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What is a “Fair Share” in Paying Taxes, Anyway?

by Michael Shermer, Sep 25 2012

In 2011 Mitt Romney paid $1,935,708 in taxes and made $4,020,772 in donations to charity, presumably most of it to the Mormon Church. Did Mitt Romney pay his fair share of taxes? That depends on how one defines “fair,” which we can think of in two uses: (1) fair value for services rendered; (2) fair percentage of earned income.

  1. Fair value for services rendered. For what amounts to roughly the same services rendered by the government that I received in 2011 (military, police, fire, roads and infrastructure, courts, and other essential services, along with future promises we both hope will be honored—Medicare, Medicaid, and Social Security), then Mitt paid almost two orders of magnitude more in taxes than I paid. And, presumably, I got everything from the government that Mitt got (except for Secret Service protection because I’m not running for President), or at least in the ballpark. So, by this definition of “fair,” it seems not unreasonable to ask: why should Mitt pay so much more than me when he doesn’t get additional police and fire protection, better roads and bridges, superior courts, and the like, than I receive for my much lower taxes? Almost no one accepts this definition of “fair,” but it’s worth thinking about as an exercise in critical thinking about how society should be structured. If Mitt and I lived on the same block why should he have to pay so much more for the same road on which we both drive? Is Mitt’s house going to get extra special fire protection from the local fire department because he paid more than I did? If we both sent our kids to the same public school, do Mitt’s kids get two orders of magnitude better education than my kids? The answer to all of these questions is obviously “no,” but why are we not asking these questions?
  2. Fair percentage of earned income. Mitt paid about 15% of his income in taxes. I paid about double that amount. Here we can turn the above questions around and ask why Mitt should only pay half of what I’m paying in percent of income for those same roads, schools, police and fire departments, courts, and the like? I’ll admit, it irritates a little that I’m paying so much more in percentage than Mitt, but I must also confessedly note that knowing Mitt paid almost two million in taxes attenuates that irritation considerably. Two million bucks is a lot of dough to hand over to bureaucrats in hopes that they do something useful with it.

So this entire topic turns on a simple definition of what we mean by “fair,” and that, in turn, seems to turn on what our goals as a society should be: equality of opportunity or equality of outcome? Equality of opportunity would seem to favor the position that we all pay our fair share of taxes in raw numbers. Equality of outcome would push us toward the position that we all pay our fair share of taxes in percentage. Given the messiness of politics it seems a foregone conclusion that we’re never going to get close to achieving either one, but if I had my druthers I suppose I would prefer that the system be designed to insure equality of opportunity over equality of outcomes. I would prefer we try to protect people’s freedom to do what they want without restrictions because of race, creed, color, religion (or not), birthplace, disability, etc. In other words, I strongly favor strong laws against discrimination. Thus, I’m not anti-government across the board. We need government for lots of important things. But making sure that outcomes in life are roughly equal for everyone is not one of them. Steve Jobs and Bill Gates changed the world in their own way, and now Gates is investing his billions in charitable causes to insure that people around the world at least have the basics in life (water, toilets) so that they can have a shot at approaching an equality of opportunity. Gates will do more with his hundreds of billions than the government ever will ever accomplish with trillions of dollars of our tax money, most of which is wasted in inefficient allocation processes that Gates would never stand for. Look what he just did by funding a prize for a $100 toilet! Can you imagine what it would cost for a government agency to design a new toilet? Or, can you imagine what Bill Gates could accomplish with a trillion dollars?

The Mind of the Market (book cover)

Some people resent the rich for evolutionary and historical reasons I outline in my book The Mind of the Market:

  1. Evolutionary egalitarianism. Humans evolved in small groups of a couple of dozen to a couple of hundred individuals in hunter-gatherer communities, in which everyone was either genetically related or knew one another intimately, most resources were shared, wealth accumulation was almost unheard of, and excessive greed and avarice was punished. Thus, we naturally respond to a free market system in which conspicuous wealth is paraded as a sign of success with envy and anger, and the expectation is that someone or something more powerful than those greedy individuals should implement corrective action.
  2. Resentment of historical inequalities. Throughout most of the history of civilization, economic inequalities were not the result of natural differences in drive and talent between members of a society equally free to pursue their right to prosperity; instead, a handful of chiefs, kings, nobles, and priests exploited an unfair and rigged social system to their personal benefit and at the cost of impoverishing the masses. Thus, our natural response is to perceive such inequalities as ill-gotten gains and to demand controls from the top down to limit the amount of wealth accumulated by any one individual. Whenever anyone says, “they should do something about it,” the they that is invoked is inevitably the social institution with the most power: in our case, the government.

To this I add the fact still today, with all the checks and balances allegedly in place to keep the system fair, some people are still able to rig the system in ways that we regular folk cannot, and these are often rich people. Crony capitalism is a very serious problem, which is why I recommend my friend John Mackey’s forthcoming book, Conscious Capitalism, as a significantly more humane form of market capitalism that also has the virtue of financially rewarding truly moral behavior.

I know in this forum that readers turn apoplectic at even a whiff of libertarianism, which is almost always mistakenly conflated with anarchism or minarchism or anarchocapitalism, or something else that implies a dramatic curtailment of government. So let me state for the record that I fully recognize that we need a Leviathan state to protect our freedoms and insure our liberties through laws applied equally to everyone. And that includes very strong laws governing Wall Streeters, who will cheat worse than doping athletes if given the chance.

And while I’m ranting…Tyler Hamilton’s new book, The Secret Race (which I wrote about in my last blog), reveals that Lance Armstrong made positive drug tests “go away” by calling the president of the governing body of the sport (the UCI) and making donations to their drug-testing agency (WADA). This would be like Barry Bonds making a donation to Major League Baseball’s steroid-testing agency during his playing years, and them accepting the money and withdrawing any further investigation of his steroid use. That level of corruption is a microcosm of what goes on between government and the rich. The problem isn’t rich people, any more than the problem is that some athletes like Lance Armstrong are incredibly successful. It is that the system can be hacked and rigged and cheated. There is nothing wrong with Lance (or Romney) making lots of money through hard work. The problem is what the system allows them to do with that money that is unfair to those who want to compete fairly. According to Hamilton, Lance’s money bought him the best doping doctors to the exclusion of other cyclists. The rich can buy politicians in the same way. The problem is not the money, it is that “we” (Congress) allows the money to be used to buy politicians.

The solution is to fix the damn system, not get rid of gifted athletes or entrepreneurs.

187 Responses to “What is a “Fair Share” in Paying Taxes, Anyway?”

  1. Lukas says:

    In your first evaluation of “fairness” (“Fair value for services rendered”), you note that you and Mitt both receive the same services from the government. I don’t think this is true. As a businessman, he profits from infrastructure like the police, or roads, much more than you do. Similarly, if we compare your situation to that of a poor person living on the street, you likely profit more from the government than he or she does, since you own more things that need to be protected by the police, make use of roads more, etc.

    In your second point (“Fair percentage of earned income”), you don’t mention the money left to the person. Sure, Mitt pays a lot of taxes, but not only does he pay less than you do in percentage, the money that is left to him after taxes is much, much more than what’s left to you. He makes much more money than you, pays a lower percentage, and ends up with even more of an advantage over you than he started out with.

    Of course, this should all be completely irrelevant, because “fairness” is usually not a good way of evaluating how well the government works. I don’t care if rich people pay a “fair” share; I care whether the system works. Can a poor person expect to get good health care, thus ensuring that the society as a whole is more productive and healthy? Is there working public transport? Are the schools working well? Is the tax burden on people such that they can pay it without falling into poverty? Can people get an education without paying it off for the rest of their life?

    • BPD says:

      Agreed. Fairness has nothing to do with it. It comes down to what kind of country we want to live in. One with maximum freedom for the few to become wealthy, or one with broad prosperity and civic participation.

      There is a spectrum between egalitarianism and oligarchy. The more wealth and power are concentrated, the more a country shifts toward oligarchy. The more wealth and power are distributed the more that same country shifts toward egalitarianism. Taxation and the redistribution of wealth through government services are important checks on the natural tendency of markets to concentrate power and wealth in the hands of a few people.

      If we want to live in an egalitarian Republic with broad prosperity and widespread civic participation, we should be prepared to tax the wealthy heavily and invest the revenue in public spending that benefits the population at large.

      Doesn’t matter if it is fair or not.

      • Paul C says:

        What seems to be missing from the argument is where the money is coming from. The majority of Romney’s income comes from investments, that is money that is being used to benefit others (Jobs, Homes, etc) for which he gets a return. Many of those who argue “fair share” seem to see the rich as Scrooge Mc Duck, with his huge vault of money he swims in. That is not reality. Money spent for an extravagant life style ultimately benefits those who provide the services and goods.

      • Dan D says:

        Paul, you seem to be making two arguments. 1) That investment income deserves to be taxed less since it is a net benefit to society–creating jobs (“homes” I don’t understand unless you mean people with jobs buy homes) etc.

        Yet not all investments do such things. Currency Speculations, many Commodities speculations, profits made short-selling–or on the failure of another company–do not benefit the society or create jobs. Day Trading and computerized micro-second trades create wealth for the investors, but not jobs, etc for the non-investment class.

        Your other argument is that spending money on an extravagant lifestyle provides a market for people selling extravagant goods and services. What you do not mention is that non-extravagant lifestyles also provide markets for people selling non-extravagant goods and services. Yet those in the non-extravagant lifestyle pay a smaller % of their income in taxes than those in the extravagant lifestyle who earn their money through investments, or through inheritance.

