Is it unfair for the rich to pay more total taxes ( not by percentage ) than the poor? [closed]

Question

Is there a compelling ethical argument why the rich ought to pay more in income taxes than the poor? For the purposes of this discussion let's assume "the rich" legally earned their wealth through either hard work or plain luck - nothing illegal.

Here I'm referring to the absolute amount of income taxes paid (measured in currency) rather than a specific percentage of income.

Arguably both individuals are utilizing comparable quantities of public resources from local, State, and Federal governments (roads, education, police and military protection, etc.). Both individuals also receive a single vote in elections. However the billionaire is contributing far more in taxes.

Answer 1

Your argument is weak, because it is false that a billionaire is using the same amount of public resources that a minimum wage worker is:

• First of all, the government will have to use more resources in protecting the billionaire's large number of assets (properties, funds, etc...), than it would in protecting the minimum wage worker and her/his family.
• The billionaire benefits from the labor and skills of a large number of people who work for him/her. Most of these people had public educations paid for by the state and are using social services paid for by the state without which they would not be able to do the work they do for the billionaire.
• The billionaire very likely uses more of the public utilities during his/her activities (travels more therefore uses more roads, produces more waste, costs the government more in terms of paper work and bureaucratic activities, etc...).

Setting aside the issue of fairness, it is in the billionaire's interest that the general public is healthy, well educated, and feeling secure about their livelihoods and families. If the working class finds itself struggling and out of money, they will not be able to purchase the goods that the billionaire produces, leading to periodic economic crises. This is known as the boom-bust cycle.

Seen from a point of view of fairness and justice, there are people who cannot contribute to the well being of society through no fault of their own: orphans, the disabled, etc...somebody has to take care of those people, and it is only fair that those who were luckiest in life (the billionaires) shoulder the most responsibility in taking care of those who the least lucky.

John Rawls adresses these questions broadly in his theory of Justice as Fairness. He discussed these ideas in his book "A Theory of Justice", but I will quote the SEP article on John Rawls:

These guiding ideas of justice as fairness are expressed in its two principles of justice:

• First Principle: Each person has the same indefeasible claim to a fully adequate scheme of equal basic liberties, which scheme is compatible with the same scheme of liberties for all;

• Second Principle: Social and economic inequalities are to satisfy two conditions:They are to be attached to offices and positions open to all under conditions of fair equality of opportunity; They are to be to the greatest benefit of the least-advantaged members of society (the difference principle). (JF, 42–43)

Most relevant to your question is the difference principle. As enunciated by Rawls in "A Theory of Justice":

The difference principal, for example, requires that the higher expectations of the more advantaged contribute to the prospects of the least advantaged. Chapter II, Section 16, pg. 95

Further down in the SEP article is a detailed explanation of the difference principle:

The second part of the second principle is the difference principle, which regulates the distribution of wealth and income. With these goods inequalities can produce a greater total product: higher wages can cover the costs of training and education, for example, and can provide incentives to fill jobs that are more in demand. The difference principle requires that social institutions be arranged so that any inequalities of wealth and income work to the advantage of those who will be worst off. The difference principle requires, that is, that financial inequalities be to everyone's advantage, and specifically to the greatest advantage of those advantaged least.

Per John Rawls' difference principle, Justice as Fairness requires that those with the greatest income contribute the most to public institutions, so as to help the less fortunate in society. Inequality is only acceptable as long as it benefits the least fortunate.

Answer 2

Arguably both individuals are utilizing comparable quantities of public resources from local, State, and Federal governments (roads, education, police and military protection, etc.)

This is clearly untrue.

Someone who can afford to own a car makes use of the roads, while someone who cannot, does not. A trucking company, of course, will make far greater use than either of these individuals, and is presumably owned by an even more affluent person (or group of people).

The same can be said of education. In the United States, which you are asking about, education funding disproportionately benefits the more affluent members of society (compare the quality of a community collage to a private college, and then compare their tuition rates).

We can also observe that those with the most valuable possessions benefit the most from an active police force. Stealing from the poor is rather pointless.

The practical answer, however, is that these usages are difficult to quantify, so instead we turn to a more pragmatic approach: Tax based on what people can afford instead of what they use. This is a better approximation of usage than you might expect, because the most affluent are, by definition, producing the most wealth, and thus benefiting the most from various forms of infrastructure and the resulting economies of scale.

Taxing based on what people can afford also has the rather tautological advantage that people can (theoretically) afford to pay their taxes, which might not be universally true if taxes were evenly distributed in the fashion you propose, and still had to pay for all the same services. You could begin to inquire into the fairness of those individual services existing (or other services not existing), but I perceive that would be more a matter of politics than philosophy.

