If all the citizens of a country have the same rights and are equal before the law, why some must pay more taxes? Isn't that a kind of discrimination?
Literally speaking, yes, it is a kind of discrimination, although not in the usual sense of the word. It discriminates between citizens based on their income or property, but not usually based on personal characteristics such as sex or age¹.
As to the "why" question, I'd like to add one point to @maple_shaft's extensive answer. A progressive tax rate may be used as an instrument to level out differences in wealth. The highest income brackets have a higher tax rate. This reduces the difference between poor and rich, which has many advantages, for example:
- It benefits economic growth more if someone living on the minimum wage gets X $/month extra than if someone already rich gets X $/month extra, because the poor person is likely to spend every single extra $ they get, whereas the rich person may just put it on a savings account or invest it in Chinese factories.
- A reduction in income differences may increase social stability and reduce crime.
Of course, there are also disadvantages. Perceived fairness may be one of them, as is the consequence that working more would not add as much extra money in ones pocket as it would otherwise. But I think most (but not all) legislations have some form of a progressive tax rate.
¹Some policies may have the apparent effect of discriminating based on age; for example, in some legislations, income from labour may be taxed at a lower rate than income from pensions, but it's not age per se that is the factor of discrimination.
As opposite to the assumption from the question, if all citizens have the same rights, why can't some of them use something, what other can?
Why can't an unemployed use a limousine, a yacht or a house with swimming pool? Isn't this the discrimination?
The equal rights mean that two citizens in identical situation will be treated the same. So, two citizens will pay the same taxes if they have the same material status etc.
From philosophical point of view the reason why some people must pay more taxes than the others can be answered with my inversion of your thesis: they must pay more taxes because they can use more goods.
A Progressive tax rate (meaning that the rich pay more) is typically predicated on a very specific definition of fairness that realizes:
An equal percentage is still harder on the poor.
Imagine, for example, that all people were taxed at 10%.
The guy who makes $1000 a week would only have $900 left over at the end. That $100 is very, very precious. It can mean the difference between groceries or medicine.
The guy who makes $10,000 a week would still have $9,000 left over. The margin increase in living standard that the $1,000 gives is far less significant than the $100 the poorer guy pays. At a certain point, one's standard of living is pretty well set. In the case above, it might mean the difference between a vacation in Maui or Tahiti, but it isn't going to determine the same hard economic choices above.
That's the typical justification for increasing the rate as income goes up.
You misunderstand equal rights and are conflating people with income. The idea that everyone is equal under the law doesn't mean that the law must affect everyone equally, but that the law may not discriminate based on certain classes.
Laws against theft only affect thieves. Property taxes only affect property owners. Gas taxes and tolls only affect drivers. There are laws that only affect specific types of businesses or government agencies. Any one of the myriad parts of the tax code may or may not affect a given person. None of this means your rights have been violated, or that you don't have equal rights under the law.
But thieves are not a protected class. Property owners, drivers, kinds of businesses, or government agencies are not protected classes. None of the myriad qualifiers in the tax code are protected classes either.
Protected classes are things like race, religion or creed, gender, and (increasingly) sexual orientation, at least in the US. In the US, you can't be taxed a higher rate because of you are white, black, Catholic, Protestant, straight, or gay.
But the US doesn't have equal rights for thieves, and it doesn't have equal rights for the wealthy or poor either. So you can be taxed a higher rate because you your salary was a certain amount, or because aren't a hedge fund manager, or because your income came from wages and not investments, etc.
And about how the US income tax brackets work: Just because you got bumped in to the next income tax bracket by a dollar doesn't mean you are paying the higher bracket's rate on your whole income. You still pay the rate on the income in the lower bracket, and then you pay the rate on the income in the higher bracket. So if the tax rate is 20% on the first $100,000 of income and 25% on incomes higher than $100,000, and you earn $100,001, you only pay $20,000.25, not $25,000. That last dollar doesn't affect what you pay on the other dollars. There are diminishing after-tax returns but there is no gap where you are better off earning less. (Though I'm sure there are more obscure rules that contradict that.)
