Forget fairness; how about volatility?
December 15th, 2010 · 1 Comment · Critical Thinking, Economics, FairTax, Politics
As I first pointed out in this post, the term “fair” (as in, for example, “the rich don’t pay their fair share of taxes”) is a value judgment. It is a completely subjective term that means different things in the contexts of different value sets. What is legitimately “fair” to a progressive is far removed from what is “fair” to a libertarian. So arguing that it isn’t “fair” for the wealthiest Americans to shoulder the majority of the tax burden is a waste of time, because you are either (a) arguing to people who share your values and hence already agree with you, or (b) arguing to people who have different values and hence will never agree with you.
But there are other problems with soaking the rich than just fairness. Robert Frank, in the WSJ, discusses one:
--------------------
Conservatives are frequently arguing that it’s not “fair” that the top 1% pay more taxes than the bottom 90%. Those on the left argue that the rich have all the money, so they should pay more of the taxes — more, in fact, than they currently pay.
To me, the problem isn’t fairness, which after all is subjective and ideological. To me the problem is economic.
If there’s one thing we’ve learned from the crisis it’s that wealth and high incomes have become increasingly volatile. Since so many of today’s top earners make their money from volatile technology and financial markets, their wealth and incomes have also become more volatile.
Taxes from the wealthy have, in turn, also become more wildly erratic. In 2000, California earned $10.7 billion from capital-gains tax revenues. In 2002, capital gains fell 70%. A similar pattern re-occurred in 2009.
California, and the rest of the U.S., is now learning that they have built much of their government spending on the most volatile end of the income spectrum. Income taxes paid by the top 5% fell by $70 billion in 2008. That drop accounted for more than two-thirds of the national income-tax declines.
-------------------------------
Income taxes in general are subject to greater volatility than consumption taxes such as the FairTax.
jeffreyellis.org |
