Fairness in the Tax Code

"As It Relates To Taxes, Who Defines 'Fair'?"
This was a question posed by a friend, to which I answer:

The people insisting that "the rich" pair their "fair share" aren’t at all interested in “fair,” and the proof is everywhere. Consider:
--Is it fair to tax saved money (that was already taxed) because the owner died? The estate tax may be politically logical and a valuable revenue instrument, but its imposition has nothing to do with “fair” -- especially when every dollar in an estate was already taxed once.
--Or is it fair to tax the gains from wise investments when we don’t allow deductions for the losses from unwise ones? Increased risks are added to the wrong side of the equation and, as a result, reduce investments. Is this fair? Hardly! Even if capital gains taxes are in some cases reasonable, no one with a triple-digit IQ can call it "fair".
--Is it fair that the top 1 percent of wage earners pay 37 percent of the income taxes? They don’t use 37 times the government-provided services of the remaining 99 percent of the country. They don’t place 37 times the burden on societal resources. And they certainly do not require 37 times the entitlements. Is the tax burden on the wealthiest amongst us appropriate? Possibly. Is it "fair"? Not by any definition I know.
--Is it fair that the bottom third of Americans pays no federal taxes at all (when they are among the largest consumers of government-provided benefits)? Of course it’s unfair. It may also be the right policy -- but that is a different debate than one over fairness.

Tax policy and fairness is a tough match. The tax code is not -- nor has it even been -- built on a concept of overall fairness. But if, like the president, alleged “fairness” is your goal, there are ways to do that.

If you think that fairness means paying an equal proportion of earnings, OK -- that means a flat tax. Under a flat tax the rich would still pay more in taxes -- it’s the percentage that would stay the same. Under this structure everyone pays the same proportion in taxes, while the amounts differ with income. A flat tax of, say, 20%, means that a person earning $250k per year would pay $50k per year in income taxes; a person earning $40k per year would pay $8k in income taxes. This is “fair,” even if it might seem inequitable to the left.

Or we could go for the most pure form of fair -- equal shares. Using this method, we would take the total federal budget and divide it by the number of people in the country, and then assign each person a share of the bill --about $11,800 per person per year. The average family of five would face about a $60,000 tax bill.
That is “fair,” even if it is absurd.

This nonsense (along with the new "shared sacrifice" mantra) has NOTHING to do with fairness -- it has to do with political reality. The fact is that the wealthy are viewed by most as having a greater ability to pay, and that ability to pay makes taking it from them “fair.” But the resulting implication -- that the 37 percent the top 1 percent (or 67 percent the top 10 percent) pays in taxes is unfair to the remaining 90-99 percent -- is beyond ridiculous.

That doesn’t mean the progressive tax system is wrong, though I think it's hideous -- but it has nothing to do with “fair.” Politicians don’t want anyone to pay their “fair share,” they want someone else to pay their constituents’ share. The fact is the Democrats are demonizing people paying the most in taxes under the guise of “fairness.”

It is an absurd line of attack. And it is one that makes villains out of the very people we are asking to give up even more. I am reminded of the scene from "Goodfellas" after Paulie takes over a restaurant at Henry Hill's urging: "Business bad? F- you, pay me. Oh, you had a fire? F- you, pay me. Place got hit by lightning, huh? F- you, pay me."