What, if anything, should be equalized in pursuit of

equity?

Abstract
The purpose of this essay is to answer the critical question of what
do we have to equalise to pursuit equity in society? To answer this, we
must first determine what equity means and explain some misconceptions
about the term. Then we are going to explain how the states by their scaling
tax payments are discriminating and punishing those people who really
contribute to society. At the end, we will try to explain how governments
using tax payers money are redistributing the costs of other people
mistakes to the whole society. To make a better demonstration of this last
point, we will use two examples where governments tried to help banks but
they actually just moved the burden on their citizens.

What is equity?
It is a common practice these days describing equity as social justice
or social equality, meaning that equity is fairness as expressed by equality.
A more precise definition given is the following equity is the distributive
or social justice through redistributive measures and poverty relief1. There
is a serious flaw in the above way of thinking that we must first understand
and then give a more appropriate meaning to the term. Equity is not about
equality or helping those who are in need or a way of justifying state
intervention into the economy. Equity simply means, as expressed in the
oxford dictionary, the quality of being fair and impartial. There is no
reference regarding to who has what, in what proportion and how these
should be redistributed to the lower income people.
Fairness is expressed only by laws, each person, rich or poor, is
equal against the laws which are established to protect us from any

1
This is the definition that the modules lecture notes give to equity.
violation of our rights and by extension of our freedom2.If we live in a free
society that everybody has their rights protected by the law then we are free
to act our own personal affairs the way the think is more beneficial for us.
That is what happening in the markets too. Every person has the right to
possess a property and do with it whatever she wants. So far, we can
observe that there is no indication of unfairness or injustice, everybody is
treated equal by the law and have their human rights protected. But
freedom means that those people who are more qualified than others or
they have a vision, or they want to do something with their lives instead of
loafing around are free to act and make profit if they want to and when they
do it, inequality arises. Therefore, inequality emerges normally by peoples
actions and there is nothing unfair with that. It is a natural consequence to
our freedoms, any act that tries to decrease inequality should be considered
as an attack on freedom.
Now that we have demystified equity and give the right meaning to
the term, we are able to understand what we should change in pursuit of
more equity in societies.

The role of tax payments in pursuing equity

As a rule, a healthy state must balance between freedom and
equality. As we have demonstrated above inequality arises because of
freedom. Therefore, the contemporary role of the state is to counterbalance
the inequalities that come with freedom. The problem though, that emerges
with the intervention of the state in its effort to decrease inequalities, is that
it creates inequality for other people, specifically the higher income people.
Governments try to deal with inequalities through the welfare state which
funds the poverty relief policies of the state. But before arguing if this is
good or bad for the society, we must understand how the welfare state is
funded and who pays for it.
As we all know, that money comes from taxes and that higher
income means higher contribution to taxes. Therefore, rich people
contribute more to public finance than poor people who sometimes do not
pay at all. The injustice is created when the state comes and forces people