Everyone pays equal taxes, and tax brackets are massively misunderstood.
The same table applies to EVERYONE:
(taken from bankrate, using 2016 numbers, and rounded for clarity)
You pay 10% on your income up to $10,000. You pay 15% on your income from $10,000 to $40,000 You pay 25% on your income from $40,000 to $100,000 You pay 28% on your income from $100,000 to $200,000 You pay 33% on your income from $200,000 to $400,000 You pay 39% on your income above $400,000
It does not matter how much you make, everyone follows the same table.
Some people (those who make less than $40K) stop reading the table after just the 2nd line.
They end up paying an effective rate below 15%.
Some people (those who make over $400K) have to read the table all the way to the end.
They end up paying an effective rate approaching 30%.
We are all reading the same table and following the same percentages; The same law applies to everyone, so I don't see that as discrimination.
I think what the original question is suggesting is that every dollar be taxed equally. The law does not treat all dollars equally, some are taxed more than others; it treats all people equally. We all follow the same tax tables, regardless of how many dollars we earned.
It is impossible to answer as stated, because the answer to "does X amount to equal/unequal rights" depends on the precise wording of what the right is.
Therefore, people who favor higher taxes on the "rich", claim that the right is to have a minimal amount of money (in which case, taxing those with more than that amount violates no rights; and moreover, NOT taxing to give to those who don't have it would violate their rights).
Whereas those who oppose such an approach would claim that the right is to not have the money YOU earned taken from you by threat of force without our consent (or to not have more taken - percentage or amount wise - than from everyone else).
Both answers are correct/incorrect entirely on how you word the "rights".
The practical problem in the USA is that Constitution, as written, has very vague legal rights listed in it ("pursuit of Happiness" from Declaration of Independence).
Everything else is up for interpretation by nine dudes and dudettes on the Supreme Court.
So if the Nine decide that Constitution doesn't afford one the right to NOT have a hefty chunk of what you worked hard to earn taken from you, you don't have that right. If they decide that you have a right to a free college tuition as part of "pursuit of Happiness", you have that right.
Things get even more murky and subjective when you start dealing with "rights" as moral/ethical as opposed to legal constructs.
You could equally well ask
If all the citizens have the same rights why are some allowed to earn more money than others?
Sure it could be argued they earned it and therefore deserve it. But how do you determine if somebody deserves money? Money is just a social convention that says the people who possess it are entitled to change it for goods.
By the original line of reasoning you could argue that everybody should pay the same amount of tax (say $ 10 000), would that be fair? If you argue not it is probably because you think that people who have more means can contribute a little more, the same argument can be used to argue in favor of progressive rates.
I don't think there is a single correct answer to your question, but to search for it probably one should try to ask oneself what do we mean by the concept of "having the same rights"?
One generally get rich mostly by luck, and partly because of personal characteristics. Does having a little more intuition about how the stock market works really entitle you to earn 1000 times more money than the average guy. Would it really be so unjust to only let him have say 200 times as much money? (yes that would mean enforcing a whopping 80% tax rate).
It seems that the best way to decide tax rates would be by looking at the benefits for society on the whole as others have pointed out in their answers.
Update: just to be clear, I'm not saying flat taxes are necessarily bad (although I personally think they probably are), I'm only saying that they cannot be justified only on the basis that "everybody has the same rights"
No government treats all of its citizens exactly the same:
- A ten-year-old child is a citizen, but not allowed to drive a car or vote.
- A young adult may be required to do military service; an elderly grandparent is not.
- A person with a criminal record may not be allowed to hold certain jobs.
- A person over the age of 65 may be eligible to collect a pension from the government; a younger person is not.
- A person making $1,000,000 a year may be paying a higher percentage in tax than someone making $10,000.
The definition of "discrimination" (via Google) is:
the unjust or prejudicial treatment of different categories of people, especially on the grounds of race, age, or sex.
recognition and understanding of the difference between one thing and another.
Obviously, the above examples are "discrimination" within the second meaning of the word. They are generally not considered to be "discrimination" within the first meaning.
There is a fundamental misunderstand of equality and discrimination implicit in the question. Equality does not mean all people are treated the same - it means they are all treated the same when they are in the same circumstances.
