Wednesday, January 25, 2012

Justice and taxes

Bill Gates joins the discussion:

GATES: Well the United States has a huge budget deficit, so taxes are going to have to go up. And I certainly agree that they should go up more on the rich than everyone else. That’s just justice.

BBC HOST: Is that a message you think that works with other people as wealthy as yourself, or is it just a small circle of friends — yourself, Warren Buffet, a few others.

GATES: Well, I hope we can solve that deficit problem with a sense of shared sacrifice — where everybody would feel like they’re doing their part. And right now, I don’t feel like people like myself are paying as much as we should.

I didn't watch Obama's SOTU. But I heard that he talked about this issue and proposed some kind of millionaire's tax. I'm sure there was a good bit of rhetoric about justice which mirrors a lot of what you hear from the public. I've said before that I don't like the way the argument for higher taxes is framed. And while I think Bill Gates mostly gets it right, I don't think he goes far enough.

The real issue within the large issue of taxes is the deficit. Liberals are, or should be, calling for higher taxes on rich people because we have a large deficit that we eventually need to bring down. But while making that argument I think it too often delves into arguments about fairness and justice. And that delves into class warfare type discussions that don't go anywhere productive.

That's in large part because conservatives take the discussion there and decry any tax increase as unjust class warfare. But it's also because liberals are framing it in terms of a broad sense of justice instead of the more narrow sense that Gates is talking about. The only way in which higher taxes on the rich are just or fair is in regard to the deficit and our current economic climate.

The deficit is high and the climate is bad for the poor and middle class. Within that climate, it doesn't make much sense to raise taxes on those people. It would deprive them of the money they need to spend in order to help the economy. Thus, it's fair or just that we get that money from the people who can afford to give it up and still have enough left over to buy things in order to help the economy. But even then, it makes sense to do that because it's good economic theory. Not just because it might be a good moral argument.

If the economy was great and we had a balanced budget there wouldn't be much of an argument for raising rich people's taxes, assuming entitlement programs were well funded. It wouldn't be very just or fair to raise their taxes simply for the sake of raising them and because they can afford it. And even aside from the state of the deficit and the economy, we should frame the issue of taxes mostly on economic theories instead of ideas of justice. Economic decisions such as taxes shouldn't be about morality, rather what the data suggests is the best way to improve the economy and implement good policy.

Update: Here is a previous post where I talked about tax rhetoric.

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