The short answer: it doesn't. Nothing about finance is "fair". The sooner this is realized, the sooner it might be possible to get to a point where there is at least some measure of justice in how taxes are collected in this country.
There's always going to be some economist or accountant who talks about how someone who is richer can pay more, and so, should, while someone who is barely getting by should be allowed to pay less (in terms of taxes). The current tax structure is this way. The richer you are, the more you pay.
In terms of socialist thinking, this is fair. This is right. This is how it should be. "From each according to their ability, to each according to their need". In terms of rational thinking, this kind of thought is stupid.
There are those who are able-bodied and get from the government (who gets by taxing others), but put nothing in. So much for "from each..."
So, how to make things closer to "fair" with taxes? First, let's look at how things are now.
The top tier of wage earners pay the most, and get the least "benefit" from the government (yes, there are the programs and departments that taxes pay for, such as the military that benefit everyone, but in terms of getting something tangible from the government, the "rich" don't. They just pay for it). Those at the bottom pay nothing, but get benefits ranging from medical assistance (if not outright total health care), food stamps, and even welfare "benefits", effectively, money for doing nothing.
The top tier of wage earners pay the most, and get the least "benefit" from the government (yes, there are the programs and departments that taxes pay for, such as the military that benefit everyone, but in terms of getting something tangible from the government, the "rich" don't. They just pay for it). Those at the bottom pay nothing, but get benefits ranging from medical assistance (if not outright total health care), food stamps, and even welfare "benefits", effectively, money for doing nothing.
To many, there is a lack of common sense to this. Many get without giving, and some give without getting. But to others, this is totally reasonable. If you make more, you have more to spare for the "greater good", and so should be compelled to give more to the government to distribute as it sees fit. Take the fact that you are talking about money out of the equation, and this approach just doesn't make sense, and is hardly "fair". The 9-9-9 Plan seeks to change all that by leveling the playing field a little bit, and giving each American a dog in the economic fight.
Say you are the best worker in your team of 100. You take the widgets, combine them with the thingamabobs, and produce more whatchamacallits than anyone else in your group. You enjoy being the best in your group. It means that you have accomplished something that not everyone can say they have.
One day, management tells you that orders are starting to fall behind. You know that there is a need for 1200 whatchamacallits a week, and you are doing all you can to meet that goal. Management even gives your group special privileges as incentive to produce more, but you, and some of the other hardest workers can't use those benefits, because you devote most of your time to making the whatchamacallits.
Yet no matter how hard you work, you keep falling short of the goal. The ones that get missed in a week still need to be made, and ultimately, your group starts falling behind Despite this, sales keeps promising more and more units to customers. You keep falling behind and work that needs to be done isn't being done.
One day you look at the numbers for your group. You, alone, account for something along the lines of 380 whatchamacallits each week. The next four guys seem to be able to manage another 200 between them. The next five guys can manage about 110 or so. The next 15 guys each manage about 10. The next 25 guys between them manage along the lines of about 11 whatchamacallits a week. The next 3 of guys eek out about one each on a good week. Finally, you see that the remaining 47 guys in your group produce nothing, yet they still get the benefits of being in the best group, which you and some of the hardest workers cannot use, because you are too busy working.
Management comes to you, and tells you that you, as the best worker in your group, needs to do more, and maybe convince the next couple of guys down from you to pick up more slack, and try to fulfill the backlog that has developed. When you explain that 47 in your group have done nothing to help out, and that if they could just be made to produce a few whatchamacallits, you might be able to ease up a bit, and maybe not burn out.
Management tells you that things will remain as they are. It's okay to give special privileges to those who aren't really working, and to expect that only the best workers will shoulder the full load.
This, in a nutshell, is the current tax system. The best workers (the rich) are those who are producing the whatchamacallits (taxes), that management (the government) use to fulfill orders and offer special privileges (national debt and public welfare programs). Sales keeps promising what isn't there, and you get farther behind (Congressional spending and deficit spending). As the best worker (the wealthiest 1%), management has told you that YOU need to tell those closest to you to produce more (government won't stop promising, but expect the highest earners to pay more taxes to support out of control spending).
Using the same general set-up, let's say that you are still the best worker. Management has cracked down and now requires that all employees produce at least 9 whatchamacallits a week. You still aren't hitting your goal, and in fact are producing fewer, but management has changed things so that now additional production can result in access to the benefits previously offered (but unavailable to you and some others because of your workload).
