Taxpayers Should Pay Their Fair Share
By Randall Holcombe • Wednesday September 28, 2011 11:50 AM PDT • 23 Comments
President Obama, asking for $1.5 trillion in new taxes, says “It’s only right we ask everyone to pay their fair share.” Few would disagree. The disagreement comes in terms of defining each taxpayer’s fair share.
The top 1% of taxpayers pay 38% of total income taxes. The top 5% pay 59% and the top 10% pay 70% of total income taxes. President Obama hasn’t specified what, exactly, he believes the fair share of upper income taxpayers to be, but presumably it is higher than this.
More alarming, the federal income tax system has become so skewed that more than half of all households pay no federal income tax. One must wonder about the future of a democracy in which a majority pay nothing for what the government produces. What limits the size of government when a majority can vote themselves more benefits at the expense of a minority?
Today, as the federal government consumes 25% of GDP and there are serious debates about whether we, as a nation, want bigger government paid for by more taxes or a smaller government and tax reductions, every voter should have some skin in the game.
Every voter should pay taxes so that for every voter the choice is, do I want to pay more taxes for bigger government, or do I want to reduce my tax burden and have smaller government? As it is today, for the majority who pay no taxes, the cost of bigger government falls on others.
Taxpayers should pay their fair share. As I see it, if the president wants a $1.5 trillion tax increase, at least some of it should be paid by those who currently pay no taxes, partly because it is fair that everyone pay some of the cost of running their government. A stronger argument is that voters should not have the option of voting for more government spending if they are not bearing some of the cost.
Tags: Budget and Tax Policy, Politics, Taxation, The State 
‘President Obama, asking for $1.5 trillion in new taxes, says “It’s only right we ask everyone to pay their fair share.” Few would disagree. The disagreement comes in terms of defining each taxpayer’s fair share.’
- I disagree. The question is based on the false premise that there is a ‘fair’ amount of loot for a robber to steal, and that fairness is based on a sliding scale depending upon the size of one’s wallet.
Paul | Sep 28, 2011 | Reply
Granted the Really rich pay a smaller percentage, but then they do create jobs, either through their own companies or through the spending (ergo-selling) that they generate. My problem lies mostly with those who do not work, therefore they pay no income taxes, yet they consume, consume and consume what the taxpayers provide for them. They are the real thieves along with the “government” officials who also basically do nothing except collect a big salary, with til death do we part benefits.
ld | Sep 28, 2011 | Reply
Fair enough, Paul. I said “Few would disagree,” and you’re saying you are one of the few. I’m OK with that.
But, the federal government is not going away any time soon, and if we are talking about everyone paying their fair share, looking at the facts it would be easy to argue that the people not paying their fair share are the people at the bottom end of the income scale, not those at the top.
Randall Holcombe | Sep 28, 2011 | Reply
What facts are you looking at, Id? You say granted the rich pay a smaller percentage, but that does not appear to be true in general. The top 1% pay 38% of total income tax payments, which is obviously a larger percentage of their incomes than the majority who pay nothing.
I agree with you that they are the job creators, the entrepreneurs, and the investors who make resources available for productive investment, so they are good for the economy. Your look at the expenditure side is a good compliment to the tax issue.
Randall Holcombe | Sep 28, 2011 | Reply
Count me as a naysayer, too, in that I can not agree that the federal government is even remotely close to following its own rule book. There would be no need for any federal income tax whatsoever if it did. Moreover, the half not paying income tax right now pay somewhere the huge FICA tax, which is also supporting blatantly unconstitutional spending programs.
Brent | Sep 28, 2011 | Reply
I should also have added that, at any rate, if Obama and congress were to raise additional tax revenue, they are going to do it ala Clinton on the backs of the middle class, because that is where the money is – undoubtedly flattening tax by raising rates and getting rid of deductions & credits. I hardly think that is something we should cheer.
Brent | Sep 28, 2011 | Reply
I definitely agree every person in the United States pay their fair share, but I’m a senior citizen and for the past 2 years our cost of living hasn’t gone up. Everything else does though. I think the whole deal of legislature should be thrown out and start new. I think we should have the option to fire everyone who is underhandedly skimming the government out of money should be stripped of their job, including the president. I think we need LESS government and they need to stop spending. Dip into their wages and pensions and insurance. What ever happened to the promise of having the same insurance that the senators and house reps. have???????? Got lost in the woodwork. Fire the whole lot in Washington and start new.
