While no one wants to pay taxes, if they must be paid then we can at least hope that the taxes of fair. Obviously enough, what counts as a fair tax is a matter of considerable dispute. Stereotypically, political liberals are cast as being favorably inclined towards taxes while the political conservatives are cast as being against taxes. While I will endeavor to avoid falling into any specific political leanings, it is obvious that any discussion of fair taxes will rest on numerous assumptions. While this cannot be avoided, I will do my best to present my assumptions so that they can be properly assessed and criticized.
One way to approach the matter of the fair tax is to assume that the fairness of a tax rests (at least partially) on the nature of the relationship between the citizens and the state, as well as the relationship between citizens. For the sake of brevity, I will consider only two main types of relationships. These are, of course, not exhaustive and I welcome others being added into the discussion. I will also be assuming that the discussion is taking place in the context of a first world democratic state, such as the United States, the UK, or Canada.
One view is that the relations between citizens and the state (and between citizens) is essentially of the same type as the relationship between a business and its customers. On this model, the state provides goods and services to the citizens and the citizens provide such goods and services to each other on the basis of economic compensation.
On this somewhat minimalist view of the state (and citizenship), the concept of a fair tax seems to be easily defined. A fair tax would be, in essence, a payment for the goods and services that a citizen receives. So, for example, if the state provides me with $15,000 in legitimate goods and services over the course of the year, then I would be fairly and justly taxed $15,000. Paying the fair value of what I receive would, obviously enough, be the epitome of fair.
This would, of course, create some practical problems in terms of calculating the value of such goods and services. However, given that businesses are able to address the problem of how much to charge, this seems to be something that could be resolved. Even if this presents a practical impossibility (which seems unlikely), it would still seem to provide a paradigm of a fair (if impractical) method of tax.
While this system would seem to be eminently fair, the extreme income disparities in countries like the United States might be seen as creating some problems. One obvious point of concern is that while the wealthy could easily pay for their goods and services, those who are less well off would probably be hard pressed to pay their fair share for such things as education for their children, police protection, fire protection, and so on.
Of course, this could be seen as being no different from the situation the less well off always find themselves in. After all, they cannot acquire all the goods and services that the wealthy can acquire and if this is fair, it would seem to be equally fair that they would be unable to receive all the goods and services of the state. If they cannot afford these services, then they must either find more income or simply do without. To use an analogy, if Bill cannot afford to buy a car, then he will have to walk. If he cannot afford to pay for police protection, then he had best learn to run. This might seem harsh, but in a pay as you go system, that is the nature of fairness. After all, why should anyone be forced to pay the way for anyone else?
While the business model has a certain appeal, it probably strikes some as being unduly harsh. After all, it essentially abandons citizens who cannot pay for their goods and services and these are, obviously enough, the people who most often need the help of the state.
One (and only one of many) alternative is to see the relationship between the citizen and the state (and other citizens) as less in terms of business and more in terms of a community. On the simplified community model, fairness is not measured solely in terms of the goods and services an individual consumes. The individual’s responsibility to the community is also a factor in determining what is a fair contribution in terms of taxes. The influence of this factor might increase the amount the individual should fairly pay in taxes or it might decrease the amount. As might be imagined, sorting out how much an individual should be fairly expected to contribute to the community is a rather controversial matter. However, it does seem reasonable to at least consider that a fair contribution might exceed or be less than what the individual actually uses or consumes in terms of goods and services. After all, there seem to be clear cases in which it is fair and just for an individual to contribute more or less than what they use or what others contribute.
To use an analogy, consider a family. In general, the children in a family are not going to be able to pay for all that they use or consume in the household. As such, the parents will have to bear the cost of their children. This would not seem to be, on the face of it, an unfair burden on the parents (although such cases could be imagined, of course).
But, someone might object, our relationship with other citizens is not analogous to the family relationship. As such, it cannot be used to justify allowing people to pay more or less based on these highly suspicious community factors.
In reply, another analogy might be offered. Suppose I am camping with my friends and a storm destroys most of their gear. Rather than let them die in the woods, I share my food, water and shelter because they are in need and they are my friends. Leaving them to die because I was unwilling to give up my “fair share” (that is, my property) would hardly seem to be fair at all.
“Aha”, an objector might say, “you are willingly sharing with your friends and not being forced to give up your goods. Taxes are not like this. Taxes are like having someone force you to share your goods to help some stupid strangers.”
This does have some appeal. However, there is an obvious flaw. I do, in fact, have a choice in regards to the taxes. As a citizen of a democracy, I have a role (albeit a small one) in the government and hence the taxes I pay are paid from choice. If I do not like how my money is being spent, I can do something about it. As far as the “stupid strangers” part, that does raise an interesting question about what we owe each other. As a country, are we more like friends or more like selfish customers thrown together into the same store by the vagaries of fate?