A few months ago a few of us had a discussion regarding the taxes in the United States. We both feel that taxes (corporate and income) need to be reduced for a number of reasons, one of them to stimulate the economy. A friend of mine, who is a Libertarian, feels exactly how the author discussed in my last post feels: the rich don’t receive any more benefit from their government than the poor so why should the rich have to pay so much more in taxes?
I can understand that reasoning a little bit. However, if everyone is going to pay the same fixed dollar amount (not as a percent of income but as a fixed amount) what would be a “fair value?” $5,000, $10,000, $50,000, or more in annual taxes? What if you make just over $10,000 and have to pay everything to the government. And with any of these amounts, the very rich would go from paying way over $200,000 in taxes a year to substantially less. The argument that the government would not be able to function on this significantly lowered tax revenue causes the Libertarian to suggest that then the government is doing too much. The government should only be doing the things that it can do better than private enterprise, namely defense of its people. And further, more money in the hands of private persons means more investment which means more money to be loaned out and more jobs created. This means that the money eventually “trickles” down to the average person. So then the argument goes back to the person or family making slightly more than the fixed tax. Since a fixed tax is inherently non-progressive, what do you offer? Does everyone making less than $X not have to pay taxes? Unless you start rich, then how does anyone “move up” in life when a huge percent of income is given to the government? Rather than the tax cuts being unfavorable to the rich, a fixed dollar amount tax would be like paying with loose change to the rich but significantly prohibitive to the poor and middle class.