      • tmac57 says:

        Now, if you just had a similar amount of compassion for people who earn $8.00 an hour,and work 60 plus hours a week,instead of $3,600 an hour…where indeed will we ever find the money…I wonder?

      • itzac says:

        Money spent on anything benefits the people who provide the goods or services. However, people who earn 100x what I do don’t consume 1000x what I do. Romney has several homes, but not 100. He has several cars, but not 100.

      • Another point of view says:

        That’s right, but since he doesn’t spend it he must invest the rest. If he does it correctly he’s going to earn more money, but so are many others who are using the money to make money, most, creating jobs.

    • itzac says:

      In support of your first point, Lukas, I think it’s important to remember that capitalism only works if you have someone to trade with. Given that someone’s ability to trade, that is whether or not they have something to trade, is at least partly the result of the benefit they get from the government, you accrue a small portion of that benefit for yourself when you trade with them. No one becomes wealthy on their own. Only through a tremendous number of trades does someone like Bill Gates amass his fortune, and with each of those exchanges, he accrues a little more benefit, so that he aggregates a far larger benefit from the government than you or I.

      • TPaine says:

        Even if you believe that the ability to trade is at least partly the result of the benefit they get from the government, every time someone traded with Bill G, they benefited no less than did Bill. So Bill does not accrue more benefit than the public. The public benefit is the unseen. If the public did not benefit, they would not trade.

      • Another point of view says:

        What trades does Bill Gates make that requires the government. The last time I knew, he started by creating a better way to control the operation of computers (DOS). IBM wanted to use his system when they got into personal computers and he was on his way. IBM traded big bucks because they wanted the use of his creation. He did not hold a gun to their head, they did it willingly because they felt they would also make big bucks.

  2. Max says:

    Can someone explain why the capital gains tax is so low? It seems to incentivize gambling on the stock market over other ways of earning an income. Most of the time, you’re not even investing in companies, but trading stocks with other gamblers.

    • tmac57 says:

      The answer to your question,in a word is ‘lobbying’. But I suspect that you already knew that.

      • Daniel says:

        As an initial matter, low capital gains tax incentives investment, which most people agree is a good thing.

        There’s also a bit of tradeoff, which most people don’t recognize when the issue is discussed. Obviously, when you invest, you take the risk that you’ll actually lose money, as opposed to the wage earner who is essentially guaranteed to get paid, save for extenuating circumstances like the bankruptcy (or crookedness) of his employer. In general you’re only able to claim a deduction of $3000 per year in capital losses. Anything greater must be written off in successive years. So if you had wages of $100,000 but took a capital loss of $10,000 in a particular year, you have to claim $97,000 as opposed to $90,000 in taxable income, even though, in actuality you’re $10,000 poorer.

        No one discuss this aspect of it, since it’s a lot easier to avoid substance, be a demagogue, and scream one percenters.

      • Gary Nolan says:

        Capital gains tax is so low because it is money that has already been taxed at the corporate level. This is a BIG distinction that Dr Shermer sadly left out. At the corporate level, this money was taxed at the 30% or whatever it is, then when Romney withdraws his cut, he’s taxed again at 15%. So the idea that he’s only paying 15% is VERY misleading.

      • Daniel says:

        Not to mention that the US has the highest corporate tax in the industrialized world.

      • LREKing says:

        Unless Mitt Romney is himself a corporation (which would explain a lot), the taxes paid at the corporate level were NOT paid by him as personal income tax of any kind.

        The idea that he is being double-taxed is deceptive and misleading.

        There is a knowledgeable and in-depth discussion of this over at Daily Kos.

      • Somite says:

        But one of the lowest for the highest bracket incomes. It should be the reverse.

      • tmac57 says:

        When I put my ‘already taxed’ wages into a CD,the interest that I earn on the CD is taxed at the higher ordinary income rate.

      • Janet Camp says:

        And when I take what’s left of my paycheck, on which I have already paid tax, and spend it at the store for anything other than food or rx, I pay tax again. So does everyone else who shops, but we all pay the same rate.

      • MadScientist says:

        @Daniel: Where do you get the idea that the USA has the highest corporate tax in the industrialized world? Most (industrialized) countries I’ve worked in have had much higher corporate taxes.

      • tmac57 says:

        My understanding is that capital gains and losses that occur in the same year can be fully realized.For example if you had $10,000 in gains and $10,000 in losses,that would be a wash.

  3. Max says:

    “I’ll admit, it irritates a little that I’m paying so much more in percentage than Mitt, but I must also confessedly note that knowing Mitt paid almost two million in taxes attenuates that irritation considerably. Two million bucks is a lot of dough to hand over to bureaucrats in hopes that they do something useful with it.”

    It’s a lot of dough to you, not to Mitt. That’s why we look at percentages in the first place. Moreover, the qualitative impact of the same rate is not the same for everyone. 15% for a middle-class person cuts into living expenses. For Mitt, it cuts into his trust fund or something.

    • Daniel says:

      Again, he gave more than $4 million to charity. I’d imagine the folks who comment here aren’t thrilled that it most likely went to a religious organization, but the fact remains is that it’s income that he has voluntarily foregone.

      All of this stuff is a distraction though. Taxing the income of the monopoly man at 30 percent (or the “Buffett tax”) will be less than a rounding error on federal revenues, and, will not make the 99 percent’s taxes any lower.

      It’s always the other guy whose taxes are too low.

      • Eric says:

        I wouldn’t call the Mormon Church a “charity.” More like a “corporation.”

      • tmac57 says:

        It’s also irrelevant in the context of this article,since it isn’t about Romney specifically,but about fairness in taxation in general.
        As of the last time that I checked,people who earn less than $100 K annually,give a higher percentage to charity than those over $100 K on average.

    • TPaine says:

      Why even look at percentages? Why if you must tax, don’t you tax at a flat rate by the person? Why penalize the producer more? Besides, taxing productivity is counterproductive. Taxing consumption is the only “fair” way for a society to prosper. Then those who consume the most, pay the highest cost and those that don’t are not penalized. And saving would be encouraged, not spending. Our present system is almost but not quite backwards.

  4. Deen says:

    And, presumably, I got everything from the government that Mitt got (except for Secret Service protection because I’m not running for President), or at least in the ballpark.

    Maybe if you count direct effects only, but not when you count indirect effects too, which you omit. Roads and affordable education benefit not only the workers and the consumers directly, but also indirectly benefit the companies that depend on those workers and consumers – and the higher you are in the food chain, the more the benefit accumulates.

    Besides, isn’t being rich in and of itself a sign that you are benefiting more from the system than others? Yes, you also benefit from your own talents and hard work, but you can’t pretend you benefit from the system too, and clearly at a higher rate than others, so it’s not unreasonable to pay more taxes in return.

    I’ll admit, it irritates a little that I’m paying so much more in percentage than Mitt, but I must also confessedly note that knowing Mitt paid almost two million in taxes attenuates that irritation considerably.

    What you completely forget to look at is the marginal utility of the income you are taxing. A $10,000 or a 1% tax increase is a much bigger sacrifice on a low income family than on a high income familiy, as it will cut into much more basic needs.

    Both marginal utility and the fact that the rich benefit more from the system is why most countries have a progressive tax code, where the effective tax percentage isn’t just the same for everyone, but even goes up with rising income. The US seems to be an outlier here.

    Throughout most of the history of civilization, economic inequalities were not the result of natural differences in drive and talent between members of a society equally free to pursue their right to prosperity;

    What makes you think that today is that much different?

    The problem is not the money, it is that “we” (Congress) allows the money to be used to buy politicians.

    The problem is concentration of power. That is why modern democracies have checks and balances, and spread out some of that power over the entire population by giving them a vote. But if money is power, then disproportionate concentrations of wealth will inherently translate into disproportionate concentrations of power too.

    The solution is to fix the damn system, not get rid of gifted athletes or entrepreneurs.

    Do tell, who is suggesting to “get rid of gifted athletes or entrepreneurs”?

    • gdave says:

      Both marginal utility and the fact that the rich benefit more from the system is why most countries have a progressive tax code, where the effective tax percentage isn’t just the same for everyone, but even goes up with rising income. The US seems to be an outlier here.

      The U.S. does, in fact, have a progressive income tax code. However, Mitt Romney receives almost all of his income from capital gains (income from investments, interest, and the like). In the U.S., this is taxed separately, at a flat rate of 15%. Taxing capital gains separately at a flat rate is actually common. Cursory research (a.k.a. Wikipedia) indicates it is the norm – except in countries where capital gains aren’t taxed at all. Among countries that do tax capital gains, the U.S. seems to be at the low end, but of course still higher than those that do not tax them at all.

      • Deen says:

        Sure, if you leave out capital gains, the tax code is progressive. But given the fact that capital gains are taxed so low in the US, and that capital gains as a percentage of income tends to go up as income increases, the total effect is a regressive tax rate.

    • David Johnson says:

      I personally feel it is impossible to have an actual, working democracy if there is more than three orders of magnitude difference in wealth between the lowest 10% and the highest 10%. More than that, and the highest can basically buy votes and insure that they run things, not the populace as a whole.

      Basically, you can have rich people, or you can have a democracy. You can’t have both.

      • TPaine says:

        “Basically, you can have rich people, or you can have a democracy. You can’t have both.”

