It’s common sense that billionaires should pay their fair share of taxes. Everyone should agree to that. It follows a fortiori, as people in the logic business say, from the idea that everyone should pay their fair share of taxes—which follows, once again a fortiori, from the idea that we should all do what is fair, or just. But this kind of reasoning, which you can hear touted every day by politicians, talk show pundits, and other traveling salesmen, simply skirts the issue while raising the emotions. For the real question—the whole and entire question—-is how we should determine what someone’s ‘fair share’ might be. And while most people will readily agree that billionaires, and everyone else for that matter, should pay it, people very obviously can and do disagree greatly about what any given individual’s ‘fair share’ might actually be—-and, more to the point, how we should determine it.
It is important to understand that these differences are conceptual in nature and not simply about how to do the math, or even the ethics for that matter. The math and the ethics, on the contrary, kick in only after you have decided what we should take into account to determine someone’s ‘fair share’. So while it may be common sense that billionaires should pay their ‘fair share’ of taxes, it simply does not follow, a fortiori or by any rule of inference known to logic, that billionaires are not already paying it, or that a billionaire should pay proportionately at least as much as his or her secretary pays.
Why not? Partly because we would first need to determine what a billionaire’s ‘fair share’ might be, and partly because the idea that a billionaire should pay proportionately at least as much as his or her secretary pays in taxes goes well beyond the idea that we should all pay our ‘fair share’. For it presumes, first of all, that a progressive system of taxation in which different people are subject to different tax obligations is itself fair; and because it presumes, secondly, that someone’s ‘fair share’ is to be conceived as relative to his or her income (or wealth); and because it presumes, thirdly, that it should be calculated as a percentage of it. This is clearly one concept of what a ‘fair share’ might be. But it is just as clearly not the only one. And to ignore the fact that it is not the only one only raises the emotions while skirting the real issue. For one may also think that a system in which different people are subject to different rates of taxation—-or even different dollar amounts—-relative to differences in their income (or wealth) is inherently unfair. One might ask whether we would regard such an arrangement as ‘fair’ or ‘just’ in any other situation. Do you think, for example, that it is ‘fair’ for someone to charge you more than another person for a house or a car or a gallon of gas or a loaf of bread just because you can afford to pay it? If not, then you might conclude that the only reason why some people think the rich should pay more taxes than the poor or middle class is because they know that the poor and middle class are unable to pay their ‘fair share’.
This is not an argument against progressive taxation—-or an argument that billionaires are already paying their ‘fair share’. It is only to point out that there are different conceptual possibilities when it comes to thinking about how to determine someone’s ‘fair share’. It is common sense that billionaires should pay it, whatever it might be. But why should we think that this means they should pay a greater percentage on their billions than someone should pay on his or her thousands? Aren’t there other factors here that someone might want to take into to account—-just to be ‘fair’? Why shouldn’t we think, for example, that a person’s ‘fair share’ of taxes should be determined relative to his or her consumption of the government services for which those tax dollars pay? And what about the differences in the absolute dollar amounts that different people might pay?
I do not know how much money a billionaire might pay his secretary. I suspect it differs. But fifteen per cent of a taxable income of one billion dollars is one hundred, fifty million dollars—-a sum that most people cannot even imagine, let alone pay. The tax rate on a taxable income of fifty thousand dollars is fifteen percent—-or seven thousand, five hundred dollars. But the ‘effective rate’—-as some politicians, talk show pundits, and other traveling salesmen call it in a different but not entirely unrelated context—-seems more like zero percent. For many people who have a taxable income of fifty thousand dollars a year, and nearly half the country, apparently pay no income tax at all.
But even if we agree that someone’s ‘fair share’ should be related to his income, and even if we agree that it should be a percentage of his income, why should we think that people with larger incomes should pay a greater percentage of their income than people with smaller incomes—-or that the percentage that they pay should also be relative to their marital status, or to how they file their taxes? Why, in other words, should we think that a married couple filing jointly with a taxable income of forty-seven, three hundred and fifty dollars should pay fifteen percent of it in taxes, and that a married couple filing jointly with a taxable income of forty-seven thousand, three hundred and fifty-one dollars should pay twenty-five percent of it in taxes? And why should we think that it is fair for a single person to pay a greater percentage of his or her taxable income than a married couple filing jointly—-or that married people filing separately should pay a greater percentage of their taxable income than they would if they filed jointly?
How can we even begin to think about what someone’s ‘fair share’ might be in this kind of situation—-let alone be so clear and certain about it, as so many people these days apparently seem to be?
Karl Marx famously envisioned a world in which goods would be distributed ‘from each according to their ability to each according to their needs’. This is an idea that appeals to those with few abilities and many needs. But Willie Sutton just as famously explained that he robbed banks because ‘that’s where the money is’. It is easy to understand how people with little money and many needs might have trouble imagining how people with more money could possibly need it. But it should also be easy to understand how people with more money and correspondingly larger horizons might have a different idea.