Hey, Millionaires! This Is Your Fair Share. Now Pay Up!
Last week, I highlighted a chant overhead at an Occupy Wall Street rally: "Hey you millionaires, pay your fair share!" I then followed that by asking a patently absurd question: "What the heck does 'fair share' mean?"
As my fellow Fool Travis Hoium quickly pointed out in the comments, "'Fair share' is an impossible concept because the range of opinions will be extremely diverse." And boy, were they ever. But showing off their Foolishness, many readers chimed in to present views from both sides of the issue.
The views were so interesting I thought it well worth it to share some of my favorites.
Short and sweet
Some commenters got right to the point and kept it brief. XMFMitten had a cynical view of the demands for "fair" and quipped:
"Fair share" = "enough so the government can pay for the things I want it to give me."
Meanwhile, plvo38's view was that the answer is much simpler than most people are making it out to be, noting: "fair share should be equal %."
It is unfair, but not for the poor!
Aptly named commenter ipaymyfairshare lamented the fact that he is coughing up a hefty tax bill while a friend taking advantage of a laundry list of deductions will pay far less. He contends:
cut the crap about fair. Fair would be a flat amount for each person with no deductions, credits, etc. People should pay something on a net basis, but 47% of people do not. THAT is not fair.
Whoa, there! Slow down.
DJDynamicNC thinks I'm getting way ahead of myself by bothering to consider what "fair share" is before figuring out what our society should be providing in the first place -- something that we don't seem to have figured out yet:
Unfortunately, we are NOT settled on the core question of what the role of public service is in America. Should our government be spending billions on freedom bombs for Afghan caves? Should we provide health care to all citizens, or only those who can afford it? Should we spend a few hundred million on NASA every year, or should we purchase a couple extra fighter jets instead? Until this nation sorts out what it wants to do with its future, discussions on what a fair share constitutes are meaningless.
The popular choice
Among all of the potential solutions proffered, a tax on consumption was far and away the most popular.
Stop taxing income, and tax consumption. Income is too easy to manipulate or even hide. Throw an additional luxury tax on the toys of the rich. If they want to buy a $500k car or $10mil boat that's fine they deserve it. But if they're enjoying that level of success I think it's fair to say that they are also capable of paying a little more tax to help ensure there are adequate safety nets out there for the less fortunate in their society.
QuarkHadron agreed with that sentiment and added:
what we have is a tax system that favors criminals! Income from criminal activity or under-the-table work isn't taxed. Drug dealer doesn't pay tax on his (or her) income. ... But, at some point, all or part of that money is spent at a legal enterprise-groceries, new car, 'bling' from the jeweler.
Finally, Bobbee53 went as far as to say that consumption tax is the "ONLY 'fair' tax."
Of course, it's notable that while that could make certain things easier as far as taxation goes, we don't necessarily get away from this question of "fairness." Out of necessity, people with lower incomes tend to spend a lot more of what they make than those with higher incomes, so you have to structure the taxes so that you don't actually end up taxing lower income folks at higher rates.
But when you do that, you end up with some businesses -- think Dollar General (NYS: DG) and Kroger (NYS: KR) , which largely sell food and other essentials -- that likely wouldn't feel much impact from the new tax system. But others -- think Coach (NYS: COH) and Tiffany (NYS: TIF) , which sell luxury goods -- that would see a hit to demand from the new system. Is that fair to those businesses? How about the employees who could be affected?
The easy way
As far as solutions go, the one that resonated with me the most was Zoltan01's view that the problem of the disparate taxation rates that Warren Buffett has complained about comes from the fact that work income and investment income are taxed differently. To Zoltan01, this doesn't make a whole lot of sense:
The Tax Rate on Work Incomes already shifts a higher burden to individuals making more money. In addition to higher rates as income increases deductions reduce to effectively make only charitable and mortgage deductions viable. Income from Investments however remains constant regardless of amount earned. This is where tax increases should be applied on individuals as investment income increases.
In discussions of changing capital gains and dividend tax rates, the debate largely seems to be stuck on the idea that one rate should apply across all individuals. But it seems pretty darn sensible that, just like regular income, the tax rate for somebody with $90 million in capital gains should be higher than somebody with capital gains of $6,000.
Of all of the responses, though, the one that really caught my eye came from Arnquist. While the comment was too long to post in its entirety here, she begins by saying, "PLEASE raise my taxes. Yes, I am in the top tax bracket (although barely)" and goes on to point out a number of ways how her family and the business that she and her husband started (which employs 100 people) have benefited from what the government provides. That list included:
- Federal grant money
- Public education ("the business requires an educated workforce")
- Interstate highways ("We need the transportation infrastructure to get our goods to and from market")
- The court system (so "our contracts are legally enforceable")
- Police and fire departments (to protect their "significant assets")
And while these thoughts are coming from a mid-sized business, it's easy to see how they strongly apply to many large U.S. companies that employ thousands. What would Pfizer (NYS: PFE) be without patent protection? Or what about Con-way (NYS: CNW) without maintained roadways?
But maybe even more interesting for investors was her view that:
My portfolio benefited tremendously from the market gains of the last 40 years...fueled in part by government spending on infrastructure and research in the 50s, when the drive to put people into space helped fuel the development of the transistor, miniaturization, the computer, the Internet...all of the things that came together to cause a seismic shift in the economy that benefited all of us.
What's your fair share?
Didn't get a chance to weigh in the last time around? Want to expand on some of the ideas above? Head down to the comments section below and chime in.
At the time this article was published The Motley Fool owns shares of Coach. Motley Fool newsletter services have recommended buying shares of Coach and Pfizer. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.Fool contributor Matt Koppenheffer does not have a financial interest in any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or Facebook. The Fool's disclosure policy prefers dividends over a sharp stick in the eye.