so as pay for his/her “fair share” of these services. We all accept this somewhat as a necessary condition for the continuation of these services.
Let’s suppose we have a hypothetical citizen who will earn $50,000 in 2011. According to the current tax system, his tax bracket will be 25% – however he will actually only be on the hook for $8625 for a 17% tax rate as a percentage of income. His support for government will be $8625. That is what his portion of government services will cost him (Let’s leave deductions and exemptions out of the equation for a moment).
Now let’s suppose someone will make $500,000 in 2011. His tax bracket is 35% and he will owe $152,314 in tax, which is 30.46% of income. This citizen will make ten times as much money but owe almost 18 times as much tax. That fact alone is unfair, but that’s not the real problem with the tax system.
The true inequities in this system come when we think about services. Will the person making $500k a year really require 18 times MORE services than the person making $50k? Of course not. He is still just ONE person and there is no reason to think he will require ANY more services than the person making $50k. In fact, the person making $500k is likely to use less government services given his high income and lack of need for those services.
One more example is needed to really drive this point home. Suppose we have a citizen who makes $5000 in 2011. This person’s tax bill will be $0 and in fact, depending on tax credit eligibility, this person may get money back from the federal government. He or she still uses government services and the government is effectively paying him or her to do so.
The progressive tax system is one of wealth transfer from the “haves” to the “have nots.” On the surface there is nothing wrong with asking the wealthy in society to help out those who are misfortunate, but you run the risk of establishing cycles of dependency. Our current system has at its goal the equalization of wealth between different income classes. It is inherently unfair and we need to recognize it as such.
We need your help! If you like PunditHouse, please consider donating to us. Even $5 a month can make a difference!
Short URL: https://pundithouse.com/?p=6613
