I just reviewed the latest information from the IRS about who pays what taxes.  It reports that the top 1% of income earners (over $388,905) paid 35.1% of all Federal income taxes.  They paid 37.4% the year before.   The top 1% also paid about 1% of all Social Security taxes and Medicare taxes.  Does that sound fair?

The bottom 50% only paid 2.9% of income taxes but almost 50% of payroll taxes, like Social Security and Medicare.  Should they pay higher income taxes like the top 1%?  Should they pay a smaller share of payroll taxes, like the top 1%.  What is fair?

Since poor people spend all or most of their income to live , almost 100% of their income is subject to sales tax.  The “rich” (I hate that word!) save some of their income, which is a tax shelter from the sales tax.  Is this fair?

And, when did the word “fair” become a dog-whistle for Democrats anyway?

 Fairness is best left to ministers, moralists or ethics professors.  From an economic perspective, this argument is comparable to “re-arranging the deck chairs on the Titanic.”  Economists are more interested with the allocation of resources.  Who gets what resources for what prices?

The economic system of capitalism does a great job of allocating those resources by market prices.  If the price of a product or service is too high, then suppliers and providers will be motivated to allocate more resources to produce the product or service, thereby increasing supply, which will eventually drive the price back down.  If the price of a product or service is too low, then suppliers and providers will be motivated to allocate fewer resources, thereby reducing supply, which will eventually drive the price back up.  The “market” will find the right price for the product.

But, notice that economists assume everybody pays the same price for the same product or service.  Does the top 1% and the bottom 50% pay the same amount in taxes for the same services of government?  Taxpayers with expensive homes pay the same for fire protection as the cheapest house in the neighborhood.  But, the bottom 50% absorb more public healthcare than the top 1%.  A recent study indicated that the affluent benefit more from police protection, because they have more assets to protect.

So, how do we allocate government services by using price (taxes paid) as the mechanism to allocate resources?  Economists have tried repeatedly, but the study is always flawed by assumptions.  I don’t think we can answer that question.  Econometrics fails us.  Therefore, we fall back to the unhelpful concept of “fairness.”

Darn it!