Taxes and Fairness

It is often heard said, most notably from President Obama, that millionaires should pay their fair share of taxes. That in itself is not controversial; it is likely that everyone would agree that millionaires should pay their fair share of taxes. Should they pay less than their fair share? Few would believe that is proper. Should they pay more than their fair share? That does not sound any fairer than paying less than their fair share.

Rephrasing the question with a slight difference might make the answer less unanimous. Should the middle class taxpayer pay his or her fair share? Most people would agree that is fair. Should the middle-class taxpayer pay more than his or her fair share? Or less? No. Most people would say they should pay their fair share.

How about the poor? Should the poor taxpayer pay his or her fair share? Or more or less than his or her fair share? No.

Most people would say every taxpayer, rich, poor or middle, should pay his or her fair share.

OK, that entire dispute is settled. It is not even a question. The real question is, what is each taxpayer’s fair share of the burden of providing whatever services the government provides?

News in recent days covered Mitt Romney’s tax burden, and Warren Buffett makes frequent news discussing his, as compared to that of his secretary. Mitt Romney and Warren Buffett each receive certain services from the government. Their roads are paved, like mine are, their borders and airways are defended, like mine are, their enemies are shot in middle-Eastern hideaways, like mine are. For the services I receive, I pay some tens of thousands of dollars annually. For the exact same services, Mitt Romney pays $3 Million annually, and Warren Buffett pays, I suppose, more than that. For those same services, some people pay a few hundred dollars per year and many millions pay nothing at all. Is that fair? Is it fair to charge a rich family millions of dollars for what I get for thousands and another family gets for free? What is Buffett's "fair share" of my "fair share?"

On the other hand, some very high income taxpayers pay only 13-15% of their incomes in taxes each year, while middle-class taxpayers pay 25-30%. Is that fair? Is it fair that Buffett’s secretary pays a greater percentage of her income to fund the services she receives than Buffett does?

I would suppose that Buffett’s secretary would like to pay 15% of her income as taxes, but would not want to pay $3 Million per year. I would suppose that the poorest would not like to pay 15% of their income in taxes. What is fair?

If I go to the movies, I pay $10.25 to get in, as do the multimillionaire next to me and the poor person behind him. Some would say that is fair; we are all going to watch the same film, though the ticket price is X% of my income, ¼X% of the rich man’s income and 3X% of the poor man’s income. It might be fairer if they charged me $10.25, charged the poor man $1 and charged the rich man $100. But then, of course, the seats would all be filled with the poor and the rich man would decide not to go.

With the government, however, if the rich man decides he does not want to see the movie, and is not going to buy a ticket, he is told, “The hell you’re not! You may not want to see the movie, but you are buying a $100 ticket.”

The problem now is that the very voices that are demanding that each should pay his or her “fair share” want to determine what that “fair share” is. Yet, I remember an old adage that says that something that is not fair to everybody is not fair to anybody.

An even more fundamental question, one that most of our politicians do not even like to hear asked, is this: What is the “fair share” of everyone’s total income that the government should be seizing from the people and spending? If the takers are the ones who get to define what take is “fair,” then any amount is fair. And if we all get to decide what the other guy’s “fair share” is, then I might feel inclined to vote that my fair share is $10, and yours is everything you get. Except, of course, that that would not really be “fair,” would it?

So the question of whether everyone should pay his or her fair share is already answered. The answer is yes. We are left with two questions: 1) What is your, my and his “fair share,” and, more fundamentally, 2) Is it possible to determine anyone’s “fair share” of an unfair burden?