Forbes' flat tax

[drkitten]

And what exactly, in your opinion, would make it a fair "exchange"? In your opinion, is it even possible for such an "exchange" to ever be unfair as long as the tax laws are democratically enacted?

Sure. That's why we have court systems (and things like fundamental rights). "Democracy" in its pure form often means tyranny of the majority, two wolves and a sheep voting about dinner --- or to use a more historical example, two whites voting about how much tax blacks should pay in order to vote.

Any person has standing to challenge the fairness of a tax policy in court, either on the grounds that it violates a right of his (such as discriminating on the basis of a prohibited category such as race) or that it simply makes no sense -- in legal terminology, that it has "no rational basis." A current example of this is an attempt by some Texas towns to tax strip clubs to pay for programs addressing violence against women. The government is then forced to defend the legitimacy of such a program in court.

The strip clubs argue, first of all, that exotic dancing is a protected activity (under the First Amendment) and cannot be the basis for a tax. (That's the first argument above.) The second argument is that there is no rational basis to link violence against women specifically with strip clubs -- there's no reason to believe that strip clubs cause or contribute unduly to such violence. The courts have not yet responded, so I don't know how that case will go.

But let me turn it around. Given that violence against women is a real problem that the government should address (even the Libertopians agree that protecting people from violence is a legitimate government activity) and that it's not free, how should such a program be paid for?

Or, to put it another way, what do you think is a "fair" way of paying for such a program?

 

[Francesca R]

Well, in this context, "fair" would be, at the very least, people not having to pay different amounts for the same quality and quantity of services received. As I said before, however, I don't believe this consideration provides a sound basis for a system of taxation, and implementing such "fairness" in practice would be unfeasable.

OK we cross-posted. So fair means exact itemised billing (although "market prices" might not exist for much taxation) that accounts moneys taxed against services received?

That's an OK definition. I agree it is a prohibitively expensive proposition for many tax regimes but not all.

So "no tax is fair" means "no tax charge is actually worked out that way"? What about value-added tax, or sales tax? You pay in proportion to what you buy.

 

[Redisca]

Any person has standing to challenge the fairness of a tax policy in court, either on the grounds that it violates a right of his (such as discriminating on the basis of a prohibited category such as race) or that it simply makes no sense -- in legal terminology, that it has "no rational basis." A current example of this is an attempt by some Texas towns to tax strip clubs to pay for programs addressing violence against women. The government is then forced to defend the legitimacy of such a program in court.

Correct me if I'm wrong -- my memory of ConLaw is getting a bit rusty -- but "rational basis" is the lowest level of scrutiny under the 14th Amendment, isn't it? So your statement that the government is "forced to defend the legitimacy" of the tax is not altogether accurate legally, since in "rational basis" cases, it is the plaintiff who bears the burden of proof, with no shifting -- and the plaintiff must overcome the presumption that the law is valid. By the way -- even where a governmental action violates a fundamental right, such as discriminating on the basis of a protected category, that action will still be upheld if it represents a narrowly tailored means towards a compelling governmental objective. True, it's a very tough standard for the government to meet, but it's not impossible. So if a program that violates someone's fundamental right is upheld in court on that "narrowly tailored / compelling objective" grounds, does it mean it's fair with respect to the person whose right is being violated? (Oops, I think the proper term is "abridged".) Notice, the "compelling objective" does not have to be for the benefit of the "abridgee". And Korematsu is still on the books, by the way -- but do you think what the government did was fair to the deportees?

Given that violence against women is a real problem that the government should address (even the Libertopians agree that protecting people from violence is a legitimate government activity) and that it's not free, how should such a program be paid for?

Or, to put it another way, what do you think is a "fair" way of paying for such a program?

Fair to whom? To the strip club owners?

 

[Almo]

deleted. No point, already covered.

 

[drkitten]

Correct me if I'm wrong -- my memory of ConLaw is getting a bit rusty -- but "rational basis" is the lowest level of scrutiny under the 14th Amendment, isn't it?

Yes, and no. It's the lowest level of scrutiny, but has nothing to do with ConLaw (it goes back to ECL). "Arbitrary and capricious" actions -- actions with no rational basis -- are prohibited generally.

But burden-of-proof issues aside, the point is that there is still a well-recognized category of tax policies that would be patently unfair and a well-recognized way to establish that unfairness (and eliminate the tax). In practical terms, almost no taxes are eliminated that way precisely because the way tax policy is written tends to assure that nothing that irrational gets put in place.

