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Solving the Case

The only way to get to the bottom of this case was to gather everyone in the same room and see who cracked first.

But they stuck to their stories. The Count believed Regressive Taxes were unfair because lower income groups paid a higher percentage of their income in taxes. The Sheriff thought Progressive taxes were unfair because higher income groups paid a higher percentage of their income in taxes. And Lorna thought the only fair way was to have a strictly Proportional Tax system. Who was right? What was fair?

The more I thought about it, the more I realized there are other ways to look at the question. The citizens of Hamalot Island were judging whether a tax is fair or not based only on how it affected their actual income. But that didn't take into account questions about their overall wealth. And what about the benefits individuals receive from the goods and services that taxes support? Shouldn't these benefits be considered when thinking about fairness?

I knew I was onto something big and I wasn't alone. Economists were even backing me up! You see, economists use two criteria to help determine the relative fairness of a particular tax. They are:

*Benefits Received -- People should pay taxes in rough proportion to the benefits they receive from them.

*Ability to Pay -- People should pay taxes in rough proportion to their ability to pay. Ability to Pay is measured in two ways: Wealth or income.

To be fair, people who differ according to these criteria should pay different amounts of taxes, but it is often difficult to apply these criteria to a particular tax. Here are two examples...


So this is what I reported to the queen

Outer Magnolia - Dead Man's Gulch - Hamalot City - Detective's Challenge - Solving the Case


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Note: For more information and resources on this subject, go to the U.S. Tax Center.
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