Taxes: Fairness vs. Efficiency

From: Albert T. Gerra (tax2004_at_paymenttax.info)
Date: 12/27/04 

Date: Sun, 26 Dec 2004 19:13:09 -0500

There is lots of talk fairness in the tax code. I personally believe the
standard should be efficiency. Let me use an example from local government.
A "fair" way to keep the streets clean would be to identify people who
litter, and then make them clean up their mess. You don't hear many
mayors talking about a fair street sweeping system. Instead, they
wisely concentrate on efficiency.

Why are we so fixated on fairness in our tax code? What is even
meant by fairness? I personally believe politicians use the word fair
to mean anything they want it to mean. Fairness is the catalyst for
inserting all kinds of mischief into the tax code. If we concentrated
on a more objective standard such as efficiency there would be two
positive consequences.

The first is that the debate would exist on a more solid ground.
Different tax systems could be compared on the basis of administrative
costs, tax evasion rates, economic inefficiencies, etc. With the debate
set in a more objective realm, perhaps there would be less partisan
hysteria.

The second positive consequence from a focus on efficiency is that we
might actually end up with an efficient tax system! Imagine that. With
an efficient tax system, economic growth would be substantially enhanced.
With enhanced economic opportunities, people could work hard and
become successful. Isn't that better than some nebulous concept of
fairness?

Albert T. Gerra
www.PaymentTax.info

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