By the way -- even where a governmental action violates a fundamental right, such as discriminating on the basis of a protected category, that action will still be upheld if it represents a narrowly tailored means towards a compelling governmental objective.

Yes. So what?

So if a program that violates someone's fundamental right is upheld in court on that "narrowly tailored / compelling objective" grounds, does it mean it's fair with respect to the person whose right is being violated?

Yes, in a word. Society is larger than your individual quirks. If your personal religion requires human sacrifice, then it's completely fair for the goverment to stop you, personally, from practicing it.

Similarly, the strip club tax is either fair or it isn't. It doesn't make sense asking about whether it is "fair to the strip club owners"'; if in fact their chosen profession is harmful to society, then it's "fair" to make them pay extra to cover the harm, even if it ends up costing them money or forcing them out of business.

A "fair" government is not obliged to act in your personal best interests. In fact, a "fair" government is often required to act directly against your personal interests, because your interests create an undue burden on the rest of society.

 

[drkitten]

OK we cross-posted. So fair means exact itemised billing (although "market prices" might not exist for much taxation) that accounts moneys taxed against services received?

That's an OK definition. I agree it is a prohibitively expensive proposition for many tax regimes but not all.

I suggest that the system we have is actually Pareto-superior.

Suppose, for a moment, that we actually had such a system in place. Any time you bought a good or service, you could sign a reciept for it, and at the end of the year, the receipts were tabulated and you owed a check for that much, including the pro-rated cost of the receipts and tracking service.

A bright young efficiency expert comes along and offers instead to sell consolodated receipts. For half the price of the individual receipts, he will give you a general purpose access to unlimited services. Would you take that offer?

You'd be a fool not to. Indeed, that's the usual way that people do business. I can buy a half-kilo of sugar more cheaply than I can buy twenty-five grams of it, because the costs of tracking individual grams of sugar would be prohibitive. I have unlimited calling on my cell phone because that's cheaper for me than paying by the call would be. I have unlimited checkout privileges at the library because that's cheaper than trying to set up some pay-by-the-book system.

Is it "unfair" that I can't buy sugar a teaspoon at a time? That no store stocks individual teaspoons of sugar? Or am I actually better off because for the price I would pay for a teaspoon (with all the associated overhead) I can buy a half-kilo, and have all that sugar to spare?

 

[Francesca R]

Well yes, it's more efficient based on cost. Seems all have agreed on that. Strictly, to be an increase in Pareto efficiency, those who benefit the most (from bulked tax collection without full transfer-pricing) should, however, make side-payments to those who lose out from it, so that everybody is better off. But I think that is also too expensive to work out.

 

[drkitten]

Well yes, it's more efficient based on cost. Seems all have agreed on that. Strictly, to be an increase in Pareto efficiency, those who benefit the most (from bulked tax collection without full transfer-pricing) should, however, make side-payments to those who lose out from it, so that everybody is better off. But I think that is also too expensive to work out.

... which in turn suggests that NOT making the side payments is Pareto-superior to making them. (The cost of tracking the payments would be greater than the payments themselves; do you really want to pay $100 for an accounting service that nets you $40?)

I just have problems with anyone decrying the system as "unfair" when they're better off as a result.

"I want to buy a cup of sugar."
"Sorry, I don't sell it in cups. But a pound will cost you $1."
"But I don't need a whole pound. This is unfair -- you're making me buy sugar I don't need! My rights are being violated!"
"All right. Let's see, costs, labor, distribution, new equipment.... Okay, come back in an hour after I've got the new equipment installed and I'll sell you a cup of sugar for $2.50."
"$2.50!"
"Measuring cups and storage space aren't free, kid."
"Yeah, but,... $2.50! That's not fair! You're charging me more per cup than if I buy a whole pound. My rights are being violated!"
"Well, all right. Tell you what. I'll see you a cup of sugar at $2.50 or two cups, which weigh a pound, at $5.00. That way, it's completely fair and you can buy as many cups as you like at $2.50 a cup."
"What if I want half a cup? You're violating my rights!"
"$3.50 a half-cup, $7.00 for a cup, $14.00 a pound. Across the board."
"How about if I want a quarter cup?"
"$4.00 for a quarter, $8 for a half, $32 a pound. And, tell you what, since you're such a good customer, I'll sell you any amount less than a quarter-cup for the same quarter-cup price, plus expenses. Can't get any fairer than that, can you?"
"No, I guess not. So, I need to make two of these cakes, and they each call for a cup of sugar."
"So you need a pound of sugar. That will be $32.00, please."
"Thanks. And I also need milk."
"No, you don't. You can't afford it."

