25 April 2012 ~ 0 Comments

Who Pays Their Fair Share of Taxes?

In the United States political realm you can’t go far without hearing someone mention ‘their fair share’ of taxes. From the Obama administration this is usually directed at folks like Warren Buffet who pay millions in taxes. From the  guys on the other side of the isle they might argue that the 47% doesn’t pay their fair share. But, have they ever sat down and asked themselves what someone’s “fair share” really is?

Before we get to deep into numbers, realize that the “fair share” phrase is just a fancy way of dressing up an argument that poses that someone else’s money is yours. It’s the adult version of two toddlers fighting over a toy. There’s no true “fair share” just dozens of ways to divvy up the spoils of a population.

It's mine!

To figure out someone’s fair share we have to throw out the idea of a progressive tax system. Progressive taxation, where people who make more pay a higher percentage of income is by no means fair. We can try to use a flat tax, as you’ll see below, but we’ll start by calculating everyone’s literal ‘fair share.’

Some Numbers

The first thing we need to know is how much the US spends. This is easy, you can find it on the Death and Taxes poster in the bottom right. In 2012 the US federal government had total outlays of 3.7 trillion dollars. That’s a lot of money. If all 313 million living humans in the US contributed their fair share towards that spending we’d all have to pay about $11,821.

But wait, that includes infants and old folks who aren’t working. Another number we could use is the total number of households. There are 113,000,000 households in the US. If each household paid its fair share they would have to pay $32,743. That wouldn’t be fair though, would it? If someone decided to live alone they would have to pay that all on their own, but if a family of 20 decided to live in a multifamily home then they would each have a significantly smaller burden.

In the United States the average life expectancy is 78 years. If we only work from the age of 18 to 65 that gives us 47 years of working and 31 off years. For that, each working year we would have to pay 1/47th of 78 years worth of our fair share. That number comes out to $19,600/year or $922,000 total. That seems to be the most realistic “fair share” calculation I can think of.

What about a flat % on income earned?

Some people don’t like the idea of making unproductive (poor) people pay and would rather just tax the productive folks. This is called a flat tax and is still pretty far away from any meaning of the word ‘fair’ that I was taught, even in public schools. As for determining the total adjusted gross income (AGI) of the entire US, I could only find 2005 figures. These showed that the total income of the US was 7.5 trillion. Wait… what?

Yes, that’s right (correct me if I’m actually wrong), all together we only made 7.5 trillion dollars in 2005. We spent 3.7 trillion in 2012, which is 49%!! That means if you drop social security taxes, corporate taxes and excise taxes the flat income tax rate would need to be 49%. But let’s compare apples to apples here. In 2005 our outlays were 2.4 trillion; meaning that those guys should have all paid 32% of their AGI to Uncle Sam to take care of our expenditures.

So, do you pay your fair share?

You might, but I doubt it. Even if you paid more than $11,800 in 2012, you would have to pay that for 78 years for it to make up your “fair share”. You would have to pay that $11,800 (and climbing) each year for the rest of your life, even after you’re done working. That’s $922,000 (2012 figures) over a life time in the United States. That’s easily enough money to buy everything you need to buy some land, build a house, drill a well, install solar panels and on and on and on.

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