By Frank Wessling
We’re thinking about taxes this time of year, and about how nice a hefty refund would be in paying the bills. Let’s keep taxes on the mind, but shift to the tax system itself.
We’re supposed to have a progressive system, in which those who have more pay more. This doesn’t mean we penalize people who work hard or succeed because of their greater talent or creativity. It only means that we sensibly expect a greater contribution to the common good from those who have more money beyond what is needed for the basics of life. They have more of what we call discretionary income.
That’s why the cousin who makes $450,000 a year pays at a higher rate than the one who takes in only $28,000. At that lower point, there’s barely enough money to eat healthy meals, stay warm in the winter, ensure against accidents and illness, and pay for transportation to a job.
We have fairly well accepted the idea of progressive income tax. But what about other parts of the whole system by which governments receive income? What about the monetary penalties in criminal law, for example? Currently, they are based solely on the crime or misdemeanor itself, not on the perpetrator’s ability to pay. Your fine for speeding in Iowa City is the same as Warren Buffet’s, assuming that the Omaha billionaire sometimes drives too fast. Is that fair?
In Finland they don’t think so. Some rich Finns grumble, but most think a sliding scale of fines based on income makes good sense.
In his recent book, “Traffic: Why We Drive the Way We Do,” Tom Vanderbilt notes that a speeding ticket was issued in Finland a few years to Jaakko Rytsola for driving 43 miles per hour in a 25-mph zone. The fine for Mr. Rytsola, who at that time was a successful millionaire Internet entrepreneur, was $71,400.
A few high-profile cases like that made some Finns push for a cap on fines. In 2001 the nation’s legislature decided by a large majority not to set limits. Everyone, rich or not, understands the system and most believe it is fair. Not incidentally, Finland is rated one of the least corrupt nations in the world. Citizens understand how their laws are made and they have confidence in the integrity of the police and court systems.
For us it would be very hard to imitate the Finns. But it’s good to think “outside the box” now and then.