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Financial Literacy

Financial Literacy

Home Finance Taxes Fairness

Fairness

The very fact that you have to pay taxes at all might seem unfair. After all, you work really hard all week, so why should the government get any of the money? Let them find their own, arewerite?

Even if we admit that the government has to raise money for health care, schools, and other good stuff—and there's really no way for Uncle Sam to go to work (those pin stripe pants would never get him past the interview stage)—there's still a lot about taxes that might make you question 'em.

Fair or Unfair? Unfair!

Say your dad works as a construction worker for 60 hours a week so that you can have a nice house, food, new jeans, and a shot at college. He works hard so that you have a good life, but he pays far more in taxes than your neighbor, who blasts loud music on Saturday mornings and works less than 20 hours a week. Why does your dad have to pay more? He earns more, but that's because he's trying to provide a better life for you—why should he be penalized for that? Shouldn't he be paying less in taxes because he's hard working and raising you?

And what about hamburgers?

They don't seem like a big tax issue, but let's say that you love the idea of a big, juicy hamburger and work hard to resist the lure because you want to stay healthy. But your best friend happily gives into temptation every day. You weigh 170 pounds and your best friend weighs 290 (at the same height). In twenty years, your BF might have diabetes. The average expected cost of health care might be $3,000 for you but $30,000 for your friend. Is it fair that you pay the same taxes for health care, even though you resist when your stomach is demanding fries?

There's only so much money to go around, even with the government digging deep into your wallet through taxes. If the government keeps creating social programs, taxes are going to go up. Does it make sense to charge more and have more social programs? Or is it better to cool the spending a little and have lower taxes?

If you've read Ayn Rand, you know the basic idea against raising taxes.

The story goes something like this:

When you tax those who work the hardest, no one wants to work the hardest; they see others enjoying life while doing less. Eventually, workers slow down and people have less cash, which means they spend less, which means that less stuff is made because there's less need for it. Jobs are lost and the economy slows down.

Pretty soon, we're sitting around in the dark, eating last year's can of beans and wondering why we aren't working in an office any more.

Okay, that may be a bit dire. But it's true that high taxes can be discouraging. Would you start a business if you knew that you'd have to pay so much in taxes that your business had a good chance of failing even if you put 100% effort in? Would you study as hard if everyone in class got the same grade, no matter how much they studied?

Fair or Unfair? Fair!

On the other side of the coin, there are plenty of folks who feel that keeping tax rates low isn't the answer.

Uh, who in the world would want higher taxes? Well, nobody really, but there are people who want to see more government programs in place and are willing to put up with higher taxes if it means getting those programs in place.

For example, some people want universal health care paid for by the government. They point out that unexpected medical expenses (the type you get after tripping over your own shoes and breaking your hip) are the leading cause of bankruptcy in this country. They say that raising taxes and providing health care for everybody would help everyone who stays at home when what they really need is a hospital.

What would you do if you didn't have to pay thousands of dollars for health care? What would you study if you could get a college degree without having to pay tens of thousands of dollars in tuition and related costs? You could claim that if everyone paid slightly higher taxes and more people got a college education, the country would have more educated workers better able to create new jobs.

Which Side Wins?

Should the rich be taxed more because they can afford it? Or did they work hard for their money and deserve to be left alone?

It's really unlikely that we'll ever see an end to this squabble. Why? Because as much as we like the idea of helping those that need it and as much as we like the idea of paying lower taxes (may we just point out that 0% is a gorgeous, round number), we're not going to get both of those things at the same time.

So let the debates continue.

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