Why Should Some People Pay More Taxes than Others? (part 1)

Lately, I’ve been hearing, over and over, about how those with more wealth “can afford to pay their fair share.” It’s as if there could be no motivation except “doing what’s right.” Well, I think it goes beyond that. There are solid reasons for our graduated tax system, and solid reasons that the wealthy and corporations should pay more than a middle class wage-earner.

We rightly think of taking what you haven’t paid for from a store as stealing. We also say that, buying something cheap gets you an inferior product – “You get what you pay for.” These two elements add up to this imperative: Pay for what you get. What I’m talking about here are the goods and services that taxes pay for: public roads, police, fire protection, education, and many others. We all benefit from these, but those with more wealth, property, or who own a business get more of the benefits than do wage-earners.

Let’s take the example of a small, privately-owned company that manufactures a product. Let’s also assume that this is an old fashioned company whose work is still performed by human beings rather than robots.

If the company makes a profit, (tricky accounting notwithstanding) then it essentially makes a profit from each of the individual activities that go into its products – at least on average. What this means is that, by definition, the work of an employee who is paid $50,000 per year earns the company some amount more than $50,000 per year. Otherwise, there would be little point in employing that person. Let’s drill down and examine this employee more closely.

The employee lives in a residential community that is some distance from the company. So, the employee has to drive to work, as there is no convenient public transportation option for the trip. The trip is made in the employee’s private car, but on public roads and, as we know, roads cost money. The road that the employee takes to work is paid for by taxes and, ostensibly, provides benefits to those who pay the taxes.

So let’s look at who gets the benefits from the road. The employee’s benefit comes in the ability to get to a paying job. But the work that the employee does at the company also benefits the owner – in an amount that exceeds the employee’s pay. Thus, whatever benefit the employee derives from the ability to drive to work on the road, the owner also derives some benefit from the very same trip because it allows an employee to come to work and produce.

The road enables the employee to do the work that makes $50,000 per year, which makes a profit for the owner. The owner get his or her own benefit from driving on the road, plus a significant benefit from the road use of each employee. So shouldn’t the owner pay a larger portion of the cost to build and maintain the road?

I’ll continue this analysis in part 2.

-Tom Rossi

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Tom Rossi is a commentator on politics and social issues. He is a Ph.D. student in International Sustainable Development, concentrating in natural resource and economic policy. Tom greatly enjoys a hearty debate, especially over a hearty pint of Guinness.

Tom also posts on thrustblog.blogspot.com

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