Now, is this "fair?" How do we define "fair?" I would define it as "ethically permissible", in this context. But now we have a problem: what system of ethics are we using? The two most popular systems, Kantianism and Utilitarianism, are both problematic since they don't distinguish permissible from obligatory (that is, they define things as either "you must do X" or "you must not do X," with no room for "you may do X."). Utilitarianism, however, does have the ability to answer questions of ethical preference ("Which of X and Y should we do, if we must do one of them?"), while Kantianism does not.

Under Utilitarianism, this system is unethical because it is not literally the best possible system. Neither is "everyone pays the same number of dollars," of course. But we can ask which system is ethically preferable if we are forced to choose one of them. In that contest, proportional taxation clearly wins because absolute taxation leads to the highly undesirable result that a lot of people cannot afford their taxes, and continue to be unable to afford their taxes because the debt piles up faster than what they are earning. This makes the whole system practically unsustainable, to the detriment of all members of society.

Under Kantianism, it's not clear to me how the categorical imperative interacts with taxation. Worse, Kantianism can't really compare these two systems, because it always gives black-and-white answers; either a system complies with the categorical imperative, or it does not.

I can, however, conclude that absolute taxation is at least as unethical as proportional taxation. Why? Because, for the reasons explained under Utilitarianism, it cannot be universalized without undoing itself.

Answer 3

When it comes to many arguments like this, I like to remind people that "fair" is a 4 letter word and an "F word." In general "fairness" arguments can always be coached both ways. You specifically ask for an argument "for the rich paying more dollars in taxes than the poor," so that's the only side of the argument I will consider. I will, however, point out that "rich" does not mean they pay higher taxes -- higher income does. It happens to be that "rich" and "high income" are substantially correlated, but the US tax code taxes income. This will be an important detail in the argument.

Those with high income tend to earn more dollars per hour. A CEO making $10mil a year does not do so by working at $10/hr for a million hours every year, that'd be ridiculous. People all work roughly the same amount, somewhere between 8 and 14 hours a day, but they earn different amounts of money for that. If one were to make the argument that what is actually being taxed is time (a rich man and a poor man both have 24 hours in a day), if you tax the high income earner proportionally more dollars than the low income earner, you are effectively taxing them an equal portion of their day. If you were to tax an even number of dollars, a CEO could earn in 5 minutes than a lower class worker could earn in 14 hours. The CEO could then spend the rest of the day earning money to further their own interests while the lower class worker is forced to slave away the entire day just to fuel the "public interests."

Answer 4

The country needs money to operate, so taxes are necessary. The government need to extract as much tax out of the people as it can without damaging their lives/livelihoods (they are there to serve the people, after all), or putting undue pressure on the people, and have them still earn a living and feel adequately rewarded for the work they do.

Now, a billionaire can contribute a lot more without it adversely affecting them than a poor person can. So that's how they work it out. In terms of serving the people, it's the only fair way. It's more about the money the people have left over than the money the government are taking.

Imagine everyone paid equal taxes. The country still needs the same amount of money as it did before, but now while that billionaire could finally afford that ivory backscratcher she had her eye on, the lives of the poor would be destroyed.

Answer 5

I did a data analysis project using the 1990 US census data PMUS which showed that if the public assistance and state support then given to the wealthy and rich categories of citizens was instead given to those below the poverty line, then 9.2% of the US population would be pulled out of poverty.

There are strong social and ethical arguments why the rich should pay the same tax as the poor (proportion or percentage, not dollar amount), and some arguments exist as to why they should pay more, but the only decent justification I have ever heard for why they should pay less is that they own the politicians and lawyers.

Answer 6

Tax schemes based on income are the only fair tax schemes. First, I assume that government is necessary and that it requires funding. Next, I concede your premise that rich and poor people use public services at identical rates. (This is absurd, by the way, but ultimately irrelevant to the argument.) It follows from this that taxation is a necessary evil.

Some quick googling shows me that US yearly tax revenue / population comes out to something like $8000 per person. $8000 of taxes would be absolutely ruinous to the majority of the US population. I assume a similar situation holds in most countries.

Finally, note that money has diminishing marginal utility, which means that each dollar brings a person less value than the dollar before it. That is, the difference between $0 and $1 is vast, as are the gaps between $1 and $10, $10 and $100, etc. For a billionaire, paying $8000 in tax is an insignificant expense; for the median household in the US, paying $8000 is something like losing 2 month's pay.

It follows that if the necessary evil of taxation is to be distributed in such a way as to minimize the suffering that it causes, the rich must be asked to pay more than the poor.