 

[UserGoogol]

Two things:

1) The whole fairness angle is completely wrong when applied to the subject of taxes. There can be no such thing as a fair system of taxation. No tax is fair. It is fundamentally UNfair to have to give up a chunk of your hard-earned money just because you've earned it, or because you've chosen to purchase diapers for your kid. Taxes that punish consumption and taxes that punish production are equally unfair, regardless of how low they are, or how they are distributed. But we need taxes to maintain our infrastructure and services, and to govern our community. And hence, taxes have absolutely nothing to do with fairness, and absolutely everything to do with the ability to pay. Rich people pay more taxes (at least in theory) because the CAN, and poor people pay less taxes because they CAN'T pay more; and that's all there is to it. The cornerstone of any sound tax system (and a sound tax system isn't necessarily a simple one) is a sober cost-benefit analysis based on utilitarian factors, not "fairness".

I think utilitarianism is the epitome of fairness, personally. If another person would benefit from something more than you would, it would be unfair for you to keep it.

 

[Just thinking]

I think utilitarianism is the epitome of fairness, personally. If another person would benefit from something more than you would, it would be unfair for you to keep it.

 

[IXP]

I think utilitarianism is the epitome of fairness, personally. If another person would benefit from something more than you would, it would be unfair for you to keep it.

So I should give the gun I have nevered used to a potential mass murderer who needs one?

IXP

 

[pbergeron]

...


Yup. And hence, it is "fair" to impose a portion of the maintenance costs on the people who use the infrastructure.

Do you drive? Good. The roads aren't free.
Do you have police protection? Good. The police aren't free.
Do you drink water? Good. Preventing raw sewage from being dumped into your watershed isn't free.
Do you buy stuff? Good. Providing a stable financial infrastructure isn't free.

And so forth.


...

I understand what is being said here and I also agree - if these were the only types of services my taxes were funding. Let me make sure I understand though - it seems from your statement that I must "use the infrastructure" in order to justify being taxed for it. Correct?

If so, this does not explain the many services (mainly social programs) that my tax dollars fund and from which I do not receive benefit. I guess one could attempt to argue that benefit is a relative term, but by benefit in this context I mean that I do not directly receive a check or service from any of the social programs.

 

[drkitten]

I understand what is being said here and I also agree - if these were the only types of services my taxes were funding. Let me make sure I understand though - it seems from your statement that I must "use the infrastructure" in order to justify being taxed for it. Correct?

Not at all -- many of the infrastructural services are more like insurance, in that you pay for them against the chance that you need them. I don't "use" police protection on a regular basis, and in fact I hope never to have to use it. Ditto the fire department or the disaster recovery services or .... well, you get the idea.

I also hope never to need unemployment compensation, workman's comp, or welfare. But I pay for them because I don't know what the future will bring....

 

[Soapy Sam]

Seems to me that one critical matter regarding taxes of any sort is that they are perceived to be fair. That's very hard to do, as others have said.
One way to improve peoples' perception of fairness might be to give them a degree of choice over where their tax contribution goes. (Even a largely illusory choice).

If, on my income tax return, I could tick boxes saying I wanted my money spent on hospitals and kittens rather than on subsidising the sale of cattle prods to dictators, I might feel happier about handing over the moolah.

Not much happier, probably, but every little helps.

 

[blutoski]

I think utilitarianism is the epitome of fairness, personally. If another person would benefit from something more than you would, it would be unfair for you to keep it.

Utilitarianism has major weaknesses, though, demonstrated by certain test scenarios.

The outcome of trying to manage these test scenarios was a concept called "Rule Utilitarianism" which sort of stapled Kantianism onto general utilitarianism.

I don't think either is justifiable.

I'm unaware of any entirely functional standard for fairness.

Even the cherished Veil of Ignorance has its weaknesses.

 

[pbergeron]

Not at all -- many of the infrastructural services are more like insurance, in that you pay for them against the chance that you need them. I don't "use" police protection on a regular basis, and in fact I hope never to have to use it. Ditto the fire department or the disaster recovery services or .... well, you get the idea.

I also hope never to need unemployment compensation, workman's comp, or welfare. But I pay for them because I don't know what the future will bring....

