It's Fair to Have a Fair System for Fairness


You know what would be fair? A butterfly-watching tax.

El Neoyorkino's James Surowiecki is displeased with his fellow Americans for not agreeing that people making more than $250,000 a year are greedy jerks who deserve to lose their money.

So he's proposed a new system: Leave those greedy jerks alone, but put a hurting on richer, greedier jerks whom everybody must hate because they're so rich:

Our system sets the top bracket at three hundred and seventy-five thousand dollars, with a tax rate of thirty-five per cent. (People in the second-highest bracket, starting at a hundred and seventy-two thousand dollars for individuals, pay thirty-three per cent.) This means that someone making two hundred thousand dollars a year and someone making two hundred million dollars a year pay at similar tax rates. LeBron James and LeBron James's dentist: same difference.

This makes no sense—there's a yawning chasm between the professional and the plutocratic classes, and the tax system should reflect that. A better tax system would have more brackets, so that the super-rich pay higher rates. (The most obvious bracket to add would be a higher rate at a million dollars a year, but there's no reason to stop there.) This would make the system fairer, since it would reflect the real stratification among high-income earners. A few extra brackets at the top could also bring in tens of billions of dollars in additional revenue.

A tax system that's both fairer and better? What's not to like? Well, here's one thing: The proper role of taxation is not to promote fairness or equality or social engineering. It is to raise revenue to fund the appropriate functions of government. Nowhere in his argument does Surowiecki ask whether tax hikes on the idle rich actually raise more revenues. It's a good question to avoid, because they don't.