Mary S | Sep 28, 2011 | Reply
The stronger argument would be to make the point that all taxation is illegitimate because it is rooted in violence. Fairness doesn’t begin to creep in just because everyone has the same amount stolen from them. And the assumption that tax payers have some kind of say in the growth or decline of government is myopic.
Grady | Sep 28, 2011 | Reply
A good point was made. If you don’t pay taxes, should you be able to vote? I can see someone on Wefare saying, of course taxes should be raised! There will be MORE Welfare money! Welfare.It has become generational, when it was only supposed to be a short-term fix. Imagine the tax savings to American citizens if we decrease Wefare/Medicaid usage! But, that is another story, for another day and a long hard battle!
Voting... every citizen should be allowed to vote. No matter. There are some elderly, some very low income earners (not Welfare) who do not have to pay taxes, but who do deserve to vote.
I say, as I have been saying for a long time, start with the ones who are asking for the rich to be taxed “more”! CONGRESS! Look at what some of them are
worth. And, HOW they got their money! Some come “from money”, but a lot have gained their wealth from their careers in politics. You can look up whoever you want and see how much they are worth. It is truly amazing! Then, let THEM pay ” MORE FIRST”! Remember, these are the very people who think none of the bills they pass involve them! They think they are omnipotent! They go into politics for power and money... mostly OUR money... and my pockets are almost empty!
Kathleen | Sep 28, 2011 | Reply
Nobody doesn’t pay taxes. Many don’t pay income taxes, but so what? For most Americans, payroll taxes are a bigger bite than income taxes, and it’s not like even the poorest Americans are getting a good deal from big government. Then there are the many other taxes: luxury taxes, property taxes, sales taxes, gas taxes, utilities taxes, beer taxes, etc. You say “a majority pay nothing for what the government produces,” yet this seems completely incorrect to me. Most Americans — 90%, easily — get far less from the government than they put in, one way or another. Most people who benefit on balance, I imagine, either work for the state or are rich beneficiaries of corporatism.
It is a wonderful thing that some people don’t have to pay income taxes. Everyone’s taxes should be reduced as much as possible, unconditionally. The idea that anyone is undertaxed seems very odd to me.
Anthony Gregory | Sep 28, 2011 | Reply
Most of the taxes you mention are state and local taxes, Anthony. Yes, every income earner pays payroll taxes, but those have been cut in half now for the second year in a row, lessening the burden at the lower end of the income distribution and shifting the burden more toward the upper end. In a democracy, that means a larger majority in favor of bigger government.
I don’t think anybody is undertaxed, but for a given aggregate level of taxation, if the burden is more evenly distributed, that would result in democratic pressures for smaller government. When a few pay almost all of the taxes, a government budget driven by majority rule will grow. Everything I wrote was about the share of taxation — how the total burden is divided — not whether taxes in the aggregate should be higher or lower.
You say 90% get far less from government than they put in, but add up government employees, people collecting social security and Medicare, government contractors, people receiving unemployment compensation, people who live in Section 8 housing and buy their food with food stamps, etc., etc., and you might re-think this statement.
Randall Holcombe | Sep 28, 2011 | Reply
Fair Share?.............Does that mean “Each according to his ability,each according to his need,” the theme of Karl Marx and the Communists. The Graduated Income Tax is the 2nd plank to the Communist Manifesto,so if you support an Income Tax then you must support communism. Why would you want to support Communism? 90% of what the Federal Government does is un- Constitutional so why should you support a government that is blatantly un-Constitutional? As I don’t use a majority of what the Federal Government wastes money on,why should I pay my “fair share” when I never get my “fair share?” The average American works till the middle of August to pay all their taxes(Federal,State,Local and Hidden)so why should they work more? The fact is that not one cent that you pay in Income Taxes to the Federal Government goes for spending but is instead diverted to the Federal Reserve Banks to pay interest on the massive Federal Debt. The only answer is to put the Federal Monster back into it’s Constitutional cage and rein in it’s out of control spending. In the end, the government has too much money now and if it gets more it will only continue to spend America into a bankrupt shell of it’s former self.
Libertarian Jerry | Sep 28, 2011 | Reply
“The only answer is to put the Federal Monster back into its Constitutional cage and rein in its out of control spending.” And how will we do that, Jerry, when the nation decides what government does by majority rule, and a majority of the people would pay nothing more if federal spending increases?
People have little incentive to oppose increases in government spending when it costs them nothing, and who knows, they might even believe they would get some benefit. Because of our tax structure, that’s what the big spenders are promising: something for nothing. It’s hard for the majority to resist.
