Paying Their Fair Share

One of the over-used mantras of liberals not too long ago was “the rich need to pay their fair share.”  This was usually followed with the assertion that “40% of Americans don’t pay income taxes.”  Using them together, liberals were appearing to imply that the rich don’t pay their taxes and for that reason, their taxes should be increased.  But is that fair?  Let’s look at the two statements independently.

First, the assertion that the rich don’t pay their fair share on the surface just doesn’t make sense.  The first reason it doesn’t make sense is that most liberals voicing this opinion could never agree on what is actually a “fair share.”  So what is a fair share?  France recently discovered that its ambitious 75% tax rate failed miserably.  What happened?  The producers left, further decreasing the amount of revenue the government took in.  All the WWII French surrender jokes aside, there’s nothing to indicate that an American experiment in an even more progressive tax code would produce any different results.  Asserting otherwise is the definition of insanity (doing the same thing over and over expecting different results).  Is it fair to tax one person at a higher rate because that person simply makes more money?  So what is a “fair share?”  No one is willing to say.  Probably because putting a cap on what a fair share would look like would limit the government’s ability to raise taxes even higher than it promised (not that that has ever stopped the government before).  OR, simply suggesting a figure that might be too high would cause the producers to leave.  There is already plenty of complaint about corporations putting their money in other countries, why exacerbate the problem?

The second reason this assertion appears false is because the tax code already taxes producers (i.e. the “rich”) at a higher rate than others.  So the tax code itself is already unfair.  If you want a fair tax code, then the only way to do that is tax everyone at the same rate.  A progressive tax code is inherently unfair.

When the fallacy of the “fair share” argument became apparent, the narrative changed (as it often does with liberal causes).  It then became less of a fair share argument than “the rich just need to pay more.”  The fallacy of that argument is pretty much the same as the fair share argument.  The rich already pay more as a result of the progressive tax code we have.

Now for the 40% statement.  One of the many things I like about liberals (because it’s so entertaining), is their insistence on using statistics without citing a source.  So if we’re going to us the 40% statement, where does it come from?  No one will say. 

Apparently even the Republicans can’t seem to get some of their statistics right.  The fact is, that the 40% of Americans that don’t taxes aren’t in the top 1%; most make less than $20,000.  (http://www.factcheck.org/2008/11/americans-paying-no-taxes/)  And apparently there are mitigating circumstances that make using stats like this tenuous at best.  (http://www.cbpp.org/cms/?fa=view&id=3505)  Using the two statements together to rally support for making the tax code even more progressive than it is now is irresponsible and intellectually dishonest.  They are two separate issues.

Neither of these arguments attaches any substance to the real problem we have in America: a government that continually spends more than it takes in.  The responsible head of every family in America knows that the family cannot spend more than it takes in and survive for long.  So the real problem isn’t a revenue problem, it’s a spending problem.  Rep Nancy Pelosi once said that we don’t have a debt problem, we have a deficit problem.  I’m not sure what she means by that, but most people understand that if you continually run a deficit (the annual difference between what you spend and what you take in) you will always run up a debt (the accumulation of your deficits).

So, wanting to be part of the solution and not part of the problem, I propose some major changes to the tax code:

1.    Eliminate all tax deductions, tax credits, and anything else that would decrease someone’s tax burden.  Part of the problem is that many people take deductions or receive tax credits, reducing their tax burden (dare I say their fair share?).

2.    Tax all Americans at the same rate.  With all deductions eliminated, a flat rate tax code will bring in more revenue because the 40% not paying taxes now will end up paying them under a flat tax rate.

3.    Make the tax deductions payroll based.  In other words, make the burden for paying the tax fall on the employer.  (Self-employed would be responsible for their own tax debt.)  Under a flat tax rate, the employers would know how much income tax is due and pay it directly.  The individual would not have to file a tax return since the employer is responsible for the taxes.  Employers already have  the mechanism in place to pay the taxes, so we wouldn’t dramatically increase the burden on the employers.  You could then reduce the size of the IRS, saving the taxpayers a lot of money.

To put a bow on this and call it wrapped up, the other thing I’d like to add is that if we are going to demand the rich pay more, or pay their fair share, those receiving benefits should DO their fair share.  What’s this mean?  It means that able-bodied people receiving benefits (i.e. welfare) need to actually work.  City, state, federal and other local governments have had to decrease their workforce due to budget issues.  Able-bodied people taking welfare should fill those positions, that is DO their fair share.  It’s un-American for people to take and not give back to the country.  To quote President John F. Kennedy, “Ask not what your country can do for you, ask what you can do for your country.”  It’s time we get back to that.  But what do I know?  I’m not an economist.  This is just my two cents … for what it’s worth.