2
our human rights or any other right are expressions of our freedoms to live, choose, possess. They
are a statement that a person has the right to live and should be free to do so and none can take it
from him except him. Therefore, laws are there to protect our freedoms.
to pay more taxes regarding their income so that it can fund the welfare
state which its purpose is to provide more equality to the citizens. But what
do rich people get from the welfare state? Nothing, and they are paying the
most part of it! The state hence takes money from higher income people to
provide services and poverty relief for the lower income by its monopoly
of coercion (if you avoid paying taxes you will probably end up in a
prison). But is it fair to have scales in taxes payments? Shouldnt everyone
contribute the same? Why should some people because they are rich must
pay more? Even the most zealous proponent of social equality and social
justice will accept that this is not fair. Of course, we are not going to let
people die from hunger and poverty or any other decease because they are
poor, the problem that arises is how we help people improve their lives. By
making them believe that the state will be behind them in whatever
difficulties they face in their lives it will just create an oppressive society
with self-indulgent people who will give up the trying of improving their
lives by themselves and will expect more and more from any elected
government. And there are many people eager to take advantage of this
situation, demagogues who use human misery to get more votes by
proclaiming the social inequality and promise to punish the big fat
businessmen with more taxes. They are mistaken though when they are
taking for granted that entrepreneurs will pay taxes at any cost in their
country they can simply take their money and move to another country
and then the country will lose all the tax payments by that entrepreneur.
The fairest way to deal with tax payments is to let people pay the
same percentage on their income, both poor and rich. Everyone ought to
pay income taxes! For example, everyone should pay taxes but not a very
high percentage, so that poor people will not pay an amount that will
prevent them from living a decent life and the rich people will still pay
higher taxes but with a fairest way, without discrimination among the
citizens. If taxes are our contribution to the safety that the state provides
us, by the right to lawful violence, why lower income people do not pay at
all? Arent they protected by the state? Why someone else must pay for
their safety or health care? And a paradox that arises through the
democratic vote is that poor people who do not pay taxes, tend to vote
parties that support higher tax payments for the higher income people! Is
this fair? Why do we have to stigmatize rich people because they are rich?
Also, if we look it more deeply we will see that the entrepreneurs initiative
is what creates the economic wealth of the nation, so what we do at the end
of the day is punishing those people for contributing to societys welfare.
The role of free competition
Unfortunately, governments do not just tend to patronize their
citizens but also big companies or companies that are bound to fail. The
financial economic crisis has showed that the state is the last hope for every
person including bankers and CEOs, when the fear of failure or
bankruptcy is near all tend to the state for help. Besides it always has
money to spend. In the United States of America when big banks were
facing mayor financial problems they were saved by tax payers money. In
Cyprus, Marfin Laiki Bank after buying a huge amount of Greek bonds and
after the Greek debiting debt, those bonds were almost half their price. The
members of the parliament were meeting at 2 a.m. to decide whether they
were going to save the bank and its depositors by funding the bank with
1.5 billion euros, (tax payers money). Of course, because the bank was
being supported by the ELA (Emergency Liquidity Assistance), the debt
was growing and the government decided to close the bank. Was it fair that
governments, in Cyprus and USA, used tax payers money to fix bankers
wrong decisions? Lets say that someone is a depositor to the bank that is
in danger. This person will definitely want that bank to be saved and will
protest if necessary to be so 3. But what if someone is not a depositor to
that bank, why he should bear the cost of someone elses wrong decision?4
The main idea of the above examples is that the state cannot
redistribute the costs by the faults of a minority of people to the whole
society. The fairest policy to follow in these situations is to let the banks
bankrupt. In Cyprus, this happened anyway so the consequences are
known, but as for the USA is hard to promote such a policy, but was still
the fairest thing to do because we cannot let people pay for others
mistakes.
Another similar example of state patronage is governmental
subsidies. Governments give subsidies to companies that might not be
profitable. For example, there is a huge effort to promote more
environmental friendly energy resources such as solar power, wind power
etc. But if people are not buying, lets say electric cars, because they are
more expensive than fossil fuel cars, why must the government give

3
In Cyprus in 2013 there were protesters who wanted their investment in Marfin bonds to be paid
back by the state! Thank god, their request was rejected by the minister of finance!
4
Besides a depositor is basically an investor because he receives interest on the amount he deposited
to the bank and as every investment there is a risk to consider.
subsidies to that company? It is a waste of money. If that company was
profitable it would not apply for the subsidy. And by giving to a firm
governmental subsidy is a discrimination to the firms competitors who
succeeded without governmental help. The taxes that were paid by the
competitors are no being used against them. It is the ultimate injustice!
Governments should stay away from economies. Their role is just to
protect our freedoms by the laws and by the states lawful right to violence
so we can live our lives peaceful and be able to prosper5.

Conclusion
The main arguments of this essay were to explain what equity
actually means and separate that meaning from the contemporary ones and
to show how governments are creating inequality by their intervention
either to decrease inequality or to save some people at the expense of
others. Fairness and equity cannot be separated from freedom. It is true that
freedom creates inequality of income but that emerges normally without
any intervention of the state, it is the necessary evil of freedom and any
attempt to change this relationship by any intervention simply means that
the state must take from someone, by the power of coercion, and give to
someone else. This is unfair. Yes, people will still find it hard to consider
it as justifiable when someone has more than them because they do not
understand that inequality is a consequence of freedom or they are just
simply feeling a masqueraded jealousy 6. And probably that is why states
have so much power over economies, because poor people do not accept
the consequence of freedom and therefore expect from their government to
solve any inequality they consider as such. Despite that though, we must
insist on the pursuit of equity by not letting the government intervene in
the way we deal with our economic affairs and in any way limiting our
freedoms. Injustice is only created by the state!

5
For more information on the role of the state see NOZICK, R. (1974). Anarchy, state, and utopia. New
York, Basic Books. Introduction
6
For more on the anti - capitalistic mentality see Von Mises, L (2009). The anticapitalistic Mentality.
Mansfield Centre CT: Martino publishing
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