When more means less.

We hear an awful lot these days about the duties the rich have toward the poor or society or “to pay their fair share.” The funny thing about this expression is that their “fair share” always seems to actually mean “quite a lot more than anyone else.” If they only paid the same percentage as everyone else (a flat tax), they would still be paying a lot more. But since we have a “progressive” tax system, they actually pay a higher percentage, meaning they pay exponentially more than others. At least that’s the idea.

Now, the reality is that high income earners often are in a position to manipulate their earnings in such a way as to wind up paying a much lower percentage than the simple system would indicate. This is a very legitimate practical part of any meaningful tax discussion and is essentially what Warren Buffett recently wrote about in the New York Times.

Nevertheless, people seem completely satisfied with the underlying notion that in a perfectly just world, we would first solve such practical defects and then proceed to impose not just a higher tax bill, but an exponentially higher tax bill, on the rich. And the exact value of that exponent should always be either slightly or substantially higher than whatever it currently is, at least if you consult the average person. In defense of this view, they will often say something to the effect of, “The rich owe more to society because they have so much.”

But this proceeds from a fundamental error about the nature of money.

Money, you see, is nothing but a measure of how much good you have done for other people. Oh, to be sure, a great many good things we do for others don’t receive any payment, and there are also nefarious ways to acquire money, the bulk of which we make illegal. But the basic idea of money is that I give it to you when you give me something I value more than that money’s capacity to buy something else. In other words, at that moment, you’re offering me what I consider to be the best value for my currency available in my society. Thus the reason you acquire it is the same reason I held it before you: you benefitted me after I benefitted another.

So when a man has a higher income than someone else, the money he earns is evidence he has done more for society. And when he earns a lot, it means he has done a lot for people who voluntarily proved the evaluation by paying you for whatever he did. Thus, a high income is the most basic evidence of a high social contribution. Again, other forms of contribution may go uncompensated and some compensation comes from not truly contributing, but the basic idea of money is as I’ve described.

That’s why the principle of taxing the high income earners is so self-contradictory. On the one hand, high incomes prove a much higher-than-average social contribution. But on the other hand, they prove a lower-than-expected social contribution. Advocates of progressive taxation thus seem to think a high income simultaneously proves you’ve done much more than most for others and yet also not nearly enough for them.

Now, I’m very much in favor of the well-off using their resources charitably. But to say to them that the proof of their social failure is the very evidence of their social success completely baffles me.