Taxes, Individual Effort, and the Social Contract.
Do those who succeed in our economy benefit unequally from the benefits of government?
Berkeley public policy professor Michael O’Hare takes on the most extreme form of the libertarian argument against high taxes, “I earned my money by my own efforts and when the government takes it from me it’s theft.”
Short version of the first lesson: what’s yours is what’s left after you pay for what you use up, which means after taxes. Shorter version: don’t like government? Try Somalia (and let us know how that works out for you). Short version of the second: just how do you propose to privately pay everyone to mean the same weight when they sell you a “pound” of something? Do you really want to buy a set of the satellites that make your GPS work by yourself? or in a little satellite club with dues and monthly meetings?
This unnecessarily complicates things, I think.
First, aside from the odd anarchist here and there, nobody’s arguing that we shouldn’t pay some taxes. The debate is over how high they should be, who should pay them, on what they should be charged, whether and the degree to which they should be progressive, and so forth.
Second, few of us really think taxation is theft, exactly. But they’re extracted coercively. And politicians have powerful incentives to use the tax power mischievously, buying votes with other people’s money, and to distribute the burdens most heavily on those without enough voting power to punish them come election time. So, it’s not exactly a textbook social contract.
Third, all of us would prefer to live in an ordered society rather than a lawless wasteland like Somalia. Rejecting the Somalia model is not therefore acceptance of limitless taxation. We can accept that it makes sense to buy GPS satellites with our tax money and yet decide that people who want navigation systems in their cars will have to buy them with private funds, for example. And we can decide to divide up the costs 310 million ways, impose it mostly on those who use the service, or have those who can most afford it pay.
Meet Anita the small manufacturer, with gross revenues of $10,000,000, and let’s accept that this properly measures the value of her product in everyone’s eyes, and compared to everything else. I have never heard such a person claim that this is all her money and she deserves to keep it all; instead she happily lets her employees, landlord, banker, and suppliers confiscate most of it, leaving her only (say) a lousy 10%, or $1,000,000. She may grouse about the prices they charge and wish she could pay less, but she doesn’t call it theft of what is rightfully hers.
Why does she let them get away with this? Because she’s making deals, agreed in advance, and more important, because these $9m worth of goods and services are completely indispensable to the $10m gross value her business creates. We don’t expect the trapeze catcher to call the flyer a thief when he takes half the gate: they’re partners, joint contributors to the enterprise. Just like Anita and her team. How they divide the gross varies, but everyone gets a share or the whole thing collapses in ruins. The iron law here is, “you pay for what you use up”: “I [not we] earned it” applies at most to net profits, not all the money you take in.
But I didn’t mention some other partners in the enterprise, who contribute essential factors of production. Among these are the folks who built the road on which parts come in and goods go out, who patrol it so Anita’s shipments are safe, who run the courts that make her contracts worth signing and save her the great expense of a private army of Pinkertons and thugs, and on and on right up to the bureau of weights and measures that make it possible for parts to fit together because everyone knows what an inch is. What these have in common is the property of market failure, which despite libertarian determination to pretend such a thing cannot exist, is a completely non-ideological, non-negotiable, technical property of certain goods, including many very good goods. They all have a real economic cost: making them uses up resources (asphalt, labor, copier toner) that are then not available for something else.
The “Anita the small manufacturer” analogy falls on a number of levels. Yes, she’s entering into agreements with suppliers and employees to compensate them for their inputs into her business. And we tangentially do the same thing with government. But Anita doesn’t allow failed competitors to vote themselves some of her money on account of they don’t think it’s fair she has so much. Nor, in most instances, can employees and suppliers raise their prices and give Anita no recourse for substitution. And there’s only an incredibly loose sense, indeed, that all of us living in the country are engaged in a joint enterprise and therefore somehow entitled to a cut of the gate.
Leaving that aside, the implicit argument seems to be that those who earn more “use up” more of the public’s resources and should therefore have to pay more. This is the argument for progressive taxation that I find cleanest and most compelling. But it’s not obviously true.
Presumably, the wealthy benefit more from, say, police and fire departments than the poor, on account of having more assets to protect. And they benefit more from pothole-free roads, too, since they tend to drive better cars. But, since nobody’s advocating a return to a head tax, even a flat rate of taxation would roughly account for this. (There’s the problem of inherited wealth, which isn’t taxed as income, but we also tax consumption.)