        Basically, this is a ridiculous statement.
        In any society or group or company or even a family there is a division of labor. Some at one extreme of this division will appear rich to some at the other extreme. If you seek to penalize the rich, you are shooting your society in the foot and will eventually kill it.

      • Vance Shaw says:

        So, in essence, extreme selfishness is the essential basis of any functioning human society?

  5. Max says:

    A more objective bottom-line measure than “fairness” is the tax rate that maximizes revenue.

    There’s the myth that tax cuts would increase revenue, but economists disagree with that.

    Even this Cato senior fellow admits that higher taxes would increase revenue, but says we should measure growth instead of revenue.

    Still, it’s funny how he has a generic graphic of the Laffer curve with a peak around 25%, while actual evidence-based Laffer curves below it show peaks around 60%.

  6. Trimegistus says:

    The whole concept of “fairness” in taxation is nothing but a bit of leftist rhetoric.

    Consider: what would be a fair way to tax people? How about everyone pays the same amount? We all live in the same country, have the same goverment, suffer the same intrusions and enjoy the same protections, so why not pay the same amount? Of course, that would equal about $30K for every man, woman, and child to cover the cost of the government’s expenditures. (Figures are rough because we haven’t actually had a budget in four years.)

    Okay, that means taxes would consume all, or even more than all the money made by a huge chunk of the population. So what else would be fair? Well, how about a flat tax? Everyone pays the same percentage. Of course, since our per-capita GDP is about $48K, that means everyone would have to pay about 60 percent flat tax. Again, that leaves a lot of people without enough for food.

    So we may as well admit that we don’t have a “fair” tax system at all. We tax people with large incomes for the same reason Willie Sutton robbed banks: that’s where the money is. There’s nothing fair about it and it’s ridiculous to claim otherwise.

    We have a system in which we tax people who have a lot of money, but give them just enough loopholes and tax shelters so that they don’t pack up their golf clubs and leave the country for good. It’s about as “fair” as a liquor-store holdup.

    • Deen says:

      So basically, you’re arguing that a progressive tax system is unfair, but less unfair than the alternatives?

    • tmac57 says:

      If you go down the ‘fairness’ road,then why not also ask how fair is it that Romney is compensated at such an enormous rate?
      Romney is very rich,but by no means he the most highly paid person,but let’s take a look:
      Romney’s 2011 income was about $21 million.
      Assuming the benefit of the doubt,and consider him an extreme ‘go getter’ let’s say he worked 16 hours a day,for the entire year.
      That works out to about $3,600 an hour,or what many people earn in an entire month if they are earning a decent wage.
      But hey,let’s be fair right?

      • Daniel says:

        If you don’t like it, move to Cuba where presumably there are no rich folks like Mitt Romney. You’ll probably find that the people there don’t benefit so much from “fairness” since many of them brave shark-infested waters for the hope of working as a dish washer in Miami and without that amazing healthcare system that white liberals who have never been in Cuba rave about.

        Or maybe Stalin’s USSR is more to your liking. They got rid of all the rich people (and religion) and built a strong military, a nice subway system and “free” healthcare for all. All those Ukranians who starved to death probably didn’t think it was so fair, but hey, sometimes you have to break a few eggs.

      • tmac57 says:

        No,I think I’ll stay in a country where I have the right to point out that the concept of ‘fairness’ doesn’t stop with the tax rate that someone pays,Daniel,and you have a right to distort and mischaracterize other people’s opinions.
        It is sublimely ironic to me,when someone champions freedom by telling others that they either need to get on board with their philosophy and political outlook on life,or leave their ‘free’ country.

  7. Somite says:

    I take issue with the comparison between Bill Gates and the government. The comparison is invalid based on the sheer difference of scale between what governments and individuals can achieve. Consider that the government created and manage:

    The National Science Foundation
    The National Institutes of Health
    Department of Energy
    Etc, etc, etc.

    Not to mention the less glamorous but still indispensable DMVs, IRS, etc.

    Libertarians believe as an act of faith that government is as inefficient as a system can be. However, there is no data to back up this assertion. It is entirely possible that government is nearly as efficient as it can be. I have worked for many private companies and I can assure you they are not nearly as efficient as libertarians believes they are. In fact, they will seek profit in spite of decreased efficiency, pollution, health hazards, etc.

    The fair share concept doesn’t have to be complicated. There are a finite amount of resources and simply because you were lucky enough to be in a situation where you could hoard a lot of resources it doesn’t mean other people should go hungry or sick. If you were lucky enough to hoard a lot of money then you should be taxed proportionally an amount that society deems appropriate to increase everyone’s well being. Money should not be an insulation from your responsibilities.

    Not to mention; are Mitt Romney’s contributions to society on equal footing with Bill Gates, Steve Jobs or for that matter non-rich people that make important discoveries or contributions to society?

    • Max says:

      Taxes aren’t on accumulated wealth, they’re on transactions, money changing hands, sales, income, capital gains, earned interest, inheritance, etc. Wealthy people tend to earn and spend more money, but if in some year they don’t earn anything and don’t spend much, then they shouldn’t owe much taxes.

      • Somite says:

        Not necessarily. Property taxes come to mind.

      • Daniel says:

        Not to mention the estate tax, which could be one of the most destructive taxes out there. Demogogues don’t think about this, and instead trot out Paris Hilton to make their argument (although the estate tax actually encourages rich people to turn their kids into Paris Hiltons, but let’s not talk about that).

      • Max says:

        The estate tax is on a transfer of money, which is why I mentioned inheritance.

      • Max says:

        Apparently, France has a wealth tax for the rich.

  8. gdave says:

    Mr. Shermer, as Lukas, Deen, and Max point out, you seem to completely ignore marginal utility in your discussion of tax “fairness”. It also seems to me, however, that you are approaching tax rates backwards.

    The point of taxes is to pay for necessary government activities. We don’t start with trying to figure out an idealized tax rate for its own sake. We start with the government spending we are trying to fund, and try to figure out the most equitable distribution of the necessary tax burden. For someone making $10,000 a year, even a 10% effective tax rate is a significant hardship. For someone making $10,000,000 a year, a 35% effective rate won’t have any noticeable impact on their life. Not to mention that the wealthy have most of the income, and you have to go where the money is. So we tax them at different rates. It has nothing to do with what their “fair share” is, or trying to figure out the return on taxes they get. It’s a simple matter of collecting the necessary revenue for government to operate, and doing so in the most equitable way we can.

    Of course, we can argue about whether we really need to, or should, spend as much as we do, and about what we spend it on, and in what proportions, and so on. And we can argue about whether income taxes, or a national sales tax, or a VAT, or what have you is most efficient, or the most equitable. But for whatever spending level we want to fund, and with whatever taxes we use to fund it, we should be aiming at the best way to fund that spending, not trying to figure out what “a fair share” is in a vacuum, as if the taxes were an end in themselves.

    • Max says:

      I think Shermer is responding to Obama’s rhetoric about everyone paying their fair share.

      • Bad Boy Scientist says:

        My thoughts exactly! This is a sly way to argue one side of politics.

        I think some of the comments have much more profound thoughts in them than the article does.

      • Joe says:

        Righty-o, Bad Boy Scientist, the comments ALWAYS have much more profound thoughts in them than any article Shermer writes.

  9. Nicky says:

    You say you want to give everybody the same opportunities without discrimination. But you are discriminating people who are less smart because they will always earn less…
    Jobs and Gates changed the world? if they didn’t, somebody else would have… Microsoft bought the UI they became famous for from Xerox; while apple was making the iPhone, 2 other companies were already building similar touchscreen-only handsets…

    The unfair part is not in how much taxes you pay, but in how you make your money. you are not going to tell me Gates or Jobs worked thousands of more hours or worked that much harder then the parents in the average household…. yet they make that much more money…

    Somebody who inherits millions, can just put it on the bank and not work a day in his life… and still earn more then the average family, only from interests… that is very unfair… no matter how hard his ancestors worked for it…

    • Tasha says:

      It’s not just discriminating against the less smart, but also the less lucky. I was valedictorian at my school and earned a scholarship. I went to college for less than two quarters when my mom suffered brain damage in a seizure (an illness I also have) and my dad got cancer. I had to leave school to help my family. My scholarship disappeared when I left and I have not been able to go back. I work my ass off to exhaustion every day and make less than 30 thousand a year. Life isn’t fair.

  10. tmac57 says:

    A common idea in economics is the you should ‘subsidize’ those things that you want more of,and ‘tax’ those things that you want less of.
    Therefore we should subsidize the rich,and tax the poor.
    Problem solved!
    You’re welcome.

    • DeanHiAz says:

      Actually, the rich are subsidized heavily, either directly or indirectly. Tax “breaks” and loopholes and shelters and schemes–all put the wealthiest on a privileged footing viz a viz the average citizen. And then there are the corporations. I would be hard-pressed to think of an industry that does not receive subsidies in one form or another.

      It’s only when individuals receive modest breaks, pittances, that conservatives and libertarians begin crying “foul”. Congress could have paid every U.S. household $50,000 to reduce its debt instead of saving Wall Street from its gambling debts, and the country would now be in better shape. As Adam Smith, himself, pointed up, a market economy works only when people feel they are being treated fairly by their institutions, or at least some semblance of fairness.

