Saturday, February 11, 2012

Answers to the Fairness Quiz

The concept of “fairness” has been coming up a lot in my house. Generally, my son Isaac is complaining that “it’s not fair” that he has to eat the same dinner as the rest of the family. I’ve suggested that he appears to have a distorted concept what the word “fair” means.

A recent Wall Street Journal editorial had a “Fairness Quiz”, intended for President Obama. Reading the quiz it seemed to me that confusion about what constitutes fairness may be more widespread.

I decided to take the “quiz” (in bold) and included my answers below.

President Obama has frequently justified his policies—and judged their outcomes—in terms of equity, justice and fairness. That raises an obvious question: How does our existing system—and his own policy record—stack up according to those criteria?

Is it fair that the richest 1% of Americans pay nearly 40% of all federal income taxes, and the richest 10% pay two-thirds of the tax?

Yes. The top 10% possess 80% of all financial assets. Since they have 80% of the money it doesn’t seem unfair that they would pay 66% of the taxes.

Is it fair that the richest 10% of Americans shoulder a higher share of their country's income-tax burden than do the richest 10% in every other industrialized nation, including socialist Sweden?

Sure. There there is more income inequality in the US than “socialist” Sweden. Maybe the income inequality isn’t fair, but obviously it’s not unfair to the people that benefit from it.

Is it fair that American corporations pay the highest statutory corporate tax rate of all other industrialized nations but Japan, which cuts its rate on April 1?

No. It is widely acknowledge that the US corporate tax code is riddled with loopholes and special deals. If the code was streamlined then more revenue could be raised at a lower rate. Of course, the corporates that benefit from these loopholes want to make sure they are maintained. And they hire lobbyists.

Is it fair that President Obama sends his two daughters to elite private schools that are safer, better-run, and produce higher test scores than public schools in Washington, D.C.—but millions of other families across America are denied that free choice and forced to send their kids to rotten schools?

Yes. American kids are entitled to decent schools and we should endeavor to provide them. But wealthy people are going to want something better for their kids than we have the means to provide for everyone. People should be free to send their kids to private schools. And we shouldn’t be surprised that that expensive private schools are better than those paid for by taxpayers.

Is it fair that Americans who build a family business, hire workers, reinvest and save their money—paying a lifetime of federal, state and local taxes often climbing into the millions of dollars—must then pay an additional estate tax of 35% (and as much as 55% when the law changes next year) when they die, rather than passing that money onto their loved ones?

Taxes need to come from someone. Taxing dead millionaires doesn’t seem significantly less fair than taxing non-dead, non-millionaires. 55% does seem too high. 35% seems fair.

Is it fair that Treasury Secretary Tim Geithner, former Democratic Senate Majority Leader Tom Daschle, former Ways and Means Chairman Charlie Rangel and other leading Democrats who preach tax fairness underpaid their own taxes?

No. Everyone should pay the taxes they are required to pay under the law.

Is it fair that after the first three years of Obamanomics, the poor are poorer, the poverty rate is rising, the middle class is losing income, and some 5.5 million fewer Americans have jobs today than in 2007?

Is rising poverty fair? To whom? I don’t understand the question.

Is it fair that roughly 88% of political contributions from supposedly impartial network television reporters, producers and other employees in 2008 went to Democrats?

Yes. Working in television doesn’t mean you aren’t entitled to have an opinion about politics or mean that you should not be permitted to give money to whomever you choose.

Is it fair that the three counties with America's highest median family income just happen to be located in the Washington, D.C., metro area?

Once again I don’t understand the question. Is it fair to whom? Other counties?

Is it fair that wind, solar and ethanol producers get billions of dollars of subsidies each year and pay virtually no taxes, while the oil and gas industry—which provides at least 10 times as much energy—pays tens of billions of dollars of taxes while the president complains that it is "subsidized"?

Burning oil and gas come with a massive externality in that it is causing dangerous global climate change. The cost of dealing with this will be borne by it’s victims and is not factored into the cost of the commodities themselves. It is perfectly fair for a government to strive towards a tax and subsidy policy that seeks the maximum benefit (and tries to mitigate disaster) for it’s citizens.

Is it fair that those who work full-time jobs (and sometimes more) to make ends meet have to pay taxes to support up to 99 weeks of unemployment benefits for those who don't work?

The extended unemployment benefits were necessitated by chronic long-term unemployment caused by a massive financial crisis. The nation certainly benefited from the extra protections offered the unemployed as the economy recovered. Since taxes for the employed were not increased during this time (and they were, in fact, reduced) it seems perfectly fair all around.

Is it fair that those who took out responsible mortgages and pay them each month have to see their tax dollars used to subsidize those who acted recklessly, greedily and sometimes deceitfully in taking out mortgages they now can't afford to repay?

If that were occurring, it wouldn’t be fair. The actual fate for people who haven’t been able  to pay their mortgages is that they’ve faced foreclosure and eviction. The system does not seem to be unfair to those people who have been fortunate enough to be able to keep their homes.

Is it fair that thousands of workers won't have jobs because the president sided with environmentalists and blocked the shovel-ready Keystone XL oil pipeline?

It’s certainly fair for the government to consider the environmental impact of an oil pipeline before approving it. And it would certainly be unfair, to the citizens within the pipeline’s path, for the project to be approved if the environmental assessment was not permitted to take place.

Is it fair that some of Mr. Obama's largest campaign contributors received federal loan guarantees on their investments in renewable energy projects that went bust?

If the reason for the loans is solely or primarily the donations, then that is not fair. If the actual criteria for approval of a project is some other, more fair system... well, then that would be more fair.

Is it fair that federal employees receive benefits that are nearly 50% higher than those of private-sector workers whose taxes pay their salaries, according to the Congressional Budget Office?

The real number is that total compensation is about 16% higher for federal employees than in the private sector. Much of that difference is due to better benefits packages for non-college graduates in government jobs.

Is it fair that a government job is one of the few ways for a high-school graduate to get health insurance? I guess that depends on your definition of fair.

Is it fair that soon almost half the federal budget will take income from young working people and redistribute it to old non-working people, even though those over age 65 are already among the wealthiest Americans?

Current beneficiaries payed into these programs for the entirely of their working lives. So long as the workers paying in now receive comparable benefits, the system is fair.

Is it fair that in 27 states workers can be compelled to join a union in order to keep their jobs?

If the salary, benefits, and other terms of the employment that make the job desirable were established due to the efforts of the union then it’s fair to ask that the people who receive those benefits to contribute to the union.

Is it fair that nearly four out of 10 American households now pay no federal income tax at all—a number that has risen every year under Mr. Obama?

It’s not true. Most every working American pays federal income taxes for Social Security and Medicare. Many households don’t earn enough to have to pay additional income taxes. But there’s nothing unfair about poor households paying any and all taxes the laws requires them to pay.

Is it fair that Boeing, a private company, was threatened by a federal agency when it sought to add jobs in a right-to-work state rather than in a forced-union state?

In 2010 Boeing received $19.4 billion in government contracts. The American taxpayers have been been more than “fair” to the Boeing corporation.

Is it fair that our kids and grandkids and great-grandkids—who never voted for Mr. Obama—will have to pay off the $5 trillion of debt accumulated over the past four years, without any benefits to them?

My kids benefit from the low tax rates we pay now. We will all benefit from an economic recovery. We do owe it to them to restore some fiscal sanity over the long term. Is it fair that they will will inherit the cost of substantial borrowing to deal with massive financial crisis caused by reckless millionaires? It is not.

But who ever said life was fair...