In the case of Anita, she presumably using up quite a few resources in running her business. But she’s paying for most of them. If, for example, she’s using trucking to move her products, the fuel taxes and fees paid to operate those vehicles are built into her cost. (If we’re severely undertaxing the trucking industry, we should obviously correct that. But that’s not a case of Anita using up more than her fair share but of a subsidy to trucking.)
Further, there are people who make good incomes who have office jobs and consume roughly the same amount of public goods as their less successful cohorts. Entertainer Ben Stein and law professor Todd Henderson, both of whom have taken some heat for complaining about high taxes, fall into this category. Henderson’s case is easiest: He’s not obviously using up more public resources than a high school teacher. Indeed, probably less since he’s sending his kids to private schools.
Implicit in O’Hare’s post is the idea that we’re pooling our resources to create an environment conducive to commerce and prosperity and that, while there’s a large amount of one’s own effort that goes into deciding who gets rich and who doesn’t, it would be impossible to get rich — much less stay rich — absent that initial investment. And, therefore, it’s reasonable to ask those who do prosper to pay more. That’s a reasonable enough position, although not one that justifies the notion that society owns everything we earn and therefore gets to decide what we keep. And it certainly doesn’t justify the notion, which I’ve been seeing a lot over the last couple of weeks, that those who have been successful should just shut up and be grateful that they’re allowed to keep anything.
Taxes I’m Exhausted: Taxed on earning, Taxes on spending, Taxes on Estate,
3.8% tax on Real Estate-Obamacare transactions. I’m Exhausted 🙂 Cap and Trade I’m exhausted 🙂
We are working our way back to 70% marginal rates or more, Value added tax, Flat tax,
doubtful existing taxes would be reformed. 🙂
Perhaps it depends on whose textbook you’re using. It seems to me that there’s a conflict going on among Lockeans, Rousseauans, and Spoonerites.
The Spoonerites claim exactly what you say nobody does, that taxation is theft. In the blogosphere you encounter them every day although I think their numbers are actually quite small.
The dispute between Lockeans and Rousseauans is precisely over where the limits over the power of the collective are.
However, in my view this isn’t where our problems are at all. I think they’re a bit more utilitarian than that. The federal government has largely removed duties from imported goods but retains them on intellectual property and certifications. This removes a benefit from people involved in the making of things in favor of those who own intellectual property (not necessarily its creators) and those who provide services in which there are barriers to entry. Predictably, our economy has made a transition in favor of the latter two at the expense of the former.
If all do not benefit equally from this transition, it creates classes in society of the protected and non-protected. The non-protected are getting increasingly unhappy that the protected are unable to restrain themselves.
Why can’t we operate solely on a consumption tax? It takes away the mischief factor inherent in the income tax. We have to consume and it is OUR choice versus the feds deciding how much to coerce. Do any of you have a good explanation of why we don’t use consumption taxation? And using a VAT on top of income taxation is not the answer I would expect.
I think your second point is largely true, that “politicians have powerful incentives to use the tax power mischievously, buying votes with other people’s money, and to distribute the burdens most heavily on those without enough voting power to punish them come election time. “
But this seems like less an argument for lower taxes and more of an argument for reform measures to remove the powerful incentives that exist. If conservatives worked half has hard on these reform measures as they do for lower taxes there would be considerably less tax theft in our system.
D-man, how does one reform the tax code when the reformers are in charge?
How does one lower taxes when the tax thieves are in charge? I guess it’s just inevitable that nothing will ever change, why waste our efforts.
There are several good reasons. First, between 70 and 80% of our economy is personal consumption. Suddenly taxing consumption at a level necessary to fund the kind of state we have now would all but certainly throw the economy into collapse.
Second, consumption taxes have traditionally been a major source of state and local government revenues. A federal consumption tax would strip a good deal of that revenue away.
Third, just as with the income tax the important question isn’t what the marginal rate is but how you determine what consumption is. It’s obvious that buying a gallon of milk at the Piggly Wiggly is consumption. Is buying a house consumption? An appointment with the doctor? Buying a share of stock? Buying a company?
An end user consumption tax would have to be pretty steep to substitute for the income tax. The VAT has the advantage that, since it’s levied at every step in the process, the marginal rate can be lower. But it’s still going to have to be steep to realize the revenue needed and that will by its nature reduce economic activity to lower than it would otherwise be. And, unless it’s levied on everything equally, it will be no more fair than the present system.
If a king set my taxes and sent his troops, I’d see it pretty clearly as theft and coercion. I think something important happens though when we transition to a democratic government. Taxes are old, democracy is new. Suddenly, we are setting our own taxes. We are a party in a new social contract. (One imagines a new Monty Python sketch in which a lone actor says “help me, I’m being oppressed” after leaving a council where his vote counted.)