Randall Holcombe | Sep 28, 2011 | Reply
If you have to have a federal income tax, the only truly fair and equal system is one which taxes everyone at the same rate (ie, say 15%), regardless of income level. Such a system should also have absolutely zero loopholes — again, to keep it entirely fair and equal. This might reduce jobs for tax attorneys and CPA’s in the short term, but if your goal is tax equality then it shouldn’t matter.
John D | Sep 28, 2011 | Reply
Randall..........Your point is well taken. In other words more people,in America, vote for a living than work for a living. That is a sad state of affairs. America has degenerated from a Republic to a Democracy to a Mobocracy to a Welfare State and finally to bankruptcy. So you are arguing to go along with a tax system that perpetuates the problem. Short of an armed rebellion,which would be crushed,what can one do? Let’s face facts: the power elites have the producers in America by the short hairs and are squeezing harder. Eventually you can’t get blood from a stone. And then what? All I can see on the horizon for America is an end to what liberties we now have left and an endless landscape filled with gulags. It has happened over and over again throughout history and now its Americas turn. This is our fate.
Libertarian Jerry | Sep 29, 2011 | Reply
“It’s only right we ask everyone to pay their fair share.”
I disagree with every part of it. “We ask” who is Obama kidding. No one asks taxpayers to pay; taxes are taken not requested.
“Everyone” again who is Obama kidding. America’s welfare class for the most part don’t pay taxes. Those that don’t work don’t pay the payroll tax. Those that live off of EBT cards don’t even pay sales tax at least not here in Florida.
“Fair share” according to whom? I disagree with soaking the rich why punish those who through skill or even luck have been successful?
I do everything I can to pay as little in taxes as I can. Not out of greed but out of contempt for the welfare state and for the dishonorable disgraceful things my local school board, state government, and federal government promote and do.
Lyn | Sep 29, 2011 | Reply
In my trade (industrial sales) we often provide samples to customers but prefer they pay us something for the sample goods. We want to impress upon them they do have some value. If you give something away free to someone, they will get the impression that it has no value or cost.
I agree everyone that has an income over a certain threshold level should pay some federal income taxes, even a token amount, so they can connect to the fact there is a cost to government services.
The only thing worse in my mind than the ever higher percentage of workers who pay no federal income taxes is the EIC, where workers can actually get a refund of taxes they did not pay.
I have not checked this, but did the EIC come into being shortly after welfare reform or before? It is in my mind thinly disguised welfare and should be defined as such.
bryan drysdale | Oct 7, 2011 | Reply
The Earned Income Tax Credit was established in 1975. It was, ironically, designed along the lines suggested by Milton Friedman, who proposed a negative income tax in his book, Capitalism and Freedom, which was published in 1962.
Randall Holcombe | Oct 7, 2011 | Reply
What is left out of all discussions on taxes – or more specifically – income taxes, is the fact that the rich do in fact pay less, (in terms of percentages, but often in terms of total dollars). This is because they are not only smarter than we the unwashed masses, but because they have helped create the loop-holes. For instance, there is not tax levied on loans. If a business owner sets his business up correctly, he can “loan” himself money each and every week, with terms of 100% payback due in 99 years, he owes zero taxes, and does not have to pay the money back in his lifetime. All perfectly legal tax-free income.
We the working stiffs cannot do this since we collect a paycheck, and the money is stolen before we ever touch it. The key to “fair” taxation (and I agree that there is no such thing, theft is theft, but for the sake of this exercise...), is to eliminate the income tax, which is simply a tax on labor, or more accurately – time, and replace it with something that we all partake in equally.
Personally, I agree with Harry Browne which is to say that we should eliminate the income tax and replace it with nothing. The government currently collects 7+ times the amount that it needs to run a Constitutional government on tariffs alone (the only taxation specifically authorized in the original Constitution.
joe4liberty | Oct 10, 2011 | Reply
The top 400 individuals in this country have more wealth than the bottom 50%.
The top 1% has more wealth than the bottom 90%.
The top 5% has more wealth than the bottom 95% (by a factor of 3!)
When the wealth held by the upper classes is shown, the tax rates don’t look “unfair”.
BADGUY | Oct 20, 2011 | Reply
A flat tax would make sense if the incomes for 99.9% of Americans were within plus or minus 20%. That’s NOT the case. A flat tax is NOT fair with our current income distributions and inequities.
BADGUY | Oct 20, 2011 | Reply