Dan Liljenquist: What is a 'fair share' of tax burden for the rich?
Photo courtesy of Lionsgate
Over the last few years, a handful of political pundits have reached the stratosphere of stardom in Hollywood. Among these people there is no bigger star than Bill Maher, host of the popular HBO show, "Real Time with Bill Maher." An unabashed liberal, Maher's political discussions are irreverent, combative and occasionally funny. He is the Charles Barkley of political punditry.
In my opinion, Bill Maher gets most things wrong, so I was surprised to find myself agreeing with him this last week. During his HBO program one of his guests, Rachel Maddow of MSNBC fame, was roundly criticizing Congressman Paul Ryan's tax reform proposals. Ryan is an unapologetic proponent for simpler, more predictable and less progressive tax policies. Maddow, dripping with her customary sarcasm, mocked Ryan's premise that the U.S. tax code is "confiscatory" by design and quipped that Ryan must believe that "rich people do not have enough money." The studio audience reacted as you might suspect, with applause for Maddow.
Maher's response quieted the audience right down. He said, "Rich people ... actually do pay the freight in this country. I just saw these statistics — I mean something like 70 percent." He went on to say "Here in California — I just want to say — liberals, you could actually lose me. It's outrageous what we are paying — over 50 percent. I'm willing to pay my share, but yeah, I mean, it's ridiculous."
This exchange between Maddow and Maher highlights the impossibilities of tax codes that try to discriminate between the "haves" and "have-nots". Wealth is, and has always been, a relative concept. A family living at the federal poverty line in the United States is 10 times wealthier than a middle-class Guatemalan family. One man's pauper is another man's prince.
Over the last few years, proponents for more and more progressive taxation schemes have accused the "rich" of not paying their "fair share" of taxes. The systematic use of invective and hyperbole to drive this argument home has divided the country into factions. Nobody can define what is a "fair share" of the tax burden. It is, by its very construct, impossible to answer.
The failings of the "fair share" approach to taxation policy are playing out before our eyes in the Eurozone country of Cyprus. In an unprecedented and shocking move, Eurozone financial regulators have required Cypriot legislators to confiscate up to 10 percent of deposits in Cypriot banks as collateral for a financial bailout. This triggered an old-fashioned bank run. Government officials shut down the banks so that citizens could not withdraw their money. The people took to the streets and Cypriot legislators have scrambled to figure out a way forward.
Christine LaGarde, head of the International Monetary Fund, weighed in on the crisis by stating that the IMF is "extremely supportive of the Cypriot authorities' intentions to introduce more progressive rates in the one-off tax." Cypriot authorities are now introducing legislation that will exempt from the tax those citizens with deposits less than $25,000. The bet they are making is that the crowd will disperse, the crisis will pass and the funds will be seized. Unfortunately, those with over $25,000 in deposits are now "the rich" who must pay their "fair share."
Chief Justice John Marshall once wrote, "The power to tax is the power to destroy." Taxation policy is a matter of life and death for a society. We must have an objective, policy driven debate on taxes. To do so, we must stop vilifying "the rich". After all, each of us is rich in comparison to somebody else.
Dan Liljenquist is a former state senator and U.S. Senate candidate.
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