      Of course, more than perception comes into play, for there are real consequences for a lop-sided distribution of income. While the incomes of middle America have remained flat for the past 30 years–despite tremendous gains in productivity–the wealthiest have captured an obscenely high percentage of the gains. Ironically, wealthy individuals and corporations have increased their share of the pie largely because of consumer spending. To now blame households and individuals for excesses seems churlish, to put it mildly.

      Somite says it better than I could: “The fair share concept doesn’t have to be complicated. There are a finite amount of resources and simply because you were lucky enough to be in a situation where you could hoard a lot of resources it doesn’t mean other people should go hungry or sick.”

      • tmac57 says:

        So what you are saying is that we now have one side of my master plan in effect.
        Now if we can just squeeze the poor a bit harder for some more taxes,then they will most likely disappear.

      • Asparaguspee says:

        Ah… ya gotta love that Social Darwinism.

  11. Gary Nolan says:

    Capital gains tax is so low because it is money that has already been taxed at the corporate level. This is a BIG distinction that Dr Shermer sadly left out. At the corporate level, this money was taxed at the 30% or whatever it is, then when Romney withdraws his cut, he’s taxed again at 15%. So the idea that he’s only paying 15% is VERY misleading.

    • Bad Boy Scientist says:

      Then aren’t paycheck taxed at a lower level – they’ve already been subjected to a ‘corporate tax’?

      I work funded by NASA grants – that IS tax money, so I should have to pay any taxes – because that’s like paying taxes on taxes – right?

      I love these sorts of arguments. They’re all so silly.

    • itzac says:

      Money is constantly being taxed and taxed again. Consider. I get a paycheck from which income and payroll taxes are deducted. I spend that money at a store, where I pay a sales tax. The store owner takes the money I gave him and pays his employees with it (among other things), but not before again deducting payroll and income taxes.

      This argument is extremely self-serving.

      That being said, I think corporate income tax should be eliminated completely, but capitals should be eliminated as a special income category. Tax it the same as everything else. That way you actually encourage long term value creating investments, rather than the fast money value extraction deals Romney made his fortune at.

  12. d brown says:

    Ike was not in Cuba! When Ike was President the top tax rate was over %90 and it stayed that way till 1964. The people paying that did not think it was fair. So what! They own far more of the country that what they pay in taxes now. Like land lords, they should be paying for taking care of it. Somebody must pay. They are the only ones who still have the money. David Stockman was Reagan’s Budget Director. Years after he was out of out of power, he said the whole purpose of tax cuts was to make the US too poor to pay for anything the government did after 1930. Its working. And all fools can say is its more fair. Can you say sheep. They keep saying it will make jobs and help the economy. Right, when has that ever happened. “US has the highest corporate tax in the world” that’s just not so. “estate tax, which could be one of the most destructive taxes out there.” How? Back in the 1800’s Andrew Carnegle said there was a that without the highest estate tax, power and money would be passed down and make a a ruling aristocracy. That happened.

  13. Janet Camp says:

    It is completely questionable that Bill Gates (or any private charity) does more good than a government. When Gates puts millions into influencing public education, he is using his money to influence a public institution without really consulting the public, even through its representative.

    We cannot, ever, all be rich, so it seems reasonable to make sure that people who work for a paycheck are treated as fairly in matters of access to food, housing, education, transportation and access to basic health care as rich people are guaranteed by their personal resources–especially in an economy that permits wages to be lower than a level that meets basic needs.

  14. d brown says:

    Oh, the 1964 tax cut did help. People went out and brought American make stuff. Who’s economy is stimulated now? Back in Bush’s time the IRS said that money Americana corporations passed the cash around so that much of the money due taxes could be found. They said that money would have paid off much of the deficit then. And they could not get the funding to do their job of finding it.

  15. David Johnson says:

    I feel a “fair share” with regards to taxes is that everyone is “harmed” at the same level. Now to someone making 20k a year, even $500 is quite a bit of “harm” – up to and including some hungry days or putting off needed medical.

    Meanwhile, to someone making 20 million a year, $5 million barely harms them at all. Oh, they might have to wait an extra year to get that fifth vacation home, but that’s about it.

    Thus a progressive tax rate.

    Furthermore, I think the current method of deducing “income” is unfair to the poorer half of the country. Income should be deduced as “total assets end of the year” – “total assets end of previous year” and then taxed at the appropriately progressive rate.

    • Matthew Bailey says:

      While I agree with this in principle, in practice it is harder to do.

      And, here in the USA, it would be nearly impossible at this point to pull off.

      It may take another revolution before people begin to understand this concept. After WWII most understood it, because we had just had a fierce war, where millions lost their lives, and people understood that standing together is far stronger than standing alone.

      The children of that generation (Boomers, mostly) are a horribly spoiled lot, who have tended to worship greed. It is that generation that has resurrected this cult of anti-taxation.

      Such a pity.

      • tmac57 says:

        That is an unfair generalization Matthew.Many of us ‘Boomers’ have been fighting this kind of thing for most of our politically active lives (just look at how close some of the past elections have been).
        I think you underestimate the forces that a small portion of well connected people can bring to bear to distort the outcome of who gets into office.See the link below:

      • TPaine says:

        This nonsense about greedy anti-taxers demonstrates a lack of basic economic sense. I recommend “economics in one lesson” by Henry Hazlett I think. After reading it you may have a new thought, that some of those people whose Ideas you abhor, may actually want the very best for the very poorest of our society. That what you see as greed is actually an Idea that is the very best humankind has come up with so far. An Idea that seeks the most prosperity for the most people. And central planning is not that Idea.

      • tmac57 says:

        So is it your contention that there is no widespread belief among,say Tea Party members,and other conservatives,that people who are at the lower end of the economy are for the most part,leeches on society that are there by their own laziness and failures,and don’t deserve the assistance that they receive?

      • TPaine says:

        That is absolutely not MY my contention. However, I am not a tea party supporter nor a republican. And I cannot speak for their positions. My position is that the economic ideas of the Austrian school clearly demonstrate the fallacies of the Kenseyan economic philosophy, and the damage it has done to the prosperity of the poorest in our society. When I am critical of the way things are, it is not because I am mean spirited or greedy. It is because I now better understand our economic system, and see a plausible solution. A system that seeks the very highest levels of prosperity for the largest percentage of the population. Believe it on not, I don’t really worry about the rich, I worry about the poor. But the central planners (republicans and democrats) only see the immediate effects of a given policy, or it’s effects on a special group, and to neglect to inquire what the long-run effects of that policy will be not only on that special group but on all groups. This is our fallacy of overlooking secondary consequences. This is bad economics and our government is presently blinded to it.

      • tmac57 says:

        I am not a tea party supporter nor a republican. And I cannot speak for their positions.

        But that is who most of us are referring to (greedy anti-taxers…your phrase) when we debate the fairness question.Libertarians are not even a blip on the radar politically right now.But good to know that you are not in that camp of people who,like Romney,have no understanding of what middle class and lower class people are earning,and going through right now:

  16. MadScientist says:

    Yes, we need to fix the system. Cap salaries and jack up taxes for the wealthy. With about half of our population now living in poverty, it’s absurd to argue that the wealthy deserve even more while so many people, many of whom are much more productive, can barely feed and clothe themselves.

    • Max says:

      Capping salaries would only push more of the best workers into gambling on the stock market.

      • Bad Boy Scientist says:

        Then raise capital gains taxes… for every measure there is a counter-measure!

      • MadScientist says:

        Nonsense. Anyway the stock market in its current incarnation is nothing but a pyramid scheme; talentless managers are welcome to it.

      • tmac57 says:

        I see it as more of a game of musical chairs,where the insiders get an advanced warning when the music is about to stop.

  17. BillG says:

    Isn’t it Arthur Schopenhauer that claimed, winners create losers? Defining fairness and/or cheating can be a nebulous term and perhaps always will in a imperfect world. Obscene wealth or atheletic supremacy (ex. Bill Gates, Lance Armstrong), all have a degree of cheating or cleverness – no one is 100% clean, thus the resentment lies in wake of the losers.

    The Microsofts and Armstrongs will always have Unix and Hamiltons claiming unfairness regardless of their own degree of beguile.

  18. igloo says:

    “Fair value for services rendered”.
    It strikes me that the benefits of the USA’s vast military expenditure are not evenly distributed. The oil companies for example, would be major beneficiaries. So maybe they should pay a bigger share of it.
    Then they might elect to do the job themselves instead of having the bloated and inefficient government do it. This should be music to the ears of the Republicans.

    • Max says:

      Everyone benefits from cheap oil and cheap imports.

      • Max says:

        Ok, not literally every single person, but you know what I mean.
        Regional instability increases oil prices, which benefits oil companies and speculators, but it raises gas prices for the rest of us.
        Maintaining regional stability, on the other hand, hurts oil companies and benefits the public.

  19. John says:

    I think it is interesting that Huffington Post just ran an article making the point that If Romney had not left Bain Capital for public service with the Olympics and serving as Governor, he would be a billionaire! Their point being he is obviously not all about money! There are many Democrats, Libertarians and Republicans that live off of investment income that has been taxed once at higher rates and provides income that is taxed with capital gain rates. There is nothing wrong or illegal about that and it can be shown that raising capital gains taxes reduces government revenues and slows new investments. Free market prosperity with all of its flaws is the only thing that makes all people better off. Freedom and democracy is never pretty……but beats everything else tried! I try to be a rational optimist……..

    • Matthew Bailey says:

      It can be shown that raising Capital Gains PAST A CERTAIN POINT decreases revenues.

