"Because they can afford it"

Was discussing some of the tax plans being put forward by the candidates at lunch the other day, and one of the guys agreed with the notion that it was OK to demand more taxes on the rich "because they can afford it". Even after discussing the disparities in the current tax domain (2006 numbers from here and here) he still thought it was a good idea.

• lower 50% pays 2.99 % of income taxes collected
• top 1% pays 39.89% of income taxes collected (AGI > $388.806)
  
• top 10% pays 70.79% of income taxes collected (AGI > $108,904)
  
• lower 50% pays average tax rate of 3%
• top 1% pays average tax rate of 22.79%
• top 10% pays average tax rate of 18.86%
• top 1% earned 22.06% of cumulative AGI (but paid 39.89% of income taxes)
• top 10% earned 47.32% of cumulative AGI (but paid 70.79% of income taxes)
• 41% of the US population will be outside the federal income tax system, essentially free-loading on on other half
• 43.4 million tax returns, representing 91 million individuals will have zero or negative tax liability (out of 136 million tax returns)
• 15 million more households file no tax returns at all
• this is by far the highest these numbers have ever been, as a percentage, going back to 1950 (when it was 28%)
• the "Bush tax cuts" caused this number to jump form 26% to 32% to 41%
• The top-earning 25 percent of taxpayers (AGI over $64,702) earned 68.2 percent of the nation's income, but they paid more than four out of every five dollars collected by the federal income tax (86.3 percent).
  
• The top 1 percent of taxpayers (AGI over $388,806) earned approximately 22.1 percent of the nation's income (as defined by AGI), yet paid 39.9 percent of all federal income taxes. That means the top 1 percent of tax returns paid about the same amount of federal individual income taxes as the bottom 95 percent of tax returns.
  
  

In the face of these numbers, I find it hard to believe that anyone thinks somehow the rich are not paying their "fair share". And to think that anyone would support taking still more from the very people who provide jobs and capital makes even less sense to me.

The notion of "spreading the wealth" is one Marx would be pleased to hear about. It was Marx, after all, who popularized the notion of "From each according to his ability, to each according to his needs." Combined with "because they can afford it" and a skewed notion of "fair share" leads to a bad place.

The ultimate conclusion of this logic is a society where everyone "earns" the same amount of money no matter what their job is or even whether they work or not. Anyone who earns more than the equality line would be taxed for 100% of their income above the equality line. Anyone who earns less will be "given" money from the government to bring them up to equality line, even if their starting point is zero. Now, everyone has exactly their "fair share" of the national product, and the wealth was spread evenly. And those whose "earned" paid into the system more "because they could afford it".

We can see clearly what would happen in such a society. Those with abilities would quickly decide that their efforts are not worth anything more than anyone else's effort and they would abdicate. Soon, they will be forced to labor "for the collective good of society".

Ayn Rand's "Atlas Shrugged" explored this very topic. In that society, well, here's what Wikipedia says:

Looters and moochers

Rand's heroes must continually fight against the "Parasites", "looters", and "moochers" of the society surrounding them.

The looters are those who confiscate others' earnings "at the point of a gun" (figuratively speaking) —often because they are government officials, and thus their demands are backed by the threat of force. Some looters are following the policies of the government, such as the officials who confiscate one state's seed grain to feed the starving citizens of another state; others are exploiting those policies, such as the railroad regulator who illegally sells the railroad's supplies on the side. The common factor is that both use force to take property from the people who produced or earned it, and both are ultimately destructive.

The moochers are those who demand others' earnings because they claim to be needy and unable to earn themselves. Even as they beg for their help, however, they curse the people who make that help possible, because they hate the talented for having the talent they don't possess. Although the moochers seem benign at first glance, they are portrayed as more destructive than the looters—they destroy the productive through guilt and often motivate the "lawful" looting performed by governments.

Looting and mooching are seen at all levels of the world Atlas Shrugged portrays, from the looting officials Dagny Taggart must work around and the mooching brother Hank Rearden struggles with, to the looting of whole industries by companies like Associated Steel and the mooching demands for foreign aid by the starving countries of Europe.

Sanction of the victim

The Sanction of the victim is defined as "the willingness of the good to suffer at the hands of the evil, to accept the role of sacrificial victim for the 'sin' of creating values."

The entire story of Atlas Shrugged can be seen as an answer to the question, what would happen if this sanction were revoked? When Atlas shrugs, relieving himself of the burden of carrying the world, he is revoking his sanction.

The concept may be original in the thinking of Ayn Rand and is foundational to her moral theory. She holds that evil is a parasite on the good and can only exist if the good tolerates it. To quote from Galt's Speech, as presented in the novel: "Evil is impotent and has no power but that which we let it extort from us," and, "I saw that evil was impotent...and the only weapon of its triumph was the willingness of the good to serve it." Morality requires that we do not sanction our own victimhood, Rand claims. In adhering to this concept, Rand assigns virtue to the trait of rational self-interest. However, Rand contends that moral selfishness does not mean a license to do whatever one pleases, guided by whims. It means the exacting discipline of defining and pursuing one's rational self-interest. A code of rational self-interest rejects every form of human sacrifice, whether of oneself to others or of others to oneself.

Throughout Atlas Shrugged, numerous characters admit that there is something wrong with the world but they cannot put their finger on what it is. The concept they cannot grasp is the sanction of the victim. The first person to grasp the concept is John Galt, who vows to stop the motor of the world by getting the creators of the world to withhold their sanction.

The question "Who is John Galt?" is also answered towards the closing of the novel — John Galt is a man disgusted that non-productive members of society use laws and guilt to leech from the value created by productive members of society, and furthermore even exalt the qualities of the leeches over the workers and inventors. He made a pledge that he would never live his life for the sake of another man, nor ask another man to live for him, and founded an enclave, separate from the rest of the country, where he and other productive members of society have fled.

Here's a thought exercise. Everyone has someone they know who earns less than they do. Some friend who is always unemployed or underemployed and never has any money. You know that it's because they've made bad choices in their life. Now, what do you think if I told you it wasn't fair that you have more, and I'm going to take half of your income and hand it to that guy. If you think that's unfair, welcome to my point of view. If you think that's fair and think it's a good idea, why haven't you handed him your money voluntarily yet?