The Idea of America: Taxes versus freedom?

This entry is part 3 of 5 in the series The Idea of America
Colonial Williamsburg Stamp Act page

CLICK this image to visit the Colonial Williamsburg website where you can learn about America’s first explosive dispute over taxation.

Today is Tax Day in America—a perfect time to bring up the tension between freedom and equality.

The tension was represented precisely by U.S. Supreme Court Louis Brandeis, who once said, “We may have democracy, or we may have wealth concentrated in the hands of a few, but we cannot have both.” Brandeis lived at a time of vast economic inequality.

Today, economic inequality is also at record levels. Do we have to choose between equality and economic freedom?

Freedom versus equality is one of the four value tensions described in The Colonial Williamsburg Idea of America project. The basic idea is that extreme economic freedom typically results in extreme inequality. On OurValues.org, we’ve covered this tension in various ways, such as the Occupy Wall Street movement and the Citizens United Supreme Court decision. (You can use the Google search function—top-right of this screen—to search for various OurValue.org columns on these topics.)

Restricting unbridled economic freedom can reduce inequality. But how to do that is the rub. Should we tax the rich and redistribute their wealth to the poor?

How about a novel idea: Instead of taxing the rich, tax inequality itself. This solution was proposed in 2011 by Ian Ayres and Aaron S. Edlin in a New York Times Op-Ed. Their idea focuses on what they call the “Brandies Ratio”—“the ratio of the average income of the nation’s richest 1 percent to the median household income.” Inequality should be held to the ratio of 36 to 1: the incomes of the top 1% percent should not exceed by a factor of 36 the median household income. If they did, the top 1% would be taxed to maintain the ratio.

So, if a rising tide lifted all boats—the rich got richer but the median household income also rose—then the rich would not be hit with an inequality tax. They would be taxed for inequality only if their boats rose much higher than the middle class fleet.

Do you agree the freedom and equality are in tension?
Should we tax inequality itself—rather than just tax the rich?

Your opinion matters …

OurValues is designed to spark spirited, civil discussion. You’re free to print out these columns and use them in a class or small group. Or, simply talk about this on Facebook or Twitter.

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