As the so-called fiscal cliff gets nearer, you'll hear lots of talk about whether current tax rates on the rich are fair. As I've said before, fairness is a concept invented so dumb people can participate in debates. Fairness isn't a natural law of the universe. It's a psychological problem.

We sometimes get fairness confused with equality. Equality is usually good, and can often be measured with a satisfying precision. Fairness, on the other hand, is usually just a rationale for some sort of bias.

If you think the rich should pay higher taxes, you probably compare today's rates to years past when the tax rates on the rich were far higher, and you conveniently leave out the fact that few people actually paid those rates because of loopholes and deductions.

If you think the rich already pay enough taxes, you focus on the percentage of total federal income taxes they pay and leave out any mention of taxes the poor pay, such as payroll and sales taxes.

To demonstrate my point that fairness is about psychology and not the objective world, I'll ask you two questions and I'd like you to give me the first answer that feels "fair" to you. Don't read the other comments until you have your answer in your head.

Here are the questions:

A retired businessman is worth one billion dollars. Thanks to his expensive lifestyle and hobbies, his money supports a number of people, such as his chauffeur, personal assistant, etc. Please answer these two questions:

1. How many jobs does a typical retired billionaire (with one billion in assets) support just to service his lifestyle? Give me your best guess.

2. How many jobs should a retired billionaire (with one billion in assets) create for you to feel he has done enough for society such that his taxes should not go up? Is ten jobs enough? Twenty? 

Make sure you have your answers before reading on.

I thought of this question because I heard an estimate of how many families a particular billionaire supports. The estimate was a hundred. If you figure an average family is 2.5 people, one billionaire is supporting 250 humans.  He gets a lot in return, of course, but what struck me is how this number affects my feeling of fairness. When I hear that one person is supporting 250 non-relatives, plus a number of relatives too, it feels as if that billionaire is doing more than his "fair" share.  But as I've said, fairness isn't a real thing. It's just a psychological phenomenon that is easily manipulated.

My personal view is that if most credible economists say higher taxes on the rich are necessary to save the economy, I'm all for it. I think every rich person would agree with that statement. The question that matters is whether taxing the rich will help or hurt the economy. Fairness should be eliminated from the discussion.

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Dec 10, 2012
Most people have a very subjective concept of fairness. Some friends of mine seem to think that they are "just getting by" and that other people, who appear to be "getting ahead" have some kind of unfair advantage. Therefore those who are "getting ahead" should be taxed more than those "just getting by".

But I have friends, with a combined income of around $200K. They have a big house with a pool, 2 nice cars, send their kids to private school and they spend 6 weeks in Hawaii each year. They spend virtually all their money on their lifestyle and think they are just getting by.

I make less than 1/3 what they make. But I live in a 2-bedroom condo. I don't have kids. My car is 5 years old, and I intend to keep it for another 5. My mortgage will be paid off in 2 years. I have savings. So I'm getting ahead, I suppose.
Dec 10, 2012
Assuming the "retired" billionaire isn't earning any new income, he isn't earning wealth, therefore in order to pay taxes, we'd have to tax assets which were bought via already-taxed income. That's my first opinion. The 100 families thing is surprising at first but I can see it.

1. Didn't have an answer, I figured maybe 10 directly, but when you start adding in jobs at country clubs he helps support, airplane mechanics, and all those other things, it starts adding up.

2. He's retired therefore a chunk of his profits are probably coming from sources which were already taxed (like dividends). Also you could argue that being retired, he helped support people and created jobs while he was working.

I agree that fairness is subjective.

Take this blaze story with a container of salt (cause beck is a conservative):

Assuming it's even close to being true (big assumption as we don't have the data) a person would be better off being on welfare than having a job. I'd say it's not fair that someone on welfare makes more than the median income of many hard-working americans. The other side would probably say it's not fair for someone to be poor at all.

It also begs the question why we don't just scrap all these excessive programs and institute a negative tax to save on expenses. But that's another discussion.
Dec 10, 2012
I'm pretty sure you could employ more than 250 people with a billion dollars if you wanted to
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Dec 10, 2012
"When I hear that one person is supporting 250 non-relatives, plus a number of relatives too, it feels as if that billionaire is doing more than his "fair" share."

By that logic if we gave ALL the money to one person in the US they'd be supporting 300 million people and they'd really be selfless.

If a person worth one billion dollars supports 250 people, isn't it worthwhile to analyze what people at other income levels do? If a person worth $3 million supports one person or a person worth half a million supports 0.2 people aren't they the ones doing more than their fair share?
Dec 10, 2012
I like your questions, even when I disagree with your opinions. I would add this one: how many people would this billionaire support if his taxes went up? I think the number would stay the same, because he has one billion dollars and only 20 or so years to spend it (spending also includes setting up inheritance). He is unlikely to degrade his lifestyle based off of government decisions because the amount of money is still so vast.
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