We are constantly treating people differently. A person convicted of a crime is put in prison and deprived of their right to liberty. That's not discrimination, as long as all people convicted the same crime, in the same circumstances, are treated the same. Likewise it is not discrimination to exclude people from (say) a concert if they don't have a ticket, as long as everybody with a ticket is admitted.
In this particular case it's not discrimination to charge people with a higher income a higher tax rate, as long as the same tax rate is charged to all people with that income (and whose other circumstances are identical).
The discrimination happens when people are treated differently based on irrelevant criteria, like race or disability. Of course it's not always completely clear what is a relevant criterion, and that's the subject of political debate.
The question also avoids a fundamental issue, which is "what makes a fixed rate more 'equal' than a variable rate?" If taxes were all fixed rate someone might well ask whether it is 'discrimination' that a person should pay twice as much tax just because they earn twice as much.
The premise of your question is wrong. Everyone is paying the exact same tax rate on their income. It just happens that portions of income in higher brackets are taxed more than those in lower ones. So for example a CEO will pay 0% on the first $50000 of his yearly income, just like a school teacher would. The extra tax is levied over income over the threshold and applies regardless of who you are, in an absolutely egalitarian fashion.
Second, your assumption that the rich are paying more tax is not fully correct. People like Warren Buffet pay a much lower percentage of their income in tax, thanks to the differences in how various sources of income are treated and the availability of offshore tax loopholes. Some billionaires pay close to 0% because they are legal residents of certain tax heavens.
Now if you're trying to ask why don't all citizens pay the same amount in absolute dollar figures, the answer is that that's the way our system works. And it works that way because it's an equilibrium that keeps most of the population happy. The rich are (for now) dependent on keeping the other 99% reasonably content and secure, so they are forced to accept paying a higher tax (in absolute dollar value) on their income. Theorethical concepts of equality don't come into play here at all.
Usually, the tax rates (no matter how simple or complicated they are) apply equally to all residents. Depending on the specifics of your situation, both the rates and the nominal amount due will differ but the rules are still exactly the same.
One one level, tax law (like all other rules everywhere) has different consequences for different people but that's trivial. If, say, the law recognizes and protects property, it will entail your right to enjoy your property and my right to enjoy my property, not my right to enjoy your property. Similarly, the penalty for murder or any other criminal offense only applies to people who committed a murder (or some other acts meeting the definition of a crime according to the law). Nobody would argue that it's discriminatory not to put everybody in jail.
When it needs to be specified beyond simplistic definitions and slogans, discrimination means something else, namely treating people differently based on some irrelevant personal characteristics. Thus, the laws or treaties that forbid discrimination usually include a list of such characteristics (origin, gender, race, religion, etc.)
Now, there are a lot of debates on the merits of various ways to structure, e.g., income taxes. For example, proposals to introduce a “flat tax” with a single marginal tax rates for all incomes are quite popular. But it's not clear that thinking of this in terms of “discrimination” is very useful or makes sense at all.
Governments, whether they be monarchies, dictatorships, democracies or communist have a common goal in promoting the safety, well being and overall good of the people.
Often this means that certain groups will be targeted for taxes or benefits to promote the general common good. Many people believe that a strong social safety net reduces economic volatility and provides for a better quality of life overall in a modern capitalist country for nearly all involved. The security of knowing that when faced with hard times that you will not starve or become homeless due to a few bad breaks in life is often reason enough to support public unemployment compensation, social security, welfare, food stamps, and even public healthcare. These are extraordinarily expensive however so taxes must be raised to pay for these things.
Furthermore it can be argued that a strong social safety net has a positive effect on economic growth, as the consequences of a failed business venture are not quite as extreme when you know that your family will not starve if you take out a large loan for an unsuccessful business or startup. These kinds of policies promote economic growth and support small businesses ultimately.
