Taxes paid by the Rich

I was watching a video that is was unfair that rich people pay more money in taxes than poor people. So I googled that and found http://www.itep.org/whopays which says rich people pay a smaller percentage of the overall income in taxes. The first video must be about the actual amount of money paid rather than the percentage. The quote was the poorest people pay 10.9 percent of their income and the richest pay 5.4 percent of their income. Then you have the other dynamic that the rich earn more of the income year after year. That means that for every dollar extra the rich each the goverment gets an extra 5.4 cents and for every dollar less that the poor people earn the government looses 10.9 cents. As income transfers from poor people to rich people the amount of money the goverment collect must be decreasing in terms of share of the ecomony. That bring up the question does the tax system existing to extract money from each person or to extract money from the flow of income. If it exists to extra money from each person then the complain of rich people that they pay more actual dollars is valid but if it exists to extract money from the flow of income then the complaint is not valid.

If one was designing a goverment and need to obtain money to run the goverment, how would you obtain that money. Each year, the people in the country produce products and services. The goverment wants to take a portion of that yearly to run. It would make sense to take a portion of the overall production rather than a fixed portion from each person. That way if the goverment took 10 percent of the overall that would be 10 percent of the products and services of the country. If the goverment took a fair portion from each person depending on how the income was divided the amount of money obtained would vary depending on the division of the income.

Let's imaging a fair system. Say the country has two people in it, Richie and Poorie. They both earn 100 dollars a year. The government taxes them each 10 dollars. That is 10 percent of their income. That is fair. Next year, Richie is smart and works hard and Poorie and lazy and does not work very hard. Richie earns 190 dollars and Poorie earns 10 dollars. In the fair system Poorie would pay 10 dollar and Richie would pay 10 dollars. All of Poorie's income would go to the government and very little of Richie's income would. Moral or not that is not practical. What is even more interesting is that in the real word income discrepency is way larger so a fair system would never work unless you let the goverment run out of money. Maybe that is why the deficits are always occurring. Where is the goverment getting the money to borrow. From Richie. That's funny.