Monday, January 23, 2012
What is the "fair rate" of taxation?
The answer is, it doesn't exist! Suppose taxpayer A earns $100,000 a year. What tax rate would be "fair?" Most pols and pundits interviewed on TV hew and haw without offering a number. Others try to attack the question by saying that the taxes should approximate the benefits the taxpayer receives from the government. Sounds reasonable, but there's no discussion in the media about what those benefits might be, or even how to calculate them. Let's take a simpler tack. Suppose taxpayer A earns $100,000 and pays $20,000 in taxes, a 20% tax rate. If taxpayer B earns $200,000, or twice as much, should be pay $40,000, or twice as much? Sounds reasonable. After all, he has twice as much income protected by the police, and so on. But that would mean the same tax rate, 20%. So a flat tax means the rich pay would pay more in proportion to their income. What's the justification for our progressive tax rate? These are the types of factors we need to consider in deciding on tax rates. They're not what pols and pundits seem to have in mind when they assert that millionaires should pay their "fair share." (They generally seem to mean nothing more than that the millionaires should pay more than they are now.)
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