Taxation and Spending are at the heart of issues #2

http://tinyurl.com/dmkrc7

Everyone Should Pay Income Taxes
It's bad for our democracy to exempt half the country.
By ARI FLEISCHER
...redistribution of income... the 10%...that makes more than $92,400 a year -- pay ...72.8% in 2005 from 67.8% in 2001...the 2001 tax cut reduced taxes for every income-tax payer in the country...reduced the bottom tax rate to 10% from 15%...child tax credit to $1,000 from $500 per child...those who made less than $44,300 in 2001 -- 60% of the country -- paid a paltry 3.3% of all income taxes. By 2005, almost all excused from...any income tax. They paid less than 1% of the income tax burden. Their share shrank even when taking into account the payroll tax. In 2001, the bottom 60% paid 16.3% of all taxes; by 2005 their share was down to 14.3%. ...this large group of voters made 25.8% of the nation's income....almost 26% of the income and you pay only 0.6% of the income tax, that's a good deal,...For the bottom 40%, the redistribution deal is even better. In 2001, these 43 million Americans, who earn less than $30,500, made 13.5% of the nation's income but paid no income tax. Instead, they received checks from their taxpaying neighbors worth $16.3 billion. By 2005, those checks totaled $33.3 billion.Obama..Democrats want the "wealthy" to pay even more so there is more money for them to redistribute...."fair share."...Is it fair for 10% to pay 70% of the income tax? Does he believe they should pay 75%, or 95%, or ...pay it all? ..."Make Work Pay" tax cut...means almost 50% of the country will no longer pay any income taxes, up from a little over 40% today....when 50% of the country gets benefits without paying for them and an increasingly smaller number of taxpayers foot the bill, ...(the system won't work.)
...Under an Economic Growth Code, everyone...pay income taxes --
****Not only is Ari Fleischer correct, and makes the right arguments, but it's amazing that the points have to be resurrected. Aristotle recognized them almost two and a half millennia ago when he pointed out that democracy couldn't survive when a majority could offload the burden of taxation onto a minority and thus "destroy the polis." Surely it must be that liberals either don't know history or deliberately erase its lessons from their memories. Caring for the weak is a societal function but when the productive are taxed for the benefit of the unproductive, the former will join the latter killing growth and prosperity.****

****More important, is HOW the tax burden of the nation should be determined? It is only periodically questioned since it has long been assumed that INCOME is the method of choice. Actually, not at all so.

Income varies from year to year and accumulation of wealth is perhaps a better measure of the benefits derived from the functions of society. The usual argument for the "wealthy" -- however that is defined -- to be taxed more since they presumably derived greater benefit from society as measured by their income. Substitute "wealth" for "income"and the argument becomes better, if not good.

Wealth itself, however, is perhaps not a good measure of the benefits the wealthy derive from society. Wealth doesn't really become a benefit until you use it to purchase actual benefits ( goods, services, lifestyle, healthcare; we should probably add "power" but will leave that for the moment since it is a very complicating factor but should include benefiting those we love and those institutions and causes we care for ). Certainly, benefits are a better measure of what someone takes OUT of society since productivity is what one puts INTO society and there is usually a plausible correlation between productivity and both income and accumulated wealth. Thus, one is led to consider a BENEFITS tax as the basis for the system with CONSUMPTION via a sales, value-added or "FAIR TAX" being the proper instrument.

We must linger on this point a bit because it underlies the philosophical chasm between the common view and any of the alternative ones. Productivity adds to society, increasing wealth and benefits for the aggregate irrespective of how it is distributed. One generally wishes to encourage productivity and most measures of Standard of Living ( not always considered by, for instance, Communist countries as the proper goal ) involve GDP per capita or similar measures of per capita productivity. Taxing something gives you less of it, subsidizing something gives you more of it. From this perspective, taxing productivity is counter-productive unless you have nothing better. Saving is also considered good generally although there is the caution of the Paradox of Thrift ( saving for the individual is good; savings, if pursued by all savers, leads to decline in economic activity for the economy as a whole.) There is, however, clearly the limits of too-little savings ( e.g. the American economy for many years ) and perhaps too-much ( e.g. the Japanese economy for many years and other economies built on exports rather than on balance with domestic consumption. ) If we have too little saving and can only benefit from more productivity, it seems folly to tax both savings and productivity as we do by taxing income or wealth. If we consume too much, then perhaps ( subject to the Thrift caution ) we should tax consumption more.

Ideally, one would argue from fairness that BENEFITS would be more accurate as a target for taxation than just direct consumption since that represents more of the OUTFLOW from society. Those who work at occupations that they love or benefit themselves more directly ( e.g. retirement, art, work for "causes" ) might be considered somewhat in the benefit category ( with being in the military, serving in fire and police departments is clearly in the public service column and healthcare should be as well while lawyers perhaps should not be since it is invariably for the benefit of the lawyer and cost to society with some exceptions ). Direct consumption would be a good start, however, since much the simplest and at least one of the best.

Whatever one chooses, there is another mathematical model to use that seems to escape notice and can be adduced to any of the above, including INCOME. That is, if the government requires X percent of the total gross taxable income T of the nation for its governmental purposes ( putting aside whether that's the same or different from its societal purposes ), it would seem "fair" to make that proportional. That is, R = total revenue = X T and each person's share should be her taxable income t(i) multiplied by her individual rate x(i) so that r(i) = t(i) x(i) / R ={ t(i)/T] {x(i)/X}. Note that this could be compatible with a FLAT TAX ( r(i) = R ) but doesn't have to. Each group of taxpayers could be divided into tranches according as, for example, they derive 10% of T with n(i) payers in the group. Following Ari ( and Aristotle's ) prescriptions, everyone would pay something and each GROUP would pay the same but each group would have vastly different numbers of payers and, hence, the rate would vary greatly for each group. As a simple example, if the income distribution followed the 80:20 (Pareto) rule where 20% of the taxpayers earned 80% of the total taxable income, they would pay at a rate of (0.8 T/(0.20N) where N is the total population of payers and T is total taxable income or a top rate of 4 T/N. The lowest 80% of payers, earning only 20% of the income, would pay 0.20T/0.80N = (1/4) (T/N} or 1/16th as much PER CAPITA.As the actual distribution varies from the simple Pareto, one might divide the population into tranches in more sophisticated ways. This might seem to be very complicated, certainly as compared to a flat tax but the only relevant parameter would be gross taxable income.

Better yet, of course, would be to use BENEFITS as the relevant parameter rather than income and allocate to groups the percentage of benefits they derive from society and proceed to tax those at the source, e.g. a consumption or FAIR TAX.