What is a Fair Share of Taxes?

What is fair is different from what is just. What is just is determined by the ethic of natural moral law as expressed by the universal ethic. The universal ethic prescribes that all acts, and only those acts, that coercively harm others, are evil. Justice is the implementation of the universal ethic in law. Justice is applied by prohibiting and penalizing evil acts, and by keeping all other acts free of restrictions or imposed costs.

The premises from which natural moral law derive are the biological independence of thinking and feeling, and the equal moral worth of all human beings. Thus a foundation of justice is equality before the law. People with equal conditions should be treated the same.

Equality implies that all persons are equal self-owners. If one person imposes his will on another, the victim becomes a slave, and the tyrant becomes a master, in violation of equality. Self-ownership implies that one fully owns one’s labor, and therefore any tax on wages or the products of labor, or the spending of wages, violates self-ownership, and is unjust. 

Self-ownership does not apply to what the self does not create, namely, natural resources. The equality premise implies that all persons benefit equally from the value of what nature provides. The value of natural resources, including spatial land, is measured by how much people are willing to pay to use them, namely, the economic rent. Economic justice requires that all persons have an equal share of the natural land rent, and that each worker be free to keep his entire wage.

A just tax system does not tax wages, goods, exchange, value-added, and entrepreneurial profits. Economic justice is implemented by collecting the economic rent of land and distributing it either in equal shares of cash or in public goods that benefit the public generally. The rent generated by nature would be globally distributed, while the land rental generated by local population, commerce, and public goods would be distributed to the local population.

Since the rent morally belongs to individual persons in equal shares in the relevant communities, a strict application of equality would be to rent payments in cash, which individuals could use to pay for services such as education or, as members of some association, as dues for the provision of public goods. Such payments are often referred to as citizens’ or residents’ dividends.

“Fairness” means that you get what you deserve, and deserve what you get. Like justice, fairness applies equality. We are born with a genetically programmed sense of equality. Children instinctively feel that it is unfair for one to get a better toy than another. But the application of equality in fairness is broader than in justice

It is not fair for some persons to be more talented or beautiful than others. A person who is born with high intelligence, beauty, strength, and talent did nothing to earn these qualities. One person does not deserve to have a better genetic inheritance than another. Nature is unfair.

A financial inheritance is also unfair. When a child is born to rich parents, the child has done nothing to deserve the good fortune. It is unfair for one child to have a rich family while some other child has a poor family.

It is also not fair for some people to live in a country at peace, while other have to suffer thru war. Those who suffer from violence, persecution, and arbitrary negative discrimination do not deserve these outcomes.

But morality requires justice rather than fairness. As the saying goes, “life is unfair”. However, natural moral law, when applied, does remove that portion of unfairness, such as violence, that is also unjust.

When politicians and commentators talk about making people pay their “fair share” of taxes, they seldom analyze what “fairness” means. They presume that it is fair for the rich to pay a greater share of their income in taxes than the poor, and that even though the rich today are paying a very large portion of taxes, they should pay even more. But fairness advocates have no logical formula for determining how much is “fair.” They also provide no analysis as to what extent the incomes of the rich are deserved.

A pure fair tax would confiscate gains from those who have undeserved qualities such as genetic and financial inheritances. A truly fair tax would collect all the land rent and distribute it equally, because nobody deserves more of the land rent than anyone else, but it would go beyond that to tax and redistribute equally all gains other than what one earns from one’s labor.

But these outcomes are not what advocates of “fair” taxation want. The “fair share taxes” organization seeks to eliminate property taxes and to keep taxing income including wages. They also want to tax net worth, which would tax savings from labor.

The “fair tax” organization seeks a national sales tax, with no sound analysis of what fairness means. If a tax on wages is unfair, because one deserves what one earns, then it is equally unfair to tax wages when they are spent. A national sales tax would also subsidize land values as the public goods paid for by sales taxes would generate undeserved land rent and land value.

Most advocates of fairness in taxation have a subjective feeling of what is fair, and indulge in not having examined the ethical and economic aspects of fairness. We should be advocating justice rather than fairness, because any fairness that goes beyond justice violates liberty and natural rights. Young children want everything to be fair, but mature adults should realize that we just have to accept the unfairness of one person being struck by lightning while others are not.

[Editor's note: this essay first appeared on Dr. Foldvary's blog, the Foldvarium, on Dec 8 2012]

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3 thoughts on “What is a Fair Share of Taxes?”

  1. Thank you! I have been trying to tell people they do not want what is “fair” and they don’t want “equality” — they want justice and equal treatment under the law. If more people would understand this difference, they couldn’t be manipulated by politicians who throw around the word “fair” as if it meant that we all deserve money we didn’t earn.

  2. Good question. I have read in several places – but I can’t remember any reference -, that’s there is a sort of universal, cross-cultural agreement that it’s 15% of revenue. That seems too high to me under the current system of revenue allocation because it automatically erects Government as the single most important economic entity in a society.

    15% would not seem too high to me if I were free to allocate it to my own choice of collective expenditures. I mean, if I were allowed to specify, for example: 8% for defense (instead of the current 4% and down); 5% for experimentation in all areas (I mean by “experimentation” trying new things with no expectation of a return.); 2% for transportation.

    I don’t know why personal allocation of tax revenue by the taxed is not discussed more in libertarian circles. It’s a form of democracy, it’s a form of direct rule that would minimize the accretion of an unmovable, ineradicable government bureaucracy. It’s not as if libertarians were shy about utopian ideas!

Please keep it civil (unless it relates to Jacques)

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