On the point of fairness, there are a number of taxes that are inherently unfair yet are politically very popular and easy to implement. "Sin" taxes like the exorbitant taxes on cigarettes and alcohol are a prime example of ones that target a specific group because it is politically easy to target them. Nobody wants to look soft on tobacco or seem like they are promoting alcohol, so few oppose such taxes and the majority of people support it because these are inherently sales taxes and are mostly transparent to the uneducated consumer.
With that being said no we address the fairness, that if all people are equal before the law and all have the same rights as citizens, we are certainly not and never will be all equal as individuals. I may have been born with innate advantages in life, born into wealth or perhaps I am Bill Gates (who consequently was in the very least upper middle class as a child) and made a few lucky breaks and was in the right place in the right period of time. The fairness argument above can also be said that the opportunities available in this country, and the rights that our government and military have protected for us make it fair for the government to ask for a little bit more from people who would not be terribly pained by this. Asking a little bit more from somebody who is living paycheck to paycheck is an enormous burden on that person.
So in the benefit of the common good we can make a number of arguments to justify if higher taxes on one group of people is fair. Certainly not in all cases, but the argument can be made that it can sometimes be fair. But then taxes are not just a means to gain income for the government, they also happen to be a convenient way to encourage behavior in citizens that benefit the economy and strengthen its people overall.
Lower capital gains vs. income tax/estate tax: Having a higher income tax or estate tax rate as compared to capital gains income encourages the wealthy to not only invest their money but to keep it invested rather than sit on it. More investment helps the economy grow.
Sin Taxes: Discourages behaviors that affect public health and cause higher healthcare spending overall as a percentage of GDP.
Mortgate Interest Deduction: Encourages home ownership in the middle class. Housing starts are the primary indicator of a health US economy, and so goes the world.
So taxes (or high taxes with loopholes) may seem unfair, but if one believes that the ends justify the means then the benefits of influencing good economic behavior and promoting overall economic growth justify that decision.
The difficulty with this question is that it's trying to make a connection between the rights of citizens and tax codes.
They're not necessarily all that related.
In the US, for instance, as several have pointed out, one's "rights" don't typically mention anything about tax rates.
As for being seen as equals in the eye of the law, again, that's typically in the context of one's rights. (And I would also add that not every nation believes in treating everyone as equals in that sense, either.)
As for it being discrimination, at least in the legal sense, I don't know of any nations that have codified the idea of discriminating on income levels as being prejudicial. Some examples of what legal discrimination can be: http://en.wikipedia.org/wiki/Discrimination#Caste_discrimination
As such, the question really can't be answered as it's worded.
You could, instead, ask "why are there different tax rates?" which would be a valid question, albeit one with rather complex answers that likely vary wildly from nation to nation.
All people are eligible to pay the exact same taxes if they are in identical circumstances. Anyone earning $1M dollars AGI, with $13,000 in mortgage interest, $8000 in property taxes, $65,000 in state income taxes, with three children is going to owe the exact same amount of federal income tax as anyone else in the same situation.
Anyone earning $45,000, with no mortgage and $3000 in state and local income taxes will owe the same amount as someone else in that same situation.
The person earning $45K should not owe the same amount or even the same percentage as the person earning $1M because their situations are not the same. Treating people who are in different situations differently is not unequal treatment, it's unequal circumstances. If the person making $1M this year only makes $45K next year, he will owe the same rate as anyone else who earned $45K, and if the person who made $45K this year makes a million, he will owe the same as others who are making $1M, so it is completely equal treatment.
Every answer so far has assumed the question was directed at something like tax brackets (which I admit it probably is), when instead it's been phrased perfectly to suggest that anything aside from something like a universally equal lump sum payment is discriminatory. The question could be referring to deductions, subsidies, income types or wealth, while not bothering to state what equality would mean. It's really not very coherent for any number of reasons.
People have already answered along the lines of income and wealth not being a protected class or the marginal utility of money decreasing as the amount an individual has increases (neither of which are controversial political/economic positions), so I won't be repeating their points. I'll instead try to answer things along the lines of equality when looking at things from the perspective of government services consumed.
