Monday, August 20, 2012

Adam Smith and Equal Sacrifice

I keep reading Adam Smith quotations. What do I know of Adam Smith? I’ve never read him and I don’t know if he knew what he was talking about, but I’m always reading quotations from him…
by Charlie Leck

Adam Smith, in book five of the Wealth of Nations, had this to say about asking the wealthy to pay a bit more in taxes than that paid by lower income citizens…

"…it is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion", because a tax on "the luxuries and vanities of life [which] occasion the principal expense of the rich... would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be anything very unreasonable."

I read that quotation in The Guardian, a British news source. It was on a web publication that was published on 18 October 2006. The argument has been going on for a long time.

Robert Reich, a professor at the University of California (Berkeley) and a former Secretary of Labor during the Clinton administration, argues that citizens should make equal sacrifices when it comes to paying income taxes – that paying equal percentages of income doesn’t make sense. Well, I’ll be the first to admit that Reich is really a liberal; but, believe me, he’s also brilliant and I think he makes sense on this particular subject.

“Equal sacrifice means that in paying taxes people ought to feel about the same degree of pain regardless of whether they’re wealthy or poor. Logically, this means someone earning $20 million a year should pay a much larger proportion is his income in taxes than someone earning $200,000, who in turn should pay a larger proportion than someone earning $50,000.
“But Romney’s alleged 13 percent tax rate is lower than that of most middle class Americans who earn a tiny fraction of what he earns.
“At a time when poverty is increasing, when public parks and public libraries are being closed and when public schools are shrinking their offerings and their hours, when the nation’s debt is immense, and when the 400 richest Americans have more wealth than the bottom 150 million of us put together – Romney’s 13 percent is shameful.”  [Robert Reich: Mitt’s 13% Tax, 17 August 2012]

Now, as has happened a number of times, I will likely have some reader send me a comment accusing me of just being jealous and urging that I leave the rich alone. I just want to say, for the sake of honesty and in the hope it will make my advocacy more powerful, I pay federal incomes taxes at a lower rate than the rate paid by many citizens who make 10 times less than I do. It just isn’t fair. “So, send a contribution to the fed,” some commenter will say. “No,” I reply. I want the tax adjustments to be across the board so that we can truly do something about the deficits and debts we have accumulated in this country because we have not fairly taxed those of extremely high annual incomes and high investment earnings.

Raise my taxes by increasing the rate that all higher earners must pay!
Warren Buffet, whose voice is a million times more powerful than mine – perhaps a billion times more – has been asking this for years. It only makes sense.

The concept of Equal Sacrifice makes sense!

Here, on the web site of the Library of Economics and Liberty you can read about Adam Smith (1723-1790).

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