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Posted on Fri, Oct 19, 2012 : 10:29 a.m.

Fairness: What is 'tax fairness' anyway?

By Wayne Baker

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Editor's note: This post is part of a series by Dr. Baker on Our Values about core American values. This week Dr. Baker is discussing fairness.

Tax policy figures prominently in our quadrennial political contest. Mitt Romney and Barack Obama propose different approaches to taxes, differences that they sparred over during the second presidential debate.

Tax policy is one way the government can level or tilt the playing field. Tax policy affects equality of outcomes, one of two ways to think about equality, as we discussed Tuesday. Generally, it’s influenced by the values we have about just treatment for everyone.

Obama uses “tax fairness” to mean that the rich should shoulder more tax burden than they do now. But there are other ways to think about tax fairness. Economists think of tax fairness in two ways, according to my colleague Joel Slemrod, one of the world’s leading experts on tax policy. One is the benefit principle. The other is the ability-to-pay principle.

The benefit principle weighs what you get from the government with your tax burden. Those who benefit more should pay more taxes. This principle suggests a progressive tax structure, as Slemrod writes in Taxing Ourselves, “because households with higher income and wealth have more to lose from the lack of security and anarchy that would prevail if the government withdrew from providing defense, a justice system, police, and so on.”

The ability-to-pay principle ignores benefits and says that the taxes you pay should be related to your level of economic well-being. So, the rich should pay more. It is this second principle that Obama has in mind when he argues tax fairness.

Economists can’t tell us what the right tax policy is. What is fair and equitable depends, ultimately, on values. That’s why Slemrod says, “any panel of economists offering their opinions on the best tax system should be followed by a panel of philosophers or ethicists who offer their views on tax equity.”

Do you favor the benefit principle?

Do you favor the ability-to-pay principle?

What are your criteria for tax fairness?

Wayne Baker is a sociologist on the faculty of the University of Michigan Ross School of Business. Baker blogs daily at Our Values and can be reached at or on Facebook.


Jay Thomas

Mon, Oct 22, 2012 : 2:46 a.m.

"Do you favor the benefit principle? Do you favor the benefit principle?" Proofreading helps.

Rork Kuick

Fri, Oct 19, 2012 : 10:31 p.m.

"It is this second principle that Obama has in mind" I think most of us either have both in mind, or neither, but I'm not a mind reader.