I was a bit surprised when I was accused of being a Socialist in a recent comment, but when I read, “I challenge you to produce a logical explanation why tax payers who make more should pay a higher rate than anyone else. It is morally wrong to have uneven tax rates.” Somehow, a person believes that it is morally wrong to have uneven tax rates, so I accept the challenge.
Through out history money has never been about fairness. People have been cheating the system and profiting from it forever. The earliest forms of cheating were the accepted form of what we call corruption today. For example, tax collectors were hired to access what people should pay to the government, and for the privilege of doing this and putting up with the hatred of the people they took their cut off the top. But, how did this work? Was it fair?
Well, the governor of a province or local area was given the task of collecting taxes from the people of his region. If we use the example of the Roman occupation of Jerusalem during Jesus’ time Caesar asked the local rulers to collect a certain amount of money, X. The local rulers needed to spend money on maintenance and local projects, so they needed to collect X+Y from the people. Imagine that they hired 25 tax collectors to gather the money from the people. They would divide the area into 25 places and tell each collector he was responsible for collecting (X+Y)/25 and whatever else they collected would be their salary. Do you think that they collected the same percentage from every household? Chances are pretty good that people who were living on just enough money to get by would not be worth the hassle. The tax collector would obviously hit up the “big fish” in his area first to get what he could to cover his (X+Y)/25 part. Then he would spend the rest of the time going around collecting what he could for himself, until the next bill came due. It is only human nature to go to the people with the money first.
But, actually that doesn’t address the specific nature of the morality of taxes and their inherent fairness. But, it does address which people can afford to cover the cost of keeping the wheels of government and the country turning. It also does not address the inherent unfairness of wages paid to people who do different jobs, but work equally hard. It doesn’t address the inherent unfairness of wages being different for the same work throughout the world. And, it doesn’t address the inherent unfairness of the cost of living and the cost of safety and what people have to put up with to earn their wages. It also doesn’t address the fact that people who “know someone” will get a plum job being paid more and working less than a person who has no connections.
But, first let us address the tax issue. Let us assume for illustration purposes two families, each with three children and two parents. Each family has a father would works and a mother that stays home with the kids. The only difference between the families is that one father earn minimum wage and the other father earns 20 million per year. Since minimum wage is different around the country, I will use $9.00/hour for illustration. This means that this father earns $18,720.00 per year. Obviously the family can not afford to buy a house on this income, so they must rent a three-bedroom apartment at $900/month just to have a roof over their heads. And, this takes $11K from the $19K leaving about $8K for food, clothing, medical to last through the year. And, if we set a tax rate of 20% they would have to pay $3744 dollars in taxes. Do you think that this family of five can afford to eat on $4256, let alone pay for doctor visits, or buy clothing or school supplies? Is it morally right to tax these people $3744?
Let’s look at the other family. The father makes 20 million dollars per year. They have a huge tax bill of 4 million dollars, but they have 16 million dollars to live off of. They buy a house and the house becomes an asset. They can sell it at any time and they get that money back. They can invest huge sums of their money in stocks and bonds which pay dividends and interest, so they make more money off of this money. They can choose to risk their money, or they can spend it on themselves. They live in a house that they could purchase with cash, but they choose to get a low interest mortgage, because the interest can be deducted from their income taxes, so they can pay less and keep the cash in the stock market which goes up on average over time.
Would it be morally wrong to ask the wealthy father paying 20% in taxes to pay 30% in taxes while asking the low income father not pay taxes until he makes enough money to pay for his family’s basic needs? I believe that the father making 20 million per years could certainly get by on 14 million instead of 16 million. The additional tax rate is only going to effect the estate that they amass and pass down to their children. Which brings up the morality of passing wealth down to your children.
The Republicans and the conservatives have always been against welfare. They claim that it is morally wrong to give a man something for nothing, because he won’t labor for money if he gets enough money to live off of with out working. This makes perfect sense, and the government should encourage people who are capable of working to work. But, these same people would like to pass their personal fortunes down to their children so that their children may exist without working. And, the size of some fortunes are so large that many many generations of people will be able to live off of these fortunes without the need to work. So, basically what the Republicans and conservatives are saying is that if I know the people, or I am related to them then they can live the high life without the need to work. They are saying that there is a group of people that does not have to contribute to the welfare of the country through their labor. And, who these people are is determined by which family they are born into. Is this morally or ethically right?
Who makes the fortunes and who does the labor has never been fair through out history. European Aristocracy is the story of families gathering wealth over hundreds of years and paying minimal amounts for the labor that kept society operating. But, in America the American myth is that anyone can break into the upper class by hard work and creative thinking. There are examples of people who have been able to do this. Bill Gates, John D. Rockefeller, well maybe Bill Gates, because John D. Rockefeller inherited his money. Bill Gates fought the odds, and he won. But, even Bill Gates says that his fortune was more luck than hard work. The myth of the American working their way up the economic ladder has very few examples of people who made their way to fortune by hard work. People with good ideas have them stolen by those who have money and lawyers. The true story about radio, FM radio, TV, automobile, and airplane were more about who had the money and the lawyers than who had the best idea. In fact, Bill Gates didn’t even have the “best” idea when it came to operating systems. He had the luck to be in the right place at the right time. Is that morally right?
It turns out that it is not quite arbitrary who makes money. It is the people who have the money who continue to control the money for the most part. Exceptions arise from time to time. Some people make modest fortunes that don’t accumulate to the size that the inheritance tax would actually impact. The fear mongering that the Republicans have spread suggests that a family farm might be subject to inheritance taxes that would force a family to sell the farm that has no basis in reality. Large portions of wealth are still able to pass to the next generation without being taxed, assuring that the benefactor would be able to go to the college of his/her choice, and even establish a small business without ever paying taxes on the money. In this way these benefactors are able to pursue their own American dream with a substantial boost of cash into their dream. The rest of us poor Americans with ideas for businesses need to go out and borrow money to start a business and large portions of the revenue will go back to the investor who finances the venture. Is that morally right?
I find it difficult to see that our current system is more or less morally right that the system that Rome had 2000 years ago. If mankind is to progress I would expect that the wise moral and ethical thinkers of our days would be able to establish moral and ethical monetary policy. And, the Republicans and conservatives that wave the morality flag would think about what is truly moral and ethical.
Don't forget what Stephen Colbert said, "Reality has a well-known liberal bias."
Cross Posted @ Bring It On