What is fair?

Again and again our liberal politicians and media talk about a fair approach to taxation. In dire need of revenue to fund their socialistic agenda, liberals cite example after example of successful people paying marginal tax rates lower than other middle income families. They only use percentages whenever comparing top wage earners to middle class. First of all let's be clear. We don't pay our bills with percentages, we pay them with dollars. I am sick and tired of only focusing on percentages when dollars are what we spend. So from now on I say let's speak in dollars whenever comparing one US taxpayer to another. Secondly, as my previous blog explains, even if we do use percentages, they need to include the entire story of that particular taxpayers situation. Remember, Capital good purchases (machinery, computers, vehicles for business and so on) can be deducted on an accelerated basis and many times all in the year acquired. But also, don't forget the people who have been very successful and now only have income from Dividend and Capital Gains, the marginal rate is 15% which is lower than say the maximum rate of 38%, but this is taxation on top of taxation. The business that issues a Dividend has already paid Corporate Income Taxes before the Dividend. Oh, and don't forget that same business that has employees, has also participated in wage taxation as part of the business. So by the time a Dividend is issued, there has already been a significant taxation revenue stream prior to the final "Dividend tax".

So let's get to the fairness question...What is fair? Let's start with  ZERO. Is that fair? Well that's in fact the case for nearly half of all federal filers. They don't have any tax liability based on the current tax code. In fact, by using the Earned Income Credit, many people get money back! That's right, they are paid money instead of paying taxes. How is that fair? So I say, how can we have a discussion about a fair tax policy when sooo many people don't pay anything. ZERO...ZILCH. Okay I understand they may have low earnings and so on. But ZERO???? Hey how about throwing in say a buck? Something. But NADA? And I thought in this great country with all of the benefits and freedoms that those things cost money. But FREE? So before we talk about increasing taxes on the top 1% that pay 40% of the taxes, let's at least get everyone to throw something in the pot. That is why there is so much focus on tax reform or flat taxes or something else that actually is fair and actually stimulates the economy. Lowering taxes while eliminating "loopholes" will increase tax revenues. And taxing everyone on either consumption or something similar could also work and be FAIR. But don't let the media confuse you. Tax policy can never be fair when half the people required to file don't pay anything at all.

Examples to consider...

Person earning $500,000 paying a net marginal rate of 20% pays $100,000 in fed taxes.
Person earning $60,000 paying 30% pays $18,000
Person earning $32,000 paying zero and getting back $3,000 on EIC.
Each of the above people has the same access to the benefits of living in America. The top example pays more than 4 times example 2. Should he get 4 votes? The last example pays nothing and gets money back. Nice.

Which person is paying his or her fair share???