What is "fair" tax?

There's been quite a lot of commentary about whether the "rich" are paying their "fair share" of tax, with an inferred moral and philosophical position that what is "fair" is "a lot" and is not just tax on income from employment or businesses, or tax on consumer goods, but tax on property acquired after both earning income and paying tax on the purchase of that property.  This is the concept of a "wealth tax", so let's consider both what this actually means, and whether a different conception of what "fairness" is might see the debate going in a different way.

Let's say you have land, or shares in a business, or an expensive asset (motor vehicle, boat, aeroplane, art work), and a socialist government (which is what it would be) decides you should pay it some proportion of whatever value it deems appropriate, in tax.  This is likely to follow you having already paid the following taxes:

• Income tax on your employment, or dividends from a business, interest from investments.  After all, to acquire an asset, you need to acquire income to get it.  Yes some people inherit wealth, some people are gifted wealth, but many earn it from employers or their own business.  Government already taxes that, and if you are wealthy the marginal rate of tax on most of that is 39%, so if you earned say $1 million, $370,000 in income tax is already paid on it.
• GST on your purchase. Yes this doesn't apply to land and buildings, unless you actually build something, or refurbish it. It also doesn't apply to buying shares in a business, but it does apply to cars, boats, aeroplanes, art works, jewellery and the like. 15% of the price is added on and taken by the government assuming it is bought through a business beyond a certain threshold. It doesn't apply to private sales of course.

So after paying tax to earn money, paying tax to buy the asset, the money-grabbing socialists want MORE, and of course if your cashflow is poor (you may have retired), then you will need to liquidate assets to pay a tax on wealth.  Yet who asks the question, why should you pay tax on owning property?

What does "fair" even mean?

From the socialist mindset, which is that of David Parker, the Greens and Te Pati Maori, and indeed appears to be that of multiple journalists, it's only fair if the state gets to take a share of everything you earn and own, including any increase in value in assets you may happen to own.  However, this idea of fairness is rooted in several concepts:

1. There is something immoral about owning property and it increasing in value without being forced to share that with the state (and enable politicians to spend that money).
2. People only obtain a lot of property because the state enabled them to do so, and so (despite them already having paid other taxes in the process of earning income and buying goods and services) the owners of such property should keep "rewarding" the state (and by extension "the community") for letting them succeed.
3. The actual amount of taxes confiscated from people should bear no relationship to the extent to which they avail themselves of what the taxes are spent on.
4. The state can spend your money better than you can, and in ways that are virtuous and benevolent to society, whereas you only spend money to benefit yourself and your family, and what you value.  Your values as a taxpayer are subordinate to the altruistic values of politicians who know how to spend your money to be kind.

This is largely nonsense. There is nothing immoral about owning anything and having its value rise without other people sharing in it, any different from it being somehow moral to own property and see its value fall, and require other people to help you out because of your losses.  Of course the socialist wealth tax advocates are never too keen on people getting big tax breaks or subsidies if their wealth collapses due to bad investment or simply the market for their assets evaporating.  

There is a kernel of an argument that a stable government with rule-of-law and property rights enables people to thrive, but the amount of state that does that is a fraction of its current size. The GST paid by the consumption of wealthy people could pay for all of that (indeed Roger Douglas proposed in the 1990s that GST could not only pay for the core functions of the state, but the welfare functions as well).  However, even if this is extended further, is it really a rational argument that the wealthier you are, the more the state has done to enable it (except for those who own businesses granted effective statutory monopolies through regulation or import tariffs/controls), and even if you pay more and more in income tax (even if it was a flat tax, a high income generates more tax than a lower one), it can never be enough?

The third point should be the centre of fairness. Treasury estimates around half of all taxpayers are net receipients of taxpayer funds through the welfare and tax credit system.  Why is that fair?  Let's assume those taxpayers occasionally consume the health system, many have children that consume taxpayer funded education and some will have taxpayer subsidised housing. An argument can be made for public goods to be funded collectively, but there are precious few of these. Why should people who have generated considerable income and acquired assets legally be expected to pay for the costs of services other people consume, many many times over themselves?  What is the fairness in being forced to pay for someone else's private goods and services? If taxes are to exist at all, they should only exist to pay for public goods.

The fourth point is clearly nonsense, the state is not a more moral actor than you are, and on average it isn't either.  This is a philosophical point of difference. Statists and socialists think governments are better placed to spend money (because it can "help" people) than you are, whereas libertarians and free-market liberals are sceptical of this. After all, a government may raise salaries for teachers, but this typically rewards both the best and the worst ones, which is a distinction that a government supported by teachers' unions does not recognise.

The real truth about tax is that it is theft and it isn't "fair" at all, it is at best a necessary evil to fund a substantial state, and the amount people pay is based on no moral basis whatsoever. Unless you believe people who have a lot of money have got it through immoral ends or are beneficiaries of a large state (regardless of how this has little evidence), then tax is simply a means to an end - the end being politicians spending money on what gets them re-elected.  The only way to make tax fairer is to have it lower and flatter, and simpler, so people get to keep more of what is theirs, and those who want you to spend it on other things, have to persuade you to give them your money

Be wary of anyone wanting to make tax "fairer" because the bottom-line is that they just think that they (or people they support) are better placed to spend your money than you are.  Oh and the spin-merchants of so-called "wealthy" people who say they "want" to pay more tax (but wont actually do it unless others are forced to) are a bizarre breed who actually think politicians and bureaucrats can spend their money better than they can, for benevolent purposes.