      But we are VERY FAR BELOW that point.

      • Bad Boy Scientist says:

        Low capital gains taxes also encourage ‘casino investments’ which can destabilize entire sectors of the economy – and create ‘bubbles’ (e.g. the Asian market bubble, the dot com bubble, & the mortgage bubble).
        When these sorts of speculative investments treat necessary commodities (rice, corn, oil) as ‘casino chips’ it often literally increases human suffering so investors can gain more wealth. Most would consider this immoral – but any sensible person realizes that increasing human suffering when there’s clearly enough to go around can increase unrest and violence.

  20. Ed Seedhouse says:

    All these ruminations are made irrelevant by the fact that the government of the United States (and of any government that is sovereign over it’s own currency, which most do (notably excluding the Eurozone)) does not have to tax in order to spend, and hasn’t since Nixon took it off the Gold standard back in the 1970’s.

    In fact the Federal government creates money by simple spending it into existence from nothing. When a dollar is spent a cheque is issued and a credit entered in the books of the individual receiving it at the same time a debit is recorded in the books of the Federal government.

    The Federal government can always purchase anything for sale in it’s own currency simply by issuing a cheque, or more commonly, updating an entry in a computer’s memory. This is called “double entry book-keeping”.

    The Federal government does not require tax for revenue, but the fact that it levies taxes is one of the things that gives it’s fiat currency a value (there are other things, but taxes are the main thing).

    This being so the Federal government cannot “go broke”. Individuals, companies, cities, counties and states must raise the money they spend either from taxation or in the case of an individual or corporation selling their production, and if they fail to do so they can go broke, but the Federal government cannot, at least in financial terms.

    Of course in real physical terms it can indeed “go broke” if the society it governs cannot produce enough to support the needs of the society.

    But the Federal government is not a State, corporation, town, county or individual. Thinking that the country as a whole t must act just like it’s components is the logical fallacy of composition.

    Please note that I did not say that there are no constraints on the spending of the Federal government. There are real constraints, but they are not financial constraints. The government cannot buy something that is not for sale, and if it tries to purchase more than is available by issuing extra money inflation results. We are currently a very long way from that latter event.

    Instead of wasting money we are busy wasting lives and the only real resource any society has is the people who make it up. That is by far the most wasteful thing any government can do.

    • Matthew Bailey says:

      There is so much wrong here that I don’t know where to start.

      So, I’ll make this short:

      Money is not “created from nothing.”

      That is one of the biggest myths there is. Money represents the strength of the economy (what people are willing to buy and sell). You don’t need “Gold” or anything like it to back the value of a dollar. All you need is a situation in which there is unmet supply and demand.

      And there will ALWAYS be unmet supply and demand.

      • Ed Seedhouse says:

        Name calling is not, the last time I heard, a valid way of arguing. You don’t believe the government (along with the banks, but that’s irrelevant to the point) creates money out of nothing? Ask Ben Bernanke who said it quite openly to the congress under oath. As did one his predecessors, Alan Greenspan.

    • MadScientist says:

      Well, Matt Bailey’s right – there’s so much wrong there it’s hard to decide where to start. The precious metal crisis was known long before Keynes came up with his idea for a global monetary system which was not based on precious metals, but it’s fortunate that there was a Keynes to show how the problem can be managed. Seriously, you don’t want a ‘gold standard’ – the USA would have one of the most worthless currencies on the planet if we did stick to that outdated system. Just look at all the current territorial disputes over gas and oil – throw gold into the mix and you’ll get endless wars.

      • tmac57 says:

        Glenn Beck would make out alright though ;)

      • TPaine says:

        Well, Matt Bailey is wrong, and your reply contains so much wrong I don’t know where to start. Now I do. Money is created from nothing, it is not backed by anything like a commodity. Try Wiki and check out the history of money.

      • tmac57 says:

        The ideas of freedom,democracy,and human dignity were created from nothing too,not backed by anything tangible.Are they worth anything, other than what society agrees they are worth?

      • TPaine says:

        I take that you now understand that dollars are created from nothing but debt?
        Our freedom is worth something equal to what society agrees it is worth. Lucky for us we live in this society. Democracy is worth something and unfortunately, it’s value may be diminishing. The value of Human Dignity varies with the human. I apparently hold views that differ from your politics, but your discourse is worthy of my respect.

      • tmac57 says:

        Not debt necessarily,but an agreement that labor,and goods are worth something,and when someone works,even if it is in service of others rather than producing a good,that it is worth something in dollars (agreed upon in advance). Our money supply ‘should’ (qualified) reflect those goods and services as accurately as possible,and we have pegged our economy to that idea,along with the rest of the world.
        I agree that the Fed creating an ever increasing money supply untethered to a realistic GDP is precarious,but so is defaulting on our debt,so it is a delicate balancing game for now,but I don’t think that adding billions more debt in the form of tax breaks for those who have more money than they will ever spend,is a wise move at this point in history.
        I respect and encourage your challenging of my ideas,as long as it stays rational,and doesn’t degrade into name calling.
        For the record,how would you value our currency?

  21. Steve says:

    This post is just plain horrible. Wow.

  22. Mike says:

    Michael, did you really pay double the rate that Romney did? We’re not talking about your tax “bracket”, we’re talking about the percentage you actually paid after deductions, credits, etc., i.e. your effective tax rate. If you really paid at twice Romney’s rate, you either need a new accountant or better tax prep software! I would wager, however, that your effective tax rate is closer than Romney’s rate than twice that.

  23. RealJLJ says:

    “The solution is to fix the damn system, not get rid of gifted athletes or entrepreneurs.”

    There are still laws and just because you can subvert the laws by bribing politicians or hiring the best doping doctors doesn’t mean the system is the only thing broken. These people need to be hung in the street. If some of the Wall St. crooks were put in real prisons there would be less appetite for corruption. It’s too easy to rationalize immoral behavior. Your statement insinuates moral behavior is no longer necessary if you’re a gifted athlete or entrepreneur. Michael Porter’s article about rethinking capitalism makes perfect sense…

    The solution “involves creating economic value in a way that also creates value for society by addressing its needs and challenges. Businesses must reconnect company success with social progress. Shared value is not social responsibility, philanthropy, or even sustainability, but a new way to achieve economic success. It is not on the margin of what companies do but at the center. We believe that it can give rise to the next major transformation of business thinking.”

    Some of the other highlights:

    New skills required. Leaders and managers must develop skills and knowledge that give them a keen appreciation of societal needs, the ability to work across profit/nonprofit boundaries, and a deep understanding of how business productivity serves more than shareholders.

    Government’s role re-conceived. Regulators must create policies, regulations and laws in ways that support shared value rather than work against it.

    Broaden the role of capitalism. Companies have taken too narrow a definition of capitalism. We should be looking to business to help solve the world’s great problems, the authors argue. “The moment for a new conception of capitalism is now; society’s needs are large and growing, while customers, employees, and a new generation of young people are asking business to step up.”

    • Phea says:

      The problem is our entire society not only tolerate criminals who call themselves, “businessmen”, we reward them as well. We need to reach a point where we shun and ostracize those who lie, cheat, and steal, (and call it “doing business”).

      The beauty of capitalism is that if done right, (making sure everyone you do business with, wins), the only losers are your competitors. Your customers, employees, ANYONE who trusts you enough to do business with you, should always win. When that is the primary goal of business, capitalism is not only tangibly profitable, but also earns things like, honor, reputation, and loyalty.

      As a society, we will continue to get the type of businesses, politicians, athletes, police, and others, that we tolerate, that we reward, that we deserve.

  24. d brown says:

    “Everyone benefits from imports.” Not the ones who once had jobs making thing here. And that’s a lot of people. True believers say that on the average everyone is better off. Like a lake has a average dept of 3 feet. And is 20 foot deep in the middle. I have enough white hair to remember the past. The only people better off after the GOP changed things are the %.47 who own it. Much of what posted about the economy, and not just here, is cribbed from lies they they want to believe. And want you too. “The key is to lie big first.” The start may have been the late 1940s when Joe McCarthy and Richard Nixon used an exaggerated Red Scare to clear the way for the GOP’s Cold War dominance of the White House. They tell outright lies to defame an enemy or to inflame the public. The Republican Party is unusual in that it not only steps across the line from time to time, but now lives there. Distortion and character assassination have become almost a political way of life.”
    “David Stockman, who was Reagan’s budget director, has gone in another direction. He’s renouncing deficit-building tax cuts, calling for their rollback.
    “We’ve had a 30-year spree of really phony prosperity in this country,” Stockman recently told Leslie Stahl on “60 Minutes.” Stockman derided the “anti-tax religion” of the GOP. “Well it’s become in a sense an absolute. Something that can’t be questioned, something that’s gospel, something that’s sort of embedded into the catechism and so scratch the average Republican today and he’ll say ‘Tax cuts, tax cuts, tax cuts,'” Stockman told Stahl. He added, “To stand before the public and rub raw this anti-tax sentiment, the Republican Party, as much as it pains me to say this, should be ashamed of themselves.”
    “John Stuart Mill in his Principles of Political Economy, “that many say governments ought to confine themselves to affording protection against force and fraud”; that people should otherwise be “free agents, able to take care of themselves.” But why, he asks, considering all the “other evils” of a market
    society, should people not be more widely protected by government–that is, “by their own collective strength”?”