You are also asked to train new employees to produce the minimum of 9, while keeping up the your higher production rate. Since this is easier to do that the frantic pace at which you worked before, you are all for it.
Obviously, there are those in your group who complain about having to produce 9, where they didn't have to produce anything before, but as the orders are able to be fulfilled, and with new hires and training in place, eventually surpassed, the benefits they enjoyed before can now be shared more equally by ALL the people in your growing group, and by working harder, some additional benefits can be bought by anyone for 9 additional whatchamacallits produced.
Everyone is now producing 9 units each (9% income tax), and more employees can be hired and trained by those whose level of work won't suffer (9% payroll tax), and the increased benefits bought for additional work (9% sales tax) will ultimately lead to the backlog of products being eliminated, and a surplus can be realized quickly.
This is what Herman Cain has proposed. Those who haven't produced will now be called upon to do so, but it will ultimately benefit everyone else.
It is not an instant fix. There IS no instant fix. It's not even a perfect plan. But it is one that allows those who currently stand to lose nothing (because they add nothing to the economy) to take some degree of ownership, and as a result, pride in keeping things going forward, in addition allowing those who are able to create jobs (the rich corporations) to have more money to do so, adding more payers of taxes into the mix.
The idea that any of this can take place in a vacuum is a flawed one.
But the rich will pay less taxes, and just hoard their money.
Wrong. You don't get richer by sitting on money. You spend it in ways that will produce some dividend. By having more money, the rich will find ways to try and make it into yet more, which in the past has been shown to happen by expansion of a company. Expansion of a company = need for more employees. More employees = more being paid into payroll taxes. More taxes spurred by greater hiring = economic growth. Economic growth = people more willing to spend money on new goods = greater taxes collected on the sales of said goods.
Like I said, it's not perfect. But it is a damn sight better than the stagnation we have experienced with taxes to date, which make rich men (and women) out of only two groups. The accountants who prepare tax documents for the rest of us, and the economists, who try and predict how the next economic disaster can be turned into justification for themselves.
Throw this one in there to explain our current system as well:
ReplyDeleteTHE TAX SYSTEM EXPLAINED IN BEER
Suppose that every day, ten men go out for beer and the bill for all ten comes to $100... If they paid their bill the way we pay our taxes, it would go something like this........
The first four men (the poorest) would pay nothing.
The fifth would pay $1.
The sixth would pay $3.
The seventh would pay $7.
The eighth would pay $12.
The ninth would pay $18.
The tenth man (the richest) would pay $59.
So, that's what they decided to do. The ten men drank in the bar every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve ball. "Since you are all such good customers," he said, "I'm going to reduce the cost of your daily beer by $20". Drinks for the ten men would now cost just $80. The group still wanted to pay their bill the way we pay our taxes. So the first four men were unaffected. They would still drink for free. But what about the other six men? The paying customers? How could they divide the $20 windfall so that everyone would get his fair share?
They realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being paid to drink his beer. So, the bar owner suggested that it would be fair to reduce each man's bill by a higher percentage the poorer he was, to follow the principle of the tax system they had been using, and he proceeded to work out the amounts he suggested that each should now pay.
And so the fifth man, like the first four, now paid nothing (100% saving).
The sixth now paid $2 instead of $3 (33% saving).
The seventh now paid $5 instead of $7 (28% saving).
The eighth now paid $9 instead of $12 (25% saving).
The ninth now paid $14 instead of $18 (22% saving).
The tenth now paid $49 instead of $59 (16% saving).
Each of the six was better off than before. And the first four along with the fifth man drink for free. But, once outside the bar, the men began to compare their savings. "I only got a dollar out of the $20 saving," declared the sixth man. He pointed to the tenth man,"but he got $10!" "Yeah, that's right," exclaimed the fifth man. "I only saved a dollar too. It's unfair that he got ten times more benefit than me!" "That's true!" shouted the seventh man. "Why should he get $10 back, when I got only $2? The wealthy get all the breaks!" "Wait a minute," yelled the first four men in unison, "we didn't get anything at all. This new tax system exploits the poor!" The nine men surrounded the tenth and beat him up. The next night the tenth man didn't show up for drinks, so the nine sat down and had their beers without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!
And that, boys and girls, journalists and government ministers, is how our tax system works. The people who already pay the highest taxes will naturally get the most benefit from a tax reduction. Tax them too much, attack them for being wealthy, and they just may not show up anymore. In fact, they might start drinking overseas, where the atmosphere is somewhat friendlier.