Tax Ethics

A recent conversation reminded me of the desire of people to grasp at anything to feel they're morally superior to people who make more money than they do. The topic was rich people who find ways to minimize their tax payments.

I'm still trying to grasp their moral condemnation.

For example, let's say a rich man tries to file his tax return. It appears to him that he owes $1 million, which seems high.

And so, he hires a team of lawyers and accountants. They figure out ways to lower his tax payment to $10,000. They charge fees totaling $989,000. The man's total expenses are $999,000. He saves $1,000 by hiring them.

Q. What does the law say the rich man owes?

a) $1 million
b) $10,000

Q. Morally speaking, what should the rich man pay?

a) More than what the law requires
b) No more than what the law requires

Whether you believe taxes are theft and pay only under duress, or believe that taxes are good and are the "price we pay for civilization," how can there be any sane answer to either question other than b?

As federal judge Learned Hand wrote in Commissioner v. Newman, 159 F2d 848 (1947):

Over and over again courts have said that there is nothing sinister in so arranging one's affairs as to keep taxes as low as possible. Everybody does so, rich or poor; and all do right, for nobody owes any public duty to pay more than the law demands: taxes are enforced exactions, not voluntary contributions. To demand more in the name of morals is mere cant."

Even if you want more laws and more government, you can't ascribe moral failure on people who do no more than minimally comply with the laws as they currently exist. They have no ethical obligation to go above and beyond their required duties.

If you disagree, consider: would you expect government employees to work overtime for free? Are they "unethical" if they won't?

If you won't expect them to go "above and beyond," then don't expect that from the rest of us. Even the rich.

The Pomposity of Statism

Check out my latest at the Downsize DC Foundation.

Are Tax Breaks Really Subsidies?

Check out my latest at The Downsize DC Foundation. Excerpt:

Should the tax code be simplified to get rid of tax "breaks" for certain kinds of behavior?

Or should those of us who want a smaller State demand MORE tax breaks so that more people can keep more money for themselves?

These questions were asked during the debt ceiling debate on ways to "raise revenue."

The underlying problem is that the State does too much. A government with few and limited functions would have low taxes. Once the State moves from justice/enforcement into the complex areas of social and economic policy, however, the tax code will inevitably grow more complex with it

Adam Carolla Economics

Check out my latest at The Partial Observer. Excerpt:

It seems ironic that someone could do something only for the hefty paycheck, and yet not be greedy. But if Carolla or Favre HAD been greedy, they would have lost their leverage. They were willing to walk away from their jobs and receive no money at all.

The same logic applies to the tax considerations of the wealthy.

Imagine someone earning supposedly $1,000/hour, but because of a 36% tax rate, nets $640/hour. Because the new tax rate will be 40%, his net income is $600/hour.