    • Max says:

      And oil companies don’t benefit from cheap oil, so I meant the economy in general, not every single person and company.
      Also, I was talking about maintaining regional stability, not outsourcing jobs.

      • MadScientist says:

        The futures brokers benefit from low oil prices though. In fact, if you’re being bled dry at the gas pump it’s the brokers making a killing, not so much the actual producers. It’s a fantastic setup where parasites are rewarded.

  25. Max says:

    It sounds like when pressed, the liberals will admit that the objective is not really fairness but the best outcome for the most people, and the government can tax as much as the voters can tolerate. And the libertarians will admit that the objective is not really fairness, as in equal opportunity or equal pay for equal work, but liberty, and private entities can pay, charge, and discriminate as much or as little as their stakeholders can tolerate.

  26. Matthew Bailey says:

    Just to make a point that probably has not been made.


    Mitt did not use the same amount of roads, post-office, railroads, sewage, garbage, etc. that you used.

    He used an order of magnitude MORE than you used.

    His money grants him access to the government and courts to a degree that no common citizen has.

    This means that he is having people use the roads, post-office, and other “public utilities” that otherwise would not be happening, for all of the people who work to gain access to the courts/government for Mitt.

    Thus, he is responsible for exponentially more wear-and-tear on the infrastructure than is a normal person, and should pay more in taxes as a result.

    His access to the courts and governments also puts a strain upon the postal service, requiring more mail be sent over the roads, and through the air (ATC is a government job, and thus part of our infrastructure).

    The more wealth that one has, the more likely that they are creating more stress upon the infrastructure than the typical person.

    There have been several models, using toy nations (simulated, like with Sim-City), done at several universities that have born up this fact, by showing that while those who have large amounts of wealth do help drive the jobs market (to a degree), they also do vastly more to stress the public infrastructure than do those without wealth, by several orders of magnitude. This is because they are able to gain access to parts of the infrastructure that normal people never get access to, and their businesses consume infrastructure that the normal person never uses at all.

  27. Paul says:

    Has anyone even mentioned that 50% don’t even pay taxes and that the top 30% pay 70% of ALL the tax revenue to the wasteful Government?
    How can anyone argue that is remotely fair with the obviously broken system you guys have at the moment?

    • John says:

      It’s not true that 50% don’t pay any taxes. They don’t pay income taxes, but they do pay other forms of taxes.

    • tmac57 says:

      No one mentioned it,because it’s not true.
      You are citing the misleading talking point that half of Americans do not pay income tax.
      This fails to account for the fact that 61% of that half do pay substantial federal payroll taxes,21% of those are elderly,and the last 17% are students,disabled or jobless.
      They also pay a greater percentage of their income in state and local taxes,and they also pay federal excise taxes.

    • MadScientist says:

      If 50% aren’t paying that’s because they don’t even have enough to live on. Society is seriously broken; this is like 17th and 18th century France.

  28. RealJLJ says:

    Wondering why my comments were never approved? Nothing I said was offensive. I already unsubscribed to the newsletter and will no longer be reading/sharing the blog since the site I thought encouraged debate apparently will not allow it.

  29. John says:

    You didn’t get everything from the government that Mitt got, because you didn’t get all of the government protections and structure over time that provided for and made possible all of Mitt’s business gains. Without all of that structure above and beyond what he personally uses, Mitt’s gains could not have happened. Fundamentally flawed premise.

  30. Max says:

    Government workers benefit the most from taxes, so for the sake of fairness they should be taxed the most, effectively paying their own salaries. ;-)

    • Ed Seedhouse says:

      Of course the vast majority of Federal government employees belong to the Army, Navy, or Air force. How do you think a politician who campaigns a salary cut for the armed forces employers will do with that idea?

    • MadScientist says:

      Hahaha. That seems to be Australia’s strategy. Fortunately for them, there’s still plenty of Australia to dig out and ship overseas to prop up a sick economy.

      • igloo says:

        Except that by most measures Australia’s economy is one of the least sick on the planet.

      • Oldskool says:

        Actually, the Australian Government spends more now in real terms than ever before- the reduction is against GDP.

        It is so easy to make something appear to be something else…

  31. Michael Montgomery says:

    Paying equal percentages of income does not unfairly impact anyone, irrespective of the gross tax figure. The higher income earner will still make significantly more money. How is this unfair? Being unsettled by the total amount of taxes paid by anyone is irrational. Capital gains is not double taxation. The tax is applied to money made on capital that was once taxed as income, but the capital gains tax is only applied to the extra money made and not on the originally invested capital.

  32. Carl Morano says:

    ANYTIME anyone pays for something, they should get a fair return. We must abandon the mystical thinking that a rich person “owes” something to government. (How Romney owes more for roads is non-nonsensical. I know millionaires who don’t own a car!) A free society must watch and limit government on a daily basis or freedom is endangered. Taxes are not penance to a god! You don’t pay it just because its required and expect nothing in return. We have every right to expect that government runs smoothly, efficiently, stays within its bounds and spends the money in a proper, ethical way that gets the desired results. Currently, our tax money is going into a black hole and we must hold elected officials responsible as well as eliminating officials from unelected positions (the biggest problem). If you feel someone ‘owes’ more to government, please move to your utopia, North Korea or somewhere similar. You’ll love it!

    • MadScientist says:

      Absolutely. So when someone invests a dollar, they should get a fair share of any profits – and the people who do the work to make the investment profitable should also get their fair share – which they currently do not.

      • tmac57 says:

        I don’t know why you keep insisting on dragging the working class into this discussion.What we are doing here is trying to find a way for the 1% to finally get a fair shake in this rotten economy.

  33. bill wallace says:

    When our college got a raise so that teachers could get a raise, a storm followed as to how to apportion it.

    One way: give everyone the same amount. One way to be fair.

    Second way: give the same percentage to each group, insuring that full professors got more and instructors go the least. This of course had its advocates.

    The president computed both ways and split the difference and NO ONE COMPLAINED!

    Thus, take both total amount and percentage into consideration.

    • Max says:

      Did anyone suggest doing the regular performance evaluations, and giving people the raise they deserve? You know, kind of like assigning grades.

    • Max says:

      If the college budget gets cut, resulting in pay cuts, I bet teachers’ conception of fair distribution would suddenly flip from the first way to the second way and vice-versa.

    • MadScientist says:

      Going by percentage is total nonsense but of course it’s favored by those who are already earning more.

  34. Kent McManigal says:

    “Taxation” is a euphemism for theft. Even if you really don’t want that to be true.

    There can no more be a “fair” amount of “taxation” (above zero, anyway) than there can be a “compassionate” rape.

    If that makes it difficult for The State to exist, well that’s just too bad.

  35. Richard says:

    Frederick Bastiat, a French lawyer, right after the Revolution of February 1848 wrote “The Law” in 1848. Unfortunately, the same socialist-communist ideas and plans that were adopted in France in 1848 are now popular in the U.S. and we are getting the same results: economic failure. The explanations and arguments then advanced against socialism by Bastiat are equally valid today — word for word. Shermer’s “Mind of the Market” was an advance in economic thinking because it moved economics from the “rational man” concept to how people really act, and (in “Why People Believe Weird Things” )Shermer explains why reasoning and results fall upon deaf ears when people want to believe something to be true without regard reality.

    I see many basic errors of thought in the comments to this article, and I now understand why.

  36. Michael Montgomery says:

    Many political discussions in this country, at their core concern the difference between “greater good” thinkers (the society’s and government’s obligation to the whole of society) and those “individual good” thinkers who support the liberation of individual accomplishments. The latter are libertarians, capitalists, free market advocates, Ann Rand followers, Republicans etc and the former support socialistic restraints on capitalism (Socialists, Democrats etc.). Greater good thinking along with atheism has been disparaged in American history since the Cold War because these values were more similar to those of our supposed enemies. Politics and truth usually make poor company and this distortion continues to pervade how americans think of their community. The good of the individual seems to represent a more primitive approach to societal wellbeing. There is balance to be struck, which has been better achieved by some European and Scandanavian Societies that have a more Socialistic and restrained capitalism approach. Most measures of societal health are better in these societies than in this country.

    • igloo says:

      Exactly. Watch Europe closely from now on. Where there is too much inequality, social unrest follows. Modern society demands ‘reasonableness’ in the distribution of wealth, and has the tools to know when things have become ‘unreasonable’. Politicians get drawn back to centrist positions in order to get re-elected.
      Of course, if your answer to social unrest is to call out the national guard, or to live in a cave in Montana, good luck!

    • TPaine says:

      “Greater Good thinking” like the former USSR, the GDR, north Korea.
      The greater good experiment has been tried and our society is blind to it’s failure. Human wants cannot be best served by central planning. It may be sad to you and appear to be “not fair” but it is nonetheless true.

  37. Anthony says:

    When talking about the percentage of taxes Romney paid a MAJOR POINT was left out. The 14% he paid was on investment returns, NOT regular income. The money he invested was already taxed so he is being taxed again on that money. It’s no different than us paying taxes on the the money we get from our job and paying again after we put it in the bank and get our return from the interest on our savings account.

    • Max says:

      He’s taxed on the new money he earned that year, not on the money he invested. It’s like renting out a building and being taxed on the collected rent.

    • tmac57 says:

      Anthony,why would you think that anyone who has ever paid tax on interest on their bank account,CD,or MM (money that they earned and already paid tax on) would not understand that?
      The interest on those types of investments are taxed as ordinary (regular?)income,and capital gains investments are taxed at a lower (preferential)rate.Could that rate be safely raised from 15% to 20% without wrecking the economy?