Even in some sort of theoretical Libertopioa, I would assume that the government still holds a monopoly on the use of force. If we assign a value to human lives based on some combination of income and wealth, then those with a higher income or wealth experiences greater value from the government monopoly of force and the resulting safety of their lives, sources of income, and capital in direct correlation to the increased value of these things. For example, if a homeless vagrant is murdered, he loses the total of his wealth (hundreds to thousands of dollars maybe?), and his projected future income (have to consult an actuary for the specifics, but probably not an impressive number). If instead a millionaire is murdered, the loss of his wealth and future income could easily go into the hundreds of millions or even higher. I would think this is simple enough to establish something like a tax that varies based on income and wealth even if you view tax as a payment and the monopoly on force as a service.
Similarly, in a normal society, people with high income and wealth consume other services not available to those with less income and wealth. For example, the use of public roads is dependent on ownership of a motor vehicle. To extend that even further, the operation of a business could depend on things like transportation of goods on public roads, a pool of educated and healthy laborers, and a wide consumer base with a level of income necessary to enjoy their product. An increase in the tax rate as income or wealth increases can reflect this increase in the consumption of services.
I think there are tree factors to this.
First, by-person taxation would create very great pressure to the poor, depriving them of many basic needs. The poor people spend much greater proportion of income on their food and other basic things. The rich people will not even notice such taxation (as it will be negligible compared to their income), which effectively would mean that the rich are tax-exempt.
Second, the rich people consume much more state services per person than the poor: for example they need more police and army to keep their wealth in safety. Being rich in a country without law is useless: any bandit criminal group will easily take your possessions. The more state services are consumed, the more they have to pay.
Third, from Marxist perspective, there is income from labor and income from expropriation of surplus value. The rich people most likely acquired their wealth through theft of surplus value from the workers, while the workers were already "taxed" by their employees who took the surplus value. As such, the state should take that theft wealth from the rich and return it to the workers in form of state services.
It should be noted that in Socialist states where all the enterprises belonged to the state, nearly all legal income (except lottery wins and the like) was due to labor. In such circumstances there was no real purpose in taxes. Indeed, the "taxes" were negligible in the USSR (one can really wonder why they were at all if they were so low).
Much has already been said regarding tax and rights. So, I'll simplify:
The government does not tax people, it taxes money. Think of tax as a fee for management of money. Consequently, any person or institution that has more money will correspondingly pay more money in taxes. Its that simple!
Think of two neighboring families (Millers and Smiths) visiting an amusement park. The head of the family pays a flat fee for his or her entire family. Millers are just the couple and Smiths have 5 kids in tow. You could argue that both should pay the same fee for their family, since a family is being charged. However, the amusement park charges the Smiths with 7 people more than it charges the Millers with just 2 people.
However, the difference in charges isn't a simple ratio of the size of the families. The amusement park reserves the right to maximize their profits and in so doing will create a fee structure that maximizes the number of people that visit them. Therefore, the fee structure will be based on several factors, among which is obviously the operational cost to the park for each guest.
Typically, they will choose to charge a family of 1 i.e. single person very little since single people need incentives to visit the park and would otherwise not visit. (For example) They would stratify fees in layers for families of sizes 3, 5, 7, 8 or more.
A government will create tax laws that it feels is in the best interest of the country towards stimulating economic growth of the country as a whole. Countries have different tax structures based on their policy regarding economic growth. There isn't a universally acceptable tax structure and it has no correlation with human rights in principle.
That leads us to the final aspect of the question: Can tax laws potentially discriminate and/or abuse human rights? Yes, they can if the imposition of tax rate is based on factors other than total income. Other forms of discrimination in practice, though not in principle, is the consistently biased selection of some people (rich members of a minority) for auditing. However, this and many potential forms of discrimination in imposition of taxes do not make the principle of stratified tax rate proportional to income itself, discriminating.
The problem is... The progressive tax system is usually (details vary from country to country) completely undermined by various deductions, often related to the ability to accrue debt, which again increases with the amounts of collateral you can put up, which again follows how 'rich' you are.
This means that the wealthy usually end up paying a lot less than they should, usually even less than the average 'poor' citizen.
This is why a completely deduction-less fixed tax system in reality would be more fair and provide more tax revenue than the current implementations of progressive tax systems.