LG, my point may not have been that clear with one example. I believe, however that graded taxation, as we have now, is quite fair, since for the guy on the bottom of the economic scale it is much more difficult to pay his share of taxes then for the guy on the top of the scale. Furthermore, because there are so many more people at the bottom, they bear, as a group, the the brunt of the national tax burden, by getting either a flat tax (a la Forbes) or worst, a consumption tax, the brunt of taxation will be borne even more on the shoulders of those that can least afford it. That will have a negative impact on the economy as well since you do not get much of a consumption boost from relieving the tax burden at the top but you get a strong negative impact on consumption by moving this tax burden to the bottom part of the economic ladder.
As for "fairness", I do not have number to substantiate the manner by which the taxes are redistributed into the economy, but I would not be surprised that the top "echelon" gets back more than the lower rungs, in term of education, infrastructure, security and safety etc. In any event taxation is a fiscal tool which when used with monetary tolls keeps some balances within the economy. Any major shifts will always cause major economic dislocations, thus whatever changes are made, I think that these should be made gradually over time, no more a sudden change of taxation like we had with Reagan on real estate, which precipitated the S&L crisis. I would say that for fairness, Graham's approach of cutting everyone's taxes by 10% is possibly "apparently" fair, but I think that a fairer distribution would be to raise the threshold of taxation and possibly the 28% bracket few thousands bucks and not touch at all the 36% and the 39.6%. This way, even the higher brackets payer will get "some tax relief", but as a percentage of their current taxation it will be minimal (and have no impact on consumption), but those in the lower segment of the economic scale, will possibly be able to buy a new HDTV or something with the tax break. After all, it is fair if every one get the "same tax relief", or $150 for each $1000 of raising the tax threshold.
That is fair, is it not? The same "Tax break" for everyone.
Zeev |
