Taxes: Is setting tax rates a moral question?

https://readthespirit.com/ourvalues/wp-content/uploads/sites/17/2013/03/wpid-1103_Albert_Gallatin_memorial_Washington_DC.jpgGALLATIN MEMORIAL OUTSIDE U.S. TREASURY IN WASHINGTON D.C. The United States’ longest-serving Treasury secretary Albert Gallatin assumed that decisions about economic policy reflected larger human values. Gallatin was credited as a brilliant economist, but also was an internationally recognized educator and defender of human rights. The Swiss immigrant founded New York University and also is known as “the father of American ethnology” for his studies in Native American culture. Photo in public domain via Wikimedia Commons.Ultimately, does the question of setting tax rates amount to more than just the value of the dollars raised? Does this question rest on underlying human values? Is this a question of fairness? Perhaps even a moral question?

Consider the key issue politicians are debating today: Should every family pay the same percentage in taxes, regardless of the family’s income? Or should rates be based on income? One hot proposal is the flat tax, which we’ve been discussing this week and simply sets one rate for all families, regardless of income. Economists call this a proportional system—everyone pays the same proportion. A progressive tax system—our current system—means that richer families pay a larger percentage than poorer families. A regressive system is where the richer pay a lower percentage than the poor. You might think that we don’t have regressive taxes, but we do. Many consider retail sales taxes to be regressive because the same amount of tax for a purchase is a bigger chunk of a poor person’s income compared to a rich person’s income.

For an objective overview, I turn to my colleague, Joel Slemrod, a foremost expert on taxes. Here is how he answers the question of fairness in his book Taxing Ourselves: “We must make a frank admission fairness is not in the end a question of economics. Neither an A+ in Economies 101, a PhD in mathematical economics nor a lifetime of study of the theory of political economy will reveal the one true answer. Fairness in taxation, like fairness of just about everything, involves ethical issues and value judgment that, by their nature, cannot be decisively resolved.”

In other words, all questions about taxes—and all proposals to overhaul the current tax system—involve values.

What do you think?

Are these simply issues of good financial planning for the country?

Or, are there underlying values that should shape tax policies?

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Originally published at www.OurValues.org, an online experiment in civil dialogue on American values.

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