The way out of this argument is to prove that dollar amounts are more relevant to fairness than relative suffering. I think this is a difficult argument to win because money has no inherent value, while suffering is inherently bad. That is, while you can spend money to get good things, having money isn't a good thing in and off itself.

Therefore, progressive taxation is the most fair system because it lets everyone keep as much of the benefit of having money as possible while still providing everyone the benefit of having government.

Answer 7

Your premise is faulty

In your question, you ask us to assume that very rich people

legally earned their wealth through either hard work or plain luck

which would seem to be suggesting that either

• they work harder than others
• their accomplishments are completely independent of others
• their "luck" was not tied to any economic event, but more like finding a bag of money on the street

These scenarios are ridiculous on their faces 9 times out of 10.

What you actually meant

I think what you probably meant was something more like "hard work, luck, intelligence, and training". Those last 2 are key. I'd re-phrase your quote as

legally (but not necessarily morally) earned their wealth through hard work applied to the correct places and economic opportunity paired with the knowledge and means to take advantage of it

There's a bunch of caveats in this new, more accurate statement:

• Anything that's legal is fair game
• Hard work doesn't pay off if applied incorrectly
• Knowing where to apply work doesn't do much if you're lazy
• Opportunity is limited without means (I can't invest what I don't have)
• Means are marginally limited without opportunity - this one is the least true, because the more money you have, the more dividends you can get from it by letting professional fund managers invest it. A savings account gets 0.05% interest, a VC firm is trying to get 10x returns on investments of millions.

So you can clearly see the problem here. You need to work hard and smart if you don't have money. Even if you see a good opportunity, you can't always take advantage of it.

Once you have money, it generates itself. At this point, this is a platitude - "spend money to make money". That's because it's true. Way more frequently than you might think, the wealthy inherited wealth from someone else, and then that money (and the education and opportunity it generates) is self perpetuating.

Pay structures are broken, and everyone accepts it

Most very wealthy people are involved in business ventures employing many people of more modest means. The wealthy people running those businesses might be able to do any job at the company, but would be unable to run it alone. If a company employing 100 people generates 100 million in revenue, it's only fair to say that on average each employee is worth a million dollars, right? They don't all generate that much value, but that's the average. Most employees aren't paid anywhere near that until you get to VP and C levels. Is it fair that an employee can take home 50,000 after generating a million dollars for a company? The remaining 950k gets split up among the people who own the company, or funneled back into building the company that the 50k employee has no ownership of.

So how is that fair? The very wealthy justify it with a few reasons:

• market forces. They can pay that because people keep accepting it.
• if that employee is so great, they'll be promoted until they're receiving a bigger piece of the company pie, or they'll go start their own company.
• the person wouldn't have a job at all without the ideas and organization of the company.

Workers accept it because the only real alternatives are

• being in a union. This was the reaction after the industrial revolution, but since then unions have become an economic boogey-man of overpaid incompetence by equally deserving non-union workers who are incapable of seeing the root cause of their problems.
• starting your own company - an extremely daunting task if you haven't been trained for it with years of business education and experience - which is a recipe for failure if you're not going into it with smart, hard work and the means to carry you through rough patches until the business is established
• being jobless and hence, homeless and hungry, because poverty support systems are so bad

Why that still doesn't justify massive income disparity

You and everyone else seems to be jumping onto under-use of public infrastructure as a reason for taxing wealthy people less. In reality, this is a ridiculous claim, less than 10% of federal taxes go towards infrastructure, and the infrastructure is for the people generating the wealth of the richest, not those noble supermen who take private jets to work instead of the highway.

Wealthy people shouldn't be taxed higher on their earnings, they should be earning less in the first place, and the money they're not earning should be directly distributed to the workers currently contributing to their success. Then:

• those workers will actually pay taxes as opposed to the 40%+ who pay no federal taxes
• 50% of federal taxes won't have to go towards social security and medicaid, because workers will have the compensation and expectation to invest intelligently to be able to support their own retirement.
• those workers will be more able to take advantage of opportunities that they see, now that they actually have money instead of the 63% of Americans who can't even afford a $500 emergency
• those workers will be less stressed, now that they can actually afford an emergency. Less stress means a healthier, longer life, maybe even extra years in the workforce being productive.
• they'll be able to lobby more effectively for better public education in their neighborhoods (now that they're actually paying taxes), so that their kids will be more educated and able to take even better advantage of opportunities than they were

All of those things are justifiable reasons to force wealth from the richest to the poorest. But you should see the negative impact they can have on the wealthy's ability to take advantage of the masses' labor, guard their businesses against disruption from startups, and ensure their own children will be the leaders of the future.

