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Comment by ShabbyDoo | Hacker News Reader

I found that a sure way to get downmodded on reddit, etc. is to ask someone who used the word "fair" to define it in the context used.

"A flat tax is a fair tax." Great, why does having a zero second derivative make a tax fair? That so few feel any need to answer such a question worries me.

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I've found that pretty much any conceivable tax curve can be considered "fair" for some definition of the word. The disturbing thing is, most of those definitions are really not that ridiculous if you make the case for them well enough.

IMO the flat tax has such great appeal because it's pretty idiot proof to explain, not because people really think it's fair - under most money -> utility mappings it's extremely regressive, and I think even its proponents realize this, but it doesn't bother them because of the idea that regressive tax structure is a net win even for the poor by keeping money in the hands of the people that can do the most efficient things with it.

But even getting into that debate involves thinking, which people do precious little of when it comes to politics...the notion that "fair" can be achieved with a simple one-sentence statement is so appealing that it's hard to make headway in the argument.

Agreed. The problem with regressive taxes is that it ignores that there's a sweet spot in income for people who perform efficient financial transactions. In reality, efficiency doesn't come into play for those who have little discretionary income, so it doesn't matter, outside of the moral standpoint of excising taxes on those who truly can't afford it. They spend the money as soon as they get it. The issue is with the top few hundred thousand income generators, who are heavily incentivized to maintain the status quo, and also have the means to put resources towards it thru lobbying, purchasing and killing innovative competitors, etc.

it doesn't bother [flat tax proponents] because of the idea that regressive tax structure is a net win even for the poor by keeping money in the hands of the people that can do the most efficient things with it.

Also worth noting is that fact that flat tax proponents are usually the people in whose hands this money will be kept :)

Of course, the idea is that it won't be kept in those hands for too long--or rather, the same money won't stay in those hands for long.

Hey, somebody has to buy those yachts!

'Fair' is tied to a moral context, as in "morally pure, unblemished" (from http://www.etymonline.com/index.php?term=fair). So an argument about what's 'fair' is an argument about what is morally "pure" (or good). Then that depends on your beliefs about morality.

A non-zero second deriviate invites gaming. The tax rate (e.g. 20% or 35%) is per "unit". If the marginal rate is too high, you can always break up into smaller units (e.g not get married or split up a company) or defer realizing income until next year, then your overall tax burden is lower. A flat rate means that scale and timing do not effect the amount of taxes paid.

And that's why capital taxes are flat. It's much harder to split up personal income.

So you can say that flat taxes are harder to game. That's a good thing. But I do not know whether it relates to a sensible definition of `fair'.

(Approval voting is also harder to game than first-past-the-post. And arguably more `fair', because a third (and fourth) party candidate does stand a chance _and_ does not have to split the votes with another candidate who happens to have similar appeal.)

First, it costs a lot (accounts and attorneys) to game the tax system. So only "the rich" can afford it. The net result is progressive taxes wind up hurting the "doing well but not rich yet". Second, if I go to a store and buy a chair the sales tax rate is flat. Everyone pays the same rate. That seems fair. But if I make a chair and sell it, the income tax I pay on the gain depends on how much income I've made that year. Thus two people making the same chair and selling it for the same gain would pay different amounts of income tax. That unequal taxing of the same gain is what is unfair about a progressive tax rate.

It's much harder to split up personal income. The flat tax is not an income tax. It is a tax on the creation of wealth. Most people think a flat tax means just changes our current tax system to have just one tax rate. The Flat Tax is a complete re-architecture of what and how to tax.

We do not disagree completely.

There are also some good arguments for taxing consumption instead of production (=wealth creation). Do you want to hear them?

Sales tax is considered a regressive tax.

http://en.wikipedia.org/wiki/Sales_tax

I appreciate all the thoughtful tax discussion, but I probably should have chosen a less contentious example. This was a specific comment I had made awhile ago on Reddit that was down-modded severely. What was odd is that I took no stand on taxation itself; I had simply asked the OP to explain his definition of the word "fair" which had been used to support the validity of such a tax policy.

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