Yikes. On the surface you are saying one citizen should deny another … on the basis of their success? Even if I try to read deeper I might come up with something similar, is the problem the poor voting?
If your argument is just that in a democracy we should be wary of the tyrannies of the majority, of course, but that doesn’t really mean that libertarians can say 36% tax is a tyranny when 34% was not. That’s just (dangerous) hyperbole.
Denying the democracy is just the kind of (dangerous) hyperbole I was talking about.
I’ve been in the wilderness opposing VAT. As I’ve said here, it seems congitive dissonance. Tax foes will be against increasing the size of government, and raising tax rates, until it is VAT and then it is OK. It’s astounding because VAT is such a “European Socialist” tax, requiring government monitoring of interbusiness transactions, and adding a burden to every such transaction.
I think Tyler Cowen agrees with me that it would be bad, but he sees it coming anyway:
More (sadly sensible) pessimism here:
Dave Shuler, have you studied the Fair Tax?
“Denying the democracy is just the kind of (dangerous) hyperbole I was talking about.”
I mostly agree. I was pointing out the silliness of Pete’s statement. Yet in reality there is very little an individual vote can accomplish in a democracy. In a democracy the individuals greatest resource to create change is their power of persuasion.
Persuasion of course comes in many varieties, which includes money. I personally believe we should limit the power of money in politics and don’t believe it’s an inevitable outcome. But we need more people working on and promoting their ideas rather than working on and promoting their slogans.
K, I misunderstood then. I’m more for open reporting on spending than limits, but that might be one of those areas where there is very little an individual vote can accomplish in a democracy.
Back to taxes, isn’t the budget gap that Tyler and I see about “democracy in action” rather than powerful elites making it all work? We have, sadly, what we collectively wanted: more spending, less taxes.
D-man, I was not suggesting we do nothing. I was interested in your opinion of how we reform the situation.
Yes, I have. It has its advantages. However, the Fair Tax is irrelevant to this discussion and my comments sidestep it—they apply to the Fair Tax as well as a VAT or any other consumption tax.
My point was that if the problem is our tax money going to powerful interest groups, the logical conclusion that one should draw isn’t that taxes need to be lowered, but that we need to prevent the money from going to powerful interest groups in the first place. I’m self-aware enough to realize I lack enough knowledge of the system to know what reforms would work, but I have enough understanding to know that reforms are necessary.
But I am always interested in counterintuitive ideas like raising Congressional salaries as a means of combating lobbying influence, though I’m not sure how much merit that particular idea has. Further I think campaign finance reforms are needed to limit the amount of power money has in politics. A lot of people oppose campaign finance reforms thinking it’s some sort of infringement on speech. But people are already limited in their speech by the money and access they have, so couldn’t campaign finance reform improve freedom of speech for those? So I believe better arguments for different types of campaign finance reforms need to be made, but sadly I don’t have them. I guess I have a lot of reading and research ahead of me.
I reread your comments. Your assertions regarding a consumption tax suggest you haven’t studied the Fair Tax in depth.
Doesn’t that approach assume that avarice has limits, which is inconsistent with human experience?
Dave Shuler, sorry the last comment was directed to you.
D-man, have you considered how the Federal Income Tax Code provides a near perfect system for the type of influence peddling so rampant between powerful interests?
“Doesn’t that approach assume that avarice has limits, which is inconsistent with human experience?”
I agree, but is there an entitlement factor? Would congressman who feel underpaid be more likely to accept certain gifts from lobbyists than congressman who feel paid satisfactorily? Or is it that people will feel a sense of entitlement regardless?
I’m saying that there’s no equivalent in the business analogy to redistribution policy. But, yes, there’s something problematic about the masses getting to vote themselves some of the wealthy minority’s money.
At some level, that’s inevitable. The very poor simply have no money and the rich are simply going to have to pay more to fund government. And, I agree — and have stated many times — that at the 39% vs. 36% top marginal rate level where the debate has been of late, there’s not the tyranny argument that existed at the 70% of 92% levels. But the tone of the debate — that the rich somehow got their money illicitly and it’s “just the rich” being taxed — does concern me.
“First, aside from the odd anarchist here and there, nobody’s arguing that we shouldn’t pay some taxes”
The “taxation is theft” argument is extremely common on the libertarian right. These people may be odd, but they are plenty of ’em…
“Rejecting the Somalia model is not therefore acceptance of limitless taxation. ”
“That’s a reasonable enough position, although not one that justifies the notion that society owns everything we earn and therefore gets to decide what we keep. ”
“…those who have been successful should just shut up and be grateful that they’re allowed to keep anything.”