If I have a loaf of bread and I pass a starving man on the street, it might not be "fair" if someone forces me to give him a portion of it, but it would be ridiculous to call it "un-just".

Answer 8

Let us say rather the government taxes in time payable as money. From this perspective, taxing income at a percentage is obviously fair. From every person the demand is the same, one third of the output of their labor.

Answer 9

The question is framed on a very simplified concept that leaving aside actual prices of products and services, there is little difference in actual quantity of resources consumed by any particular individuals on a daily basis. A rich person can afford to buy expensive products and services, while a poor person must be satisfied with less expensive things, but the same amount of infrastructure is required to transport a pound of product, travel a given distance, etc. Based on that information, then why should the rich pay more total dollars in taxes than the poor for using the same infrastructure?

That concept is missing a key fact though. Consumption is only one factor involved in taxation. (Actually for consumption the question is already partially answered with sales and use taxes. It doesn't matter whether rich or poor, everyone pays sales and use taxes only on products and services purchased.)

Another important factor to consider is how much infrastructure is required to produce each dollar of income. When that fact is taken into consideration then someone making a million dollars a year is utilizing much more of the infrastructure than someone making ten thousand dollars a year. For this reason income taxes and capital gains taxes are calculated based on earnings and profits.

To answer the original question about fairness though, an even more important consideration is actual benefit received from the system. Much is made lately about government entitlements to the working class, but I don't imagine any millionaires out there would be willing to trade places with someone that needs their income supplemented to meet basic needs. The wealthy are already receiving much more benefit from our economic system than anyone receiving any benefits from government assistance.

In this case the argument rests on the requirements of reason. The wealthiest people in our society receive the most benefit from the economic system we have, they also use a higher percentage of resources to acquire and maintain that wealth, therefore it is reasonable that they should pay more taxes for the society to maintain that system. So, it is ethical to require the rich to pay more total dollars in income tax than the poor are expected to pay.

Answer 10

A lot of these answers seem to be complicating things more than they need to.

Now, maybe this isn't a purely ethical answer, but it is by far the simplest

Lets say you're in a group of five friends. they have $2, $4, $5, $9, and $80.

All of you are out in town and need to buy something to eat. A pizza. Let's say it costs $20.

Now, you could say that everyone should just pitch in $4. that might be fair in a sense, except hold on, one of you doesn't have that much money. So you either need to buy half a pizza for $10 (with each person contributing $2), which isn't nearly enough for all of you, or accept that there needs to be some level of unequal (in quantity) contribution.

Ok, option 2 is everyone contributes 20% of what they have. ($0.40, $0.80, $1.00, $1.80, and $16 (for $20 total). This works out rather fairly, if pizza is the only expense everyone had, but wait. Everyone needs to pay for the bus home too. that costs $1.50 for everyone except the guy with $80, who's taking a taxi home since it's faster. He's paying $4.

The problem now is that even though we're spreading the pizza cost around as an even %, the guy with $2, is spending 95% of his money on this day out with friends, and the guy with $4 is spending 58% of his money on this trip, while the guy with $80 is spending only 25% of his money. So this doesn't seem very fair to most of them either (although some disagree, probably like the guy with $80)

So option C is to charge different percentages depending on how much money they all have spare. let's say each of them contribute 22% of the money they have -free-. The guy with $2 has $0.50 free, contributes only $0.11, the guy with $4 has $2.50 free, so he contributes $0.55, meanwhile the guy with $80 has $76 free, so he contributes $16.72 instead of $16 in the earlier plan.

This last option leaves the group paying an increasing percentage based on their amount of wealth, with the $2 guy contributing 5.5% of his money, while the guy with $4 contributes 14%, and the guy with $80 contributes 21%, but leaves each with a more similar percentage of their wealth free to spend on whatever else they want, although still somewhat weighted towards the people with more money ($2 guy has $0.39 free (19.5%) while $4 guy has $1.95 free (49%), and the guy with $80 has 59.28 free (74%).

This last option is the way most real-world countries apply their taxation, the parallels being pizza == taxation, while the cab ride home is other unavoidable living costs, which as in the example, increase with wealth, but much slower than income does (lowest tier incomes may be spending 80% of income on rent alone for example, while highest tier spends less than 20% on housing/rent)

So is it ethical to tax different people disproportionate quantities? It is when you consider the alternatives, either providing insufficient services to everyone, or all but removing low income people's ability to spend money on anything except the basic essentials of life such as housing and food (and perhaps even those).

Disproportionate taxation, like many things in life, is perhaps unfair, but it is less unfair and immoral than the alternatives, which in a sense, makes it the ethical choice.