Paying Your Fair Share

Something that often gets mentioned when talking about taxes is the idea of paying your "fair share." This idea to me always seemed childish. As I grow older I have to acknowledge more and more that life is not fair. Very few things could be considered fair. Yet people bring up the need for things to be "fair" or the idea of something being "deserved." I want to focus on the idea of "fair share" and why this is all just childish garbage.

Almost everything today gets taxed. You make money, pay a tax. You inherited money that was already taxed, pay a tax. Spend money, pay a tax. Own property, pay a tax. I could go on for quite a while, the point is there is a tax for everything. In most cases we all pay the same amount per dollar. Sounds reasonable, right? Despite this, if you have a larger income then you have to pay more per dollar than other people. That's not right, how is that fair? Well, it's not. So a fair share would be to pay the same amount, right? No, the people talking about paying your fair share means that if you make more money you should be paying even more. How is that a fair share in anyone's mind?

So the way it works is currently is (2019) we have a few "tax brackets" for different income levels. Currently it goes like this for a single person:

The first $9,700 is taxed 10%
From $9,701 to $39,475 is taxed 12%
From $39,476 to $84,200 is taxed 22%
From $84,201 to $160,725 is taxed 24%
From $160,726 to $204,100 is taxed 32%
From $204,101 to $510,300 is taxed 35%
And from $510,301 and up is taxed 37%

The first thing you may notice is that there are some big jumps, one being a 10% difference. So how much is it numerically for each at the top of the bracket. We start with $970, then $3,573, then $9,839, then $18,366, then $13,880, then $107,170 roughly when rounded to the nearest dollar. Added up that is $153,798. This averages to 30% of your income as taxes. this excludes marriage, dependents, and other things that you can deduct. We could go and average each bracket, but the bottom line is it's taking more per dollar from people that make more money. Even though they will pay more per dollar than anyone, people still think it isn't enough to be fair. we haven't even taken into account state income tax and all the other extras that are paid out on top of all of this.

From what I can find, in 2018, 44.4% of Americans actually did not pay any federal income tax, but they still pay out for Social Security and Medicare. That means that we burden 55.6% of wage earning Americans to float a huge portion of our federal budget. Despite this, people say it isn't fair and the rich need to pay more.

Often times to show the numbers, people try to show off the net worth of individuals as though they can take a huge chunk of it. What people fail to realize is that a lot of time it is not money on hand or income, but investments. I can have a million dollars worth of investments without a cent on me and make no income whatsoever. See the thing is, there are things that aren't taxed until you sell them. These fall under capital gains tax. This can be stocks, bonds, precious metals, real estate, and property. As long as the investment is held, it is not getting taxed. These are taxed differently than your income tax, but they are added together to find the percentage to be taxed.

Regardless, if someone is paying more per dollar, they are paying more than their fair share. The only fair tax would be a flat tax with no deductions, then everyone would be paying their fair share of income tax. In my honest opinion, we should be working towards eliminating income tax entirely.

You see, income tax was a concept for a way to fund a war effort. In 1799 Great Britain implemented income tax to fund fighting the French, led by Napoleon. It was viewed as temporary. The US considered income tax to fund the War of 1812, but the war ended before it happened. Congress passed the Revenue Act of 1861 which had income tax to help fund efforts in the Civil War. Due to problems with the details of income tax law, taxes were not collected until the revision in the Tax Act of 1862. It was amended multiple times until being repealed in 1872. The government was making most of its revenue through taxing imports, exports, and sales. The problem they found was it mostly effected the rich. They came up with a graduated income tax in 1894 and tried to enact it across the country. It was found unconstitutional in 1895 by the supreme court because all federal taxes had to be based on state population. To finally get a permanent income tax, they ratified the 16th amendment to eliminate the need that federal taxes be based on state population.

"The Congress shall have the power to lay and collect taxes on incomes, from whatever source derived, without apportionment among the several states, and without regard to any census or enumeration."

In the same year, the federal government ratified the first permanent income tax law.

It starts as a temporary idea to help pay for a war. It then becomes an idea to make the average American pay their fair share. Now the rich are being told they aren't paying their fair share. There is a lot of history surrounding income tax, and taxes in general. Going through most of it, it is hard to imagine people are not rioting in the streets to repeal all the taxes. The bottom line for me is I think paying any income tax at all is more than your fair share.