The Privilege of Money

Oct 11, 2011 by

One of the arguments I have heard that the tax rates in America should be raised is that there are millionaires who do not pay their “fair share”.  Now, the question remains, what is a “fair share”?  I have heard two arguments towards this “fair share”  The first is that many millionaires do not pay anything in taxes, because of loop holes and the like, and so we should raise taxes in order that they may pay their “fair share”.  The second argument is that millionaires make more money then anyone else, and thus should be paying a higher percentage of their money.  I think that both of these arguments need to be refuted.  They both stand on shaky ground.

The first argument, that millionaires find loop holes in the tax code, is not solvable by increasing taxes.  An increase in taxes does only one thing, it harms the honest millionaires and billionaires.  If there is an increase in taxes, then the dishonest millionaires and billionaires find more loop holes.  Thus, the solution is not an increase in taxes, but a decrease in loop holes.  The problem with this is two-fold however.  One, government revenue would increase, temporarily.  Now, many of these dishonest businesses would cut back and do many thing which would harm the economy.  However, the increase would give the government more money for one year.  Now, this increase is like temporarily giving a cocaine addict more cocaine.  It does nothing to solve the problem, and only makes them MORE addicted.  Now, the second problem is that millionaires who use the common loop holes only to not have to pay the 28% tax, but still pay a considerable percentage of money, would have a tax increase.  This would harm the good millionaires as well as the bad.  Thus, with the cutting of loop holes, there needs to be a cutting in the tax percentage.  Thus, rather than increasing revenue, you keep it the same.  And, rather than putting the millionaire burden on the backs of a certain amount of millionaires, all millionaires share an equal amount of the burden.

Now, the second argument is that since millionaires make more money, they should pay a higher percentage.  There is two problems with this argument.  The first is the percentage part.  People confuse a higher percentage with a higher amount.  If I make one hundred dollars a year, Bill makes one thousand dollars a year, and there is a ten percent flat tax;  then I pay $10 and Bill pays $100.  Now, this is more in proportion to the amount of money he makes.  Thus, he pays more by paying an equal amount in percentage.  Now, let us take the same example, but say that I have a 5% tax rate and Bill has a 15% tax rate.  Now, I pay $5 and Bill pays $150 in taxes.  Now, this may be more money, but what the message becomes is:  Bill makes more money, so he has less of a right to his money than I do to my money.  So, because Bill makes more, he deserves less of each dollar he makes.  This seems to be disproportionate.  Imagine if taxes were the opposite.  I pay $15 and Bill pays $50.  People would be up in arms stating that Bill does not have more of a right to his money than me.  However, we comply to this illusion that more money means you need it less.  And needing it less means you have less of a right to it.  Rights do not come from needs.  It is like stating that because I do not value my life it should not be defended by the police who value theirs.  If the police went by those standards, everyone would be offended.

If there is to be any tax at all, is it “fair” to charge higher rates to people who make more?

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