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Thursday, March 09, 2006

Fairness Is A Moving target

The latest Cato Unbound had an essay by David Schmidtz entitled "When Inequality Matters". While the whole essay should be read, I liked his explanation of why redistribution never fully corrects the inequality issue. he writes:

If the question has no simple answer, part of the reason is that equality is multi-dimensional. Suppose Jane Poor earns $10,000 and pays a tax amounting to 10%, while Joe Rich earns $100,000 and pays a tax amounting to 38%. Together they pay $39,000, 95% of which is paid by Joe Rich. If we cut each rate by 1%, Jane saves $100, while Joe saves $1000, which is to say, Joe gets about 90% of the benefit. The pundits belabor this point, without ever mentioning that the way people get more than their share of a tax cut is to be paying more than their share of the tax that got cut. After the cut, Joe still pays $37,000, compared to Jane’s $900. So, does inequality matter? Which one? There remains a 7-fold gap in what they have left after paying? Is that unfair? Should Joe Rich be paying more? The 38-fold gap in what they pay is now a 41-fold gap (even though it has shrunk in dollar terms). Is that unfair? Should Joe Rich be paying less? Closing one gap widens the other.

It was timely for me. I recently attended a Bat Mitzvah. One of the people at my table stated that "the rich are getting a free ride". I wondered what that actually met. First, who are the "rich"? Then, assuming it is the people with the highest incomes in a particular year, do they not pay about 90% of the taxes paid in the US? And what is this "free ride"? I'd say the low income people who are paying no taxes are closer to getting whatever free.

For the sake of shalom at the special event, I did not engage the man on the subject. The above tends to explain how there can never be enough to satisfy people who seek this ephemeral fairness, justice or whatever they call it.

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