Tuesday, November 13, 2007

The Fairness of Mathematics

It never fails to amaze me how so many people can sit on TV with a straight face and say that the rich don't pay their fair share. Ever. It doesn't matter how high a percentage the income tax is for the rich, they still somehow don't ever manage to pay their "fair" share of income taxes. Most of these people tend to be politicians, so it doesn't surprise me that they are able to do this.

For those of us who are normal and believe that garbage, let me help enlighten you by giving you a brief lesson on the mathematics of percentages and taxes. When you multiply a percent, say 16%, with a number, say 10,000, you get a fraction of that number, which is 1600 in this case. So when we talk of tax rates, this is really the percentage of your income that will be taken away from you. And thanks to Donald Duck, we have it taken away from us at every paycheck, instead of once a year, unless you're self-employed, in which case you have to waste time away from your job to report your income to the government, without a warrant of course.

Anyway, if you logically follow that percentages are a fraction of a whole number, then you have to conclude that higher numbers yield larger amounts when using the same percentage. So if we keep that 16% and multiply it by 100,000, then the result is 16,000.

Now, compare that to the tax system. The tax system has progressively higher percentages (or tax rates) as you earn more income. While I don't know the exact numbers, an example would be using a percentage of 5% for $10,000 earned, which yields $500 taxed and a percentage of 35% for $100,000, which yields $35,000. In my previous example, I demonstrated how at a rate of 16%, we only get $16,000 for the "rich" person and $500 for the "poor" person. Now we see more money coming out of the rich man's pockets because, simply put, he worked harder most of his life and now earns more then the person who makes less.

In mathematics, it is obvious that the fairer solution is for both wealthy and broke to pay at the same rate of taxation. This is because both end up paying their fair share of earnings to the government. But our current tax system does not reflect rational mathematics. The argument against such a reasonable solution is that the rich, essentially, stole their money from the backs of the working poor. This is a fallacy at best and at worst shows a blaring ignorance of economics and the value of labor. I never gave you what the rich man does for a living and what the poor man does for a living, nor did I highlight the differences in motivation and education. And this is just for two individuals. The vast majority of Americans don't make above $50,000 a year, but there is a good percentage who make well above that by virtue of their occupation and education. Looking at hard numbers can only give us a picture of hard numbers.

In any case, fairness as defined by the Socialists (or progressives or liberals or leftists or whatever other names they are using these days) in this country is much different from fairness in many other cases. Essentially, what happens is that Americans who make the right decisions early in their life end up with more comfortable wealth later in life while those who don't end up sucking the tit of government and demanding that those who made good choices have their money transferred by force to them. Politicians are happy to oblige because there are probably more people who have made bad decisions in their lives than those who have made good decisions. And everyone gets one vote.

The bottom line is that we live is a progressive tax system that hurts the rich and poor alike, but in different ways. The rich loose money that could be invested in the economy and used to create more jobs. The poor loose their motivation to do better than they do right now. So we should raise tax rates on the poor and lower tax rates on the rich. That way, many of the poor will do what it takes to get better income and the rich will create more opportunities for the poor to do so.

Simple and rational. But inside the rim on insanity, such things are in short supply.