How To Prove Everyone's Taxes Need To Be Raised

As Congress and the President prepare to stage a grand debate about raising our taxes, I thought I should write a few brief words about how much of a sham it all is.

Recently, at dinner, I overheard a couple of people discussing tax "fairness." Before I go on, let's consider what is meant by the term "tax fairness." Tax fairness is the concept that follows from a few key principles:
  1. We all have to pay taxes, period, full-stop.
  2. Because we all have to pay taxes, the tax rates should be arranged in a way that seems "fair" to everyone.
  3. I know what "fair" means, and you don't.
The first item in the list is as much a truism in this day and age as anything else. Ever since Mark Twain told us so, death and taxes are the only certainties in life. You can't escape the tax man. He will hunt you down and take his cut. It has been thus for thousands of years.

If we were libertarian-minded people, we might conceivably hold a conversation about whether taxes are either fair or necessary. What would be the harm in simply doing away with taxes? For one thing, the assumption that we owe our governments a slice of everything we produce or purchase is tenuous at best. For another thing, it's not as if tax revenue covers our government's expenditures, right? So, considering that there is no hope whatsoever of making up this gap, even if we tax the rich at 100%, why not just scrap taxes altogether and accept the fact that our nation's government spends more than it takes in. So long as the debt is perpetually growing, why not keep as much of our take home pay as possible?

But let's not assume that we are all libertarian-minded people. Let's not have that conversation.

Instead, let's take Point 1 above as given. Then, Point 2 follows directly from Point 1 and the additional stipulation that - at least in nominal terms - we do not actually want to be unfair to anyone.

Setting aside alternate definitions of the word that do not apply in the present usage, "fair" can mean one of two things:
  1. Free from bias, dishonesty, or injustice; or
  2. Legitimate, or proper under the rules.
Let's start with the low-hanging fruit. By the assumption that our government is legitimate, and that its rules are always "internally proper," then I think it can safely be said that any set of rules about taxation are always fair under Definition 2. Anyone have a problem with that statement? Let me know about it in the comments.

If I'm right about that, then all discussions about "tax fairness" are either (a) ignorant of the considerations involved in Definition 2, or (b) not inclusive at all of Definition 2. Because "fair" is an incredibly common word in English, I am going to go out on a limb and merely speculate that "tax fairness" discussions do not involve Definition 2, ever, at all. I can't prove this, naturally, because that would require that I step into the mind of anyone who has ever discussed "tax fairness" and make that determination for sure. At any rate, I think it is a safe assumption to make.

Which leaves us at Definition 1. A "fair" set of tax rules can only be those rules which are free from bias, free from dishonesty, and free from injustice.

To the question of bias, I point out that we have what is called a "progressive tax code," which means that the more you make, the more you pay. This scheme is a literal bias built into the code. By design, our tax code fails the "bias" component of Definition 1. Period. Full-stop.

But, perhaps "tax fairness" only means that the tax code is free from "dishonesty." Well, I have been to the library, and I have seen the tax code. It's all there, in black-and-white, every rule that applies to every conceivable tax situation you might face, and even rules about tax situations you never even thought of before. There are no lies about the tax code. The rates we all pay, and the deductions we can all claim, are all fully elaborated upon. Nobody that I know is lying about it. So this seems to indicate that our tax code is fair under the "dishonest" component of Definition 1.

Now the only question left to consider is whether our tax code is "just." If it is, then our tax code is fair. If it is not, then our tax code isn't fair.

Justice is a big question. Plato wrote a whole book on the topic. In the end, he didn't really solve the puzzle of the question "what is justice?" I strongly doubt you and I could, either.

What I will say is that our tax code levies steeper taxes on the rich than on the poor, allows for deductions from our tax burden during times of financial loss (e.g. educational expenses, children, mortgages, capital loss, foreign tax burden, business losses), and reduces to zero for those of us who are truly poor. From a bird's eye view, the tax code at least appears to make considerations of "fairness" with respect to the amount of tax we all pay.

So why do so many of us insist that so many others of us aren't paying a "fair share?"

I suggest the answer to this question is that, no matter how much some of us pay, it will never be enough for others of us. This is either because others of us want our government to do more than it is currently doing, or because others of us want to pay lower taxes and know that the difference must be made up somehow, or because others of us want to use the tax code to reapportion income according to their own personal value system.

In short, "tax fairness" is not about fairness at all. "Tax fairness" is about changing the tax code according to our own personal vendettas.

So, is that fair?


  1. The working definition of 'fairness' for most more or less corresponds to 'would raise taxes on everyone who makes more than me, but on no one who makes what I make or less'. This can lead to a mathematical proof that if only 'fair' changes to the tax code are ever allowed, the resulting one-way ratchet/filter will inevitably cause the tax incidence function to become a very steep and confiscatory step-like function.

    To a lot of people, tax-code changes that hit them (and some people making a little less than them) can also be deemed 'fair', essentially because the result will have the pond-shrinking/bigger fish effect I discussed here:


    (This is why the super-wealthy favor higher taxes; even though it takes their money, it more importantly keeps down the nouveau-riche)

    The result of the above dynamics is that all tax-code changes that make the tax incidence curve *more* like (in L2-space, say) '100% tax on every dollar made over X, 0% tax on every dollar made under X' (say X=100k or 150k or 90k or something more or less middle-classish) will tend to pass the 'fairness' test of a majority of people. And all tax-code changes that make it less like that, will be voted 'unfair' by a majority of people.

    A shorthand way to say all this is that 'fair' just means communist.

  2. You fail to even recognize that there is lot more to taxation than federal income taxes. All taxes, whether it's corporate tax, VAT, or any other, is paid by the end consumer. Low income earners spend a larger percentage of their income on consumption than wealthy, so when you take that plus a sales tax into consideration the system is regressive overall. This is why we have a progressive tax to offset the regression.

    Additionally, taxes shouldn't be about what's fair. Its about what makes economic sense. Progressive taxes work because it forces the wealthy to invest in their businesses and pay their employees higher wages, or face higher taxes. It doesn't take a genius to look at tax levels across all 50 states and compare it to median wages and quality of life statistics to see what works and what doesn't.

    1. Why do you say I "fail to even recognize" that there is more than just income taxation? You may benefit from reading my post on understanding the purpose of using examples in the context of making a point: http://www.stationarywaves.com/2012/11/personal-experience-forest-trees-and.html

      Here's a proposition: Perhaps you can start by illustrating in no uncertain terms - no math tricks, no clever denominators - EXACTLY how taxation is regressive over all? Then, once I understand your claim, I'll respond to it.

      Additionally, you say that taxes shouldn't be about what's fair, and then you go on to talk about forcing the wealthy to do certain things. Are you sure you're NOT talking about what you think is fair?