  38. John says:

    Here’s a fair and simple way to impose taxes:

    1. The government comes up with a budget.

    2. The budget divided by the number of registered voters equals everyone’s fair share of taxes.

    3. Your tax receipt from the IRS becomes your voter registration for the year.

    • tmac57 says:

      Do a bit of a thought experiment and play out the consequences of such an action.

    • tmac57 says:

      Oh,I should have added,your comment reminded me of the old careless and knee jerk “Bomb them back into the stone age” sentiment that came out of the Vietnam war era.
      Quick and dirty ‘gut’ reaction ‘solutions’ to complex and thorny social problems.

      • MadScientist says:

        Why? What’s wrong with John’s proposal? The rich folk already run the country anyway – his proposal just gets a few of the poorer ones off the voter’s list.

      • tmac57 says:

        I didn’t read his proposal that way.I presumed (maybe incorrectly?) that John’s point was that as soon as everyone realized that by shifting the burden of government, divided exactly by how many people vote,regardless of how much they earn/have/own,that they would be shocked into voting for those who promise (unrealistically) to lower their tax burden.

    • Asparaguspee says:

      OK, John, the Federal Budget is a hair under 3.8 trillion, and the current population is 311,600, so the fair share works out to a little over $12,000 a head.

      Bring your receipt and we’ll see you at the polls!

      • Asparaguspee says:

        Oops, sorry John, I missed that ‘registered voters’ part… that’s about 151 million, so double what I said above.

      • tmac57 says:

        I’d pay $24,000 to get the same access to government that someone like Romney has.
        There is a reason that his wealthy buddies are willing to shell out $50,000 a plate to listen to him trash 1/2 the citizens of the U.S. without compunction.It’s merely a business investment to them,and one that historically pays off big time for the winners,be they Dems or GOP.

  39. Bad Boy Scientist says:

    Here is some context when we consider the fairness of taxes.

    The military draft demands the ultimate sacrifice from a small subset of the American population(young men from 18 to … well, that depends on how dire the circumstances). We forcibly take men from their lives and put them in situations where they will kill or be killed. Many who are not killed are physically or mentally maimed as a result. IMHO: Having your sons taken to maybe die is a bigger deal than having some of your income taken (but that just may be my person priorities).

    We generally accept that the only way to ensure national defense during major wars is by forcing young, able-bodied men into the military. We do not even accept 60-year old volunteers into the military (unless they happen to have a rare by critical skill – like a language) because their contribution would be too small.

    Some have pointed out that there’s no universal definition of a ‘fair share’ of taxes – I agree, just like there’s no ‘fair share’ of son’s you have to lose in a war.

    I guess I cannot help but feel that there’s some ‘shirking of duty’ going on when millionaires and billionaires are dodging paying taxes while America’s infrastructure crumbles and our economy falters. For those who only believe in sacrifice in times of war – much of this damage to our economy is a result of ‘economic warfare’ by foreign competitors who have targeted specific American industries (Socialist nations have been better at this sort of economic warfare than capitalist nations. Something to think about, eh?)

    • MadScientist says:

      What ‘economic warfare’ are you talking about? US managers have screwed over the US workers in part by sending jobs overseas so that they can gain larger profits and larger bonuses. No external entity, not even communist, is to blame for the damage.

      • igloo says:

        US managers are not screwing anybody over. They are acting quite rationally in the interests of their stockholders.
        Show me the US citizen who would rather pay $1000 for a US-made product than $500 for a foreign-made equivalent and you might have a point.

    • Phea says:

      The draft was just a slick way of getting the young and powerless, (an 18 year-old couldn’t vote, last draft), to shoulder an unfair share of the tax burden. We’ve never had to draft other government employees, because we pay them enough to insure a never ending supply of job applicants.

      It does save a bunch of money, drafting instead of paying competitive wages, (at least for unskilled,cheap to train, cannon fodder). Perhaps a partial solution to our current economic and budget woes would be to draft everyone for a couple years, for virtually ALL government jobs, local, state and federal.

  40. d brown says:

    Most of the economic posts here, and in other places, use the Fox News kind of economics. Mostly that’s lies. Like the Laffer curve. Its was not anything new, every economist knew about that it. Even I did. But the fact is that Laffer lied about the data and what it showed. How can people keep believing lies unless its what they need to believe.
    Everyone acts like this job loss is a surprise. It was know to be coming back in the 60s. In America your worth is your job. Back then they said the countries society would fall apart if too many could not have jobs. It was said that the employers would make so much more with automation and free trade, that the work week could be shorted with the same pay. Then the party of and by the rich got in and losers were just losers and who cared. I bet most of the losers voted for the people who did this to them. To get the jobs back we need tariffs. The owners who shipped the jobs away so they would make more money will not like that. Who is the economy for anyway. The rich or the rest of us?

    • igloo says:

      But tariffs are not the answer. An economist will tell you that erecting tariff barriers will, in the long run, drive down your real wages to the level of the people you are seeking protection from.
      Besides which, if you tariff China’s goods, for example, they will tariff Boeings airplanes and GEs jet engines.
      A tariff war benefits nobody in the end, and puts a drag on global growth.

    • TPaine says:

      Damn automation!

  41. Eric Berendt says:

    Dr. Shermer, you are a libertarian whore. A very bright, thoughtful,and engaging libertarian whore, but a whore none-the-less. The real question is:: what does it cost to live a decent life in our society as we find it? If Mitt paid $5 million in taxes, he’d still have more money than god, excuse me, Darwin’s ghost. How many $50K a year teachers would that excess taxation hire? Forget the libertarian non-sense. A society only functions when most of its members are functional within the rules established by those who control the system. When the society is based only on money, then everyone needs to have enough. Come on, man, you saw through fundamentalist Christianity, seeing through Romney should be a no brainer.

  42. d brown says:

    The fall of the economy was the doing of  libertarians who wanted the smart guys to run the banks without the government telling what they could not do. Their banking reform act let them do the smart thing, for them. They raped the worlds economy for their own good. Here they did bets on Wall St. All the states gambling laws had stopped that before the state laws were superseded by the new banking reform act. Free traders love repeating part of what Adam Smith met about free trade. Never mind that when he was England’s economic minister he did not do that. In fact, a example he used, was trading needed things between two countries without tariffs on them. That’s fair trade, not what is called free trade now. Just because some, not all, experts say it works does not mean it does.

  43. TPaine says:

    “The fall of the economy was the doing of libertarians who wanted the smart guys to run the banks without the government telling what they could not do. Their banking reform act let them do the smart thing, for them. They raped the worlds economy for their own good.”

    You’ve been brainwashed. This is exactly backwards.
    Who were these libertarians who screwed things up?
    Barney Frank?, Ben Bernake?, Chris Dodd?, Alan Greenspan?, Paul Krugman?
    Heads of Morgan Stanley?,Bear Stearns? Citi? Congress? Who?

  44. Moviemark says:

    The whole reason that the subject of Mitt Romney not paying “His Fair share” of taxes came to everyones attention, was basicly a political attack on his fitness to be president and represent you the average American. Can anyone honestly tell me that when tax time comes around your first thought is, I need to pay my fair share of taxes so I won’t take any deductions at all and I will also give extra money to the government because the government deserves it. No you take your deduction and go to a tax place to try and get more money back. So why is Romney bad when he takes advantage of the laws on the books,Just like everyone else? And then gives a high percentage of his income to his charity of choice his church. Regardless of what you believe about religion or the Mormon faith he still gave a good percentage of his money away. Fair to most people is taking away the other guys stuff because they have more than me and thats just not fair.

  45. d brown says:

    Alan Greenspan is a libertarian. For more than 30 years former Federal Reserve chairman Alan Greenspan and others pushed for reliance on self-regulation by financial institutions. He wanted deregulation. He worked to strip away key safeguards, which could have avoided this catastrophe.”

  46. Canman says:

    One of the most maligned ideas in economics is the Laffer Curve. While you can argue all you want about where its crest is, you’d be hard pressed to argue that its basic premise is false. As tax rates go up, so does the value of tax breaks, accounting gimicks, being a crony capitalist and going somewhere else. Would the Steve Jobs and Dean Kamens of the world been able to accomplish what they have if they had been forced to pay a bigger share?

    • tmac57 says:

      Would the Steve Jobs and Dean Kamens of the world been able to accomplish what they have if they had been forced to pay a bigger share?

      That’s an interesting question,and a more complex one than what you imply.For example,Dean Kamen founded FIRST,a 501 c 3 charity (in other words gov. supported) to foster technical innovation through mentor programs for kids centering on engineering and science.He also has a company DEKA,that is developing a robotic prosthetic arm with funding from DARPA (more tax dollars).
      If you want to focus solely on money coming out of people’s pockets,as though it is falling into a furnace,never to be seen again,then taxes seem like an intrinsically unfair,useless evil.But if you take some time to also look a the real benefits to society that those tax dollars provide,then you are getting a more balanced and nuanced view of the question.
      Maybe they would have accomplished less when all the possible variables are taken into account,and not just their tax dollars,but the system as a whole may have actually set them up for more success than if government had not set the wheels in motion (DARPA is one case in point).

      • TPaine says:

        And maybe they would have created even more prosperity if they had not had so much of their wealth coercively taken from them.
        Imagine for a few seconds Dean Kamen with with $40m in his hands, now the govt. takes the money from him. Who does the most good with it? I am not betting on the central planners, sorry.