Yea, I guess we could sit here and argue for days about what the Constitution meant by "general welfare", but I for one do not believe it meant things like national healthcare, welfare, and federalized "insurance" programs - especially since all of these were instituted within the last century (exception being national healthcare which will be here by Nov. anyhow).

One other thing. You do not pay for them "because I don't know what the future will bring"...you pay for them because you do not have a choice.

 

[JoeEllison]

Yea, I guess we could sit here and argue for days about what the Constitution meant by "general welfare", but I for one do not believe it meant things like national healthcare, welfare, and federalized "insurance" programs - especially since all of these were instituted within the last century (exception being national healthcare which will be here by Nov. anyhow).

One other thing. You do not pay for them "because I don't know what the future will bring"...you pay for them because you do not have a choice.

So, you don't think that "general welfare" actually meant "general welfare"... interesting interpretation, please tell me more!

 

[pbergeron]

So, you don't think that "general welfare" actually meant "general welfare"... interesting interpretation, please tell me more!

Thomas Jefferson stated "Congress has not unlimited powers to provide for the general welfare, but only those specifically enumerated."

Specifically enumerated? How about Article I, Section 8 of the Constitution.

Also google "constitution general welfare clause". Tons of articles on this subject.

 

[JoeEllison]

Thomas Jefferson stated "Congress has not unlimited powers to provide for the general welfare, but only those specifically enumerated."

Specifically enumerated? How about Article I, Section 8 of the Constitution.

Also google "constitution general welfare clause". Tons of articles on this subject.

No, tell me what YOU think.

 

[pbergeron]

No, tell me what YOU think.

general welfare to me = The government shall see to it that everything mentioned in Article I, Section 8 is properly implemented and maintained. In doing so, the government will inheritently promote the general welfare of the states and its citizenry. This guarantee will allow the States of America and its citizens the freedoms necessary to address all other aspects of their lives, including but not limited to one's own health, without further hinderance.

Give back power to the states (decentralize). The beauty (in my opinion) of giving power to the states is that you form a nation that runs much like a business - states compete, through their policies and laws, for populations to help sustain itself. This would help to guarantee that the states with the best policy for its citizenry would survive - a testament to its (the state) form of government being best. In the end, we would all win, because other states would eventually mimic the policies of states that are surviving and thriving. Where would socialism fit into this picture? I have no idea. It would have been a great experiment and could have been easily executed if power would have remained in state's hands.


I have gotten off topic a bit and I apologize. Let's get back to a formal (please feel free to provide your own definition) of the term welfare:

welfare (dictionary.msn.com) -

"somebody's state or condition with respect to whether he or she is healthy, safe, happy, or prospering"

The keyword in this definition for me is safe. Much of what is listed in Section 8 deals with safety (military).

So you are free to argue that you want to expand welfare to include the "healthy"* part of the definition. But if you do (include healthy), then who is to stop us from also including happy in the equation, and if you do, how do you define "happy"? I am sure some could define it as providing everyone in the USA with a new car, big screen TV, and tickets to Disney World (happiest place on earth) as this would almost certainly bring some bit of happiness to everyone? How can you argue this? I would even be willing to bet (being serious here) that we could find some politicians that would even be willing to provide such services if they knew it would get them votes. I happen to draw my line at safety - you extend it to include healthy. I argue that providing safety, I am free to assume responsibility for everything else - including my own health. Where do ALL of us draw the line?

Also, I would like to make note of the term "general" - meaning all or majority (not formal definition so feel free to provide your own). This would mean to me that any one specific program would have to prove beneficial to all or the majority to be considered general. Is there a social program in particular that you can point to that applies to most or all citizens? Perhaps you could argue that collectiviely the majority receives a government benefit in some form or another through a social program - but what are the rules that governed the enactment of the first social program? It would be nice if I could note here the exact percentage of people on welfare today. I will have to do some research.

Am i right? It is an interpretation. I never claimed to be "right". I am also not claiming you are wrong. This brings me back to my first point which states that, "we could argue for days..." about this topic.

This brings up one last point. If "general welfare" meant social programs, then why wait until the 1930's to institute them? Surely people from the late 1700's thru 1930 could have made use of such programs. Why not institute all of this immediately? Was everyone up until 1930 too stupid to realize the importance of these types of programs?


* How do you define "healthy" in the context of the definition of welfare mentioned above? Does this mean "free" healthcare for everyone? Healthy is another relative term.