[FoRK] Re: Limeys can't comprehend US tax law? ;-)

Stephen D. Williams <sdw at lig.net> on Fri Apr 25 13:33:31 PDT 2008

Jeff Bone wrote:
>
> On Apr 25, 2008, at 2:17 PM, bill stoddard wrote:
>
>> Humm..... "1% of the country pays 33% of the bill".  Not exactly sure 
>> why the statement makes you go hyperbolic... guess I'm an idiot 
>> because  I don't see enough information in the statement to know 
>> whether it's fair or not.  What % do you think is fair?
>
> Cf. discussion of "fairness" in the context of taxation on FoRK circa 
> 10 years or so ago, where I thrashed around with several formal models 
> of the "fair tax" proposal and concluded among other things that for 
> several reasonable definitions of fair you could clearly argue that 
> flat or consumption taxes were (or weren't, depending on the 
> formulation) "fair."  Note that that doesn't necessarily mean the 
> present form of progressive taxation is fair for any reasonable 
> definition of fair, though.  "Fair" isn't an easy concept.
Indeed.
It seems that questions of fairness are not usually generic.  They 
usually are relative to a particular person or group that has benefited 
in a way that perhaps seems unfair.  Perhaps the next level of 
"fairness" might be something that is modulated.  Of course, we already 
have some of this with tax breaks or other incentives for certain 
activities, industries, actions, etc.  That we are able to enact these 
sometimes, but not others that may be even more clearly in need of 
either a boost or a drain, is where fairness gaps grow.

If we want to foster an industry or type of risk or area of innovation 
that is not very viable, we can incentivize in various ways.  We do this 
all the time, including for instance, benefits of public research going 
freely or cheaply to startups or established companies.  Cheap mineral 
rights.  Allowing oligopolies in Oil, cable, cell phones (now mostly 
over, but went on far too long).

Still, we have many cases of runaway profits at the expense of consumers 
who, in one way or another, funded or enabled the winner.  It isn't that 
the winner should be punished, but that the public should share a bit 
more than the average, generic rates in some circumstances.
Fixing this is difficult and probably not deterministic, however it can 
be much more fair.

Some possible examples might be oil, gas, and utilities that end up with 
windfalls, companies convicted of illegal monopolies, companies based on 
public research or other major contribution that reach a certain level 
of runaway profitability, etc.  Cable, local exchange telephone, the old 
cell phone oligopoly...  This kind of thing should work both ways.  When 
some of these have rough times, the tax burden should be lessoned, 
especially if they were "over" taxed in a past boom.

Examples of companies with little or no reason to be put into this 
"payback" category would be Google, Yahoo, Amazon, and the vast majority 
of other "normal" businesses.

sdw
>
> I would say, though, that even IF you favor a progressive system on 
> the notion that it's more "fair," then even so it's reasonable to 
> expect that there should be parity in the total fraction of the wealth 
> owned by one group of taxpayers and the total amount of the tax burden 
> shouldered.  I.e., even most progressives don't think tax should be 
> *punitive* of wealth, therefore most progressives should agree that 
> the total amount of the tax burden you shoulder should match the total 
> amount of the wealth you've got.
>
> If you buy that, then you can clearly see that the present system is 
> generally "fair" but specifically (though not greatly) unfair both at 
> the top *and* the bottom.  From the numbers I posted yesterday from 
> Wikipedia:
>
>     the top 1% pay 36.9% of federal tax (wealth 32.7%)
>     the bottom 50% pay 3.3% (wealth 2.8%)
>
> As you can see, both the top 1% and the bottom 50% pay a greater 
> portion of the taxes than they own of the wealth, though it's more 
> significant in the former case.  (The above data notwithstanding, 
> Kevin's comments about the bill being "gone" by the time you get to 
> the bottom 50 is approximately correct anyway, as 3.3% is essentially 
> epsilon.)
>
> And that's if you buy into the desirability and "fairness" of 
> progressive taxation in the first place.
>
> Net-net, most folks who favor progressive taxation today should more 
> or less be happy with the present system.  Those who feel that the 
> system should be even *more* progressive are, IMHO, just being assholes.
>
> ;-)
>
> jb
>
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