      • Max says:

        He could buy himself another island.

      • BC says:

        > Imagine for a few seconds Dean Kamen with with $40m in his hands, now the govt. takes the money from him. Who does the most good with it?

        If Dean Kamen is investing the money in new products, then he hasn’t paid personal income tax on that money. This means his level of personal income tax is completely irrelevant to this example.

  47. d brown says:

    The Laffer Curve is much older than Laffer. Its a well known fact that too much taxes does harm. But Laffer used phony numbers different from what everyone else had always used. He, and who he was working for, were only making up reasons to cut the riches taxes. The idea was old and right. He was wrong and did much harm. This shows just how little so called Conservative economists and talkers know about anything out side their own little gang. They only talk to themselves.

    • Canman says:

      This shows just how little so called Conservative economists and talkers know about anything out side their own little gang.

      After becoming famous during Reagan’s administration, Arthur Laffer went on to be a Bill Clinton supporter while still touting his curve.

  48. d brown says:

    Oh yes, Keynesian theory worked. Libertarian is one of those many things that looked good, should have worked, but did not.

    • TPaine says:

      Your economic emperor Keynes, has no clothes. It may take decades longer to see it but eventually your children will. And all the “animal instincts” you can muster will not save an economic model built on a foundation of sand.

      • tmac57 says:

        Do you have any example of any government that would qualify as economically Libertarian as you define the term?

      • TPaine says:

        No, I do not know of any example.

      • tmac57 says:

        Too bad.You see that’s the problem that I have with
        solutions to big problems that only exist in theory.
        The socialists thought that on paper they had a better solution for the inequities that were rampant in their society,but it did not pan out in practice,and got horribly distorted and led to much misery,which obviously was not their intent.
        It’s those tricky “unintended consequences” that I worry about too with Libertarianism ideals.

  49. Michael Miller says:

    Under “equality of opportunity” does it not follow that “equality of burden” must be met in order to express the former?
    He that has no profit, either by his choice or the choices of those in the mythic top 10%, who influence laws by virtue of their wealth, surely cannot have equality of opportunity if paying his taxes means no food, while he who pays many times the smaller proportion must do without another diamond stickpin for his 400th suit.
    Simply apply equality of burden to the definition of equality of opportunity and you have extremely progressive taxation such that the well off also face a question of hunger to pay their taxes.
    This is one reason to ignore the equality of opportunity argument, since it falsely assumes equality of starting place in the competition for resources to gain wealth.

  50. Canman says:

    Besides the Laffer Curve, another much maligned economic concept from the 80s is the so called “trickle down theory”. Phones and music collections that fit in your pocket did not come from some comsumer electronics commision. They came from creative, driven companies competing with each other. Maybe the government helped fund the military communications network that became the internet, but it had no idea where it was going. Very few people did. I remember a rather gloomy mood when Bill Clinton was elected.

  51. Henry Hawkins says:

    The error here is the term ‘fair’. Fair according to whom? Ask twenty people, you’ll get twenty different answers. Also, a person’s sense and definition of what is ‘fair’ will change as their wealth status changes. Plastic, malleable definitions do not work well.

    The proper term is what is legal. Ours is a nation of laws. If one likes the tax code, then defend it via standard political agency: voting, lobbying, etc. If one doesn’t like the tax code, then change it via the standard political agency: voting, lobbying, etc.

    Substituting the only applicable term ‘legal’ with the ephemeral term ‘fair’ is typically the practice of those wanting to shortcut our system of laws and reform of laws.

    • tmac57 says:

      I think you are missing a step here.If one does or doesn’t like the tax code/law,then they must make a case based on some argument in order change/defend that existing law.Without establishing some reason for action, the process would seem totally arbitrary to the public,and establishing a reason for action that does not attempt to treat the affected public in as fair a manner as possible distorts democracy.
      So at some level,you need to try and sort out what is and is not fair,despite its subjective nature.

      • TPaine says:

        How about the only fair thing is to stop coercing people. How about people be allowed to their personal rights and their property rights. How about the central planners stop constantly skimming from the money supply through systematic inflation. It is not only “not fair” that the Fed implements a constant inflation rate that constantly steals from the poorest in society, it is in fact nothing more than theft of property. Can you grasp this concept? What good reason do you have to support this action? It would be hard to imagine a plan more clearly calculated to discourage work and production and saving and eventually impoverish everybody.In the words of the progressives emperor John Maynard Keynes;
        “By a continuing process of inflation, government can confiscate, secretly and unobserved, an important part of the wealth of their citizens”
        Can you make a case to support existing law?

      • Max says:

        This should go in a different thread.

      • tmac57 says:

        This argument cannot be solved here.Let these guys duke it out:

  52. TPaine says:

    You are correct, I apologize for the rant. I seek not to solve, only to influence.
    But I do love the rap

  53. d brown says:

    BILL TAXED THE TOP 1% and it worked great! Bill’s years of peace and prosperity began with a war over taxes, just like now. When President Clinton was seeking to enact his first federal budget in 1993,President Clinton found his “fiscally conservative” predecessor had left a $290-billion deficit. He responded by imposing substantial tax increases on the top 1 percent of taxpayers and omitting the “middle-class tax cut” he had promised in his campaign. That measure passed by one vote in the Senate.
    Predictably, the Republican right threw a screaming tantrum, falsely
    describing the tax increase as the “largest in history” (that honor
    actually belonged to Reagan) and warning that it would result in a severe recession or worse. Conservative politicians and pundits unanimously predicted that higher taxes would mean fewer jobs and larger deficits. They were wrong. Within a few years after the ’93
    tax hike, we were enjoying full employment, shrinking poverty, rising
    household incomes at all levels, greater home ownership—and the prospect of a gigantic federal surplus. but Bush fixed all of that. Clinton left almost no deficit, and most of that was the payments on Reagan burrowing. By the time Bush was gone we were making payments on 1.7 trillions dollars. Almost all most to rich foreigners. (i stole some of this)

    • TPaine says:

      Counterargument to Clinton sainthood;
      With a Democratic white house and a republican congress, little could be accomplished by our govt. This can sometime mean less spending. When the country is ruled by the evil party and the stupid party, the worst thing is bipartisanship.

  54. Quaz says:

    It’s a bit of a mental shell game to lump in all rich to the same group. Companies are all about cost-benefit, and we should have the same look at them from a society point of view, but on a case by case bases.

    Is Mitt’s charitable contributaion to society balanced out to his cost to society? As a CEO of a company well noted for costing Americans jobs (at least thats the public image projected to us by the media) is Mitt’s contrubtion greater than his cost. That’s really the only question and caculation that should be shown. Of course most people whould rightly argue that you can’t predict his future contributions, but we could start from this point, rather than just “he’s rich”.

    Certainly, those who developed and used “creative market math” (such as credit default swaps as one example) that helped cause the last market crash should face tough question how they justify tax rates and postions as “job creators” while costing the country trillions. And despite Mitt’s buisness background, certainly he does not reach the top of the list of people not paying their “fair share”.

    And don’t forget, for those of us old enough to remember, when Gates was poytrayed as an evil ceo playing dirty games and costing small buisnesses their existances. Perception changes greatly over time.

  55. Undercover Brother says:

    you paid 30% in taxes???

    get a new tax guy/gal or at least get Turbo Tax. if you own a home/have children/buy stuff or pay state income taxes. your tax rate should be no more than 25%.

    your 30% rate is unrealistic.

  56. double-helical says:

    Good blog post! As should be very obvious to any educated reader, there are an insane number of points and counterpoints that can be made on this extremely complicated issue. I was unable to sift through this particular miasma because the logical points were obscured by religious fervor (!) of the left, right, and libertarian adherents. If any reader has survived the onslaught long enough to reach my humble reply, I would like to direct your attention to Shermer’s discussion of Evolutionary Egalitarianism, and think deeply about the implications. Since modern humans have been around for 200,000 years, why has progress been so slow? I submit that it’s precisely because of the notion of egalitarianism. As the saying goes, “the nail that sticks up gets hammered down.” If you lived in a clan of 100 people or so, and had a brilliant idea, say, of farming instead of following herds, how far would you get with your idea? It only took 185,000 years to take hold. How about new flint technology? Read up on the stone age, and you’ll see that many technologies were virtually unchanged for long periods of time. Occasionally, very rarely, some inventive genius was able to get it through his or her fellow clan members that a new technology, such as an atlatl or bow, was really a good thing, and that the inventor was not just some clan member who thought they were “better than everyone.” One hypothesis as to why innovational ideas were slightly more likely to be accepted by the clan is that, by 10,000 years ago (or less) there were more human clans around. Gradually, it became apparent that the winners of the survival competition not only had to “win” over nature, but over other clans competing for the same resources. Competition, then, allows for innovation to — grudingly — be accepted. Today, these evolutionary facts about humans are buried in the tons of print that has been generated in the last 400 years. Think about that. Modern humans, 200,000 years old. Modern systems, only a few hundred. Is our system perfect? No. What human system is? Can we make it better by hammering down the nails that stick up? I submit that the answer is no. Humans did that for 185,000 years. It’s a long time to wait for civilization.

    • tmac57 says:

      Some ‘innovations’ deserve to be hammered down:
      Cold Fusion

      A rational resistance to untested new ideas is part of the skeptical nature of science.