It is not a very good sign for the strength of your argument when you seem to feel the need to argue against some phantom, or some odd totalitarian who believes in limitless taxation, the seizure of all private property, and a government that will deign to grant you a small stipend so long as you keep your mouth shut.
Hey, I agree – those kind of proposals really suck. I would oppose them too. You think you have won something though?
I think you are missing the main force of the argument. The right wing libertarians always make arguments that ignore the reality of what government spending does to maintain our economic landscape. Our prosperity is as dependent on the spending that we do for regulation of the marketplaces as it is on the spending we do for defense. From the money we spend on research that ends up making countless commerical enterprises possilbe, to the money we spend, as a collective society, to clean up the garbage that businesses spew into our environment, government spending is an essential component to our prosperity.
Of course there are always inefficiencies that should be corrected, programs that outlive their usefulness, or things that may better be left undone. But the scope for these things are rather marginal. Libertarians, almost by definition, are those committed to a radical restructuring of the relationship between government and free enterprise, and in this they are almost always somewhat delusional. O’Hare’s piece seems to have hit that nail on the head.
Excellent, iPhone works this morning …
I think when extremists exclude themselves from accountability “because the other extreme did it,” we should call them on it. It’s too easy to say “I’m not responsible until I get my way”. We should be very wary of claims some minority got their way.
If a majority created too much spending with too little tax, we can lay that on the majority, and should accept our role in it.
I will remind you of that Tea Party rally supporting NASA spending, mentioned here some months ago …
@Tano: None of those are straw men. My point is that O’Hare is proposing false dilemmas. One can agree that government provides useful services and that someone has to pay for them without saying that there should be no limits.
And read the Bill Maher and other screeds against the op-eds and you’ll see that there is very much a visceral anti-rich argument that’s quite mainstream.
I introduce my responses to O’Hare by saying that he’s overcomplicating the argument. And I identify the two strong points in it that I think should be the basis for discussion. The analogies and false dilemmas distract from that discussion.
” That’s a reasonable enough position, although not one that justifies the notion that society owns everything we earn and therefore gets to decide what we keep. ”
That is not how i ever see it phrased by responsible writers. The question is how much do we need to pay to have the services we want. This might be something you see from true socialists, who are probably less common than anarcho-capitalists.
Here is another way to think about it. GDP grew in the last 30 years, yet wages were stagnant for most people. For the top 0.1% they grew a lot. What did they do that was so wonderful? What great new products or services have we seen as a result? Executive salaries have grown much more in the US than in the rest of the world. What do we have to show for that disproportionate growth? Most of the growth in the aughts was in finance? What do we have as a result of that growth? Should we be concerned that the top 5 hedge fund managers made more than the combined CEOs of the S&P 500?
It is not entirely clear why so much of our income and wealth have shifted to the top 0.1% Many people have written on it. Since extreme inequality is common in economies that do not function well, and it reached prior highs just before the Great Depression, I think it should concern us. While a majority of poor people could in theory vote themselves a share of that money, I think history shows us that those with wealth are even more likely to use that wealth to influence votes, to rent seek and to make sure that they continue to increase their wealth.
“One can agree that government provides useful services and that someone has to pay for them without saying that there should be no limits.”
Once again James, where does this “no limits:” come from? What do you mean by that? Who argues that?
Let me state my position clearly. When you say that O’Hare “takes on the most extreme form of the libertarian argument” I disagree. He takes on the CORE of the libertarian perspective. Libertarians who wish to appear reasonable and mainstream might fudge the application of these principles – they would not explicitly embrace Somalia as their dream-world – but they do in fact remain loyal to the principles. Its like a commitment to the Bible amongst Christians – they will insist it is the true word of god, in principle, even if they don’t really live by much of what it says. The insistence on the importance of the pure theory is of the utmost relevance though, because it serves to guide the direction that specific policy proposals take.
The notion that taxation is theft is a concept which is crucial to defining the libertarian understanding of the relationship between the individual and the state – that there are free men, and there is an oppressive state. Libertarian’s seems stuck in a pre-American revolutionary mindset – the notion of ‘we the people’, of a democratic state, seems foreign to them. Its all colonials trying to get out from under the thumb of a distant monarch. I thought we solved that issue a long time ago.
“The debate is over how high they should be, who should pay them…[etc]”
Yes of course. But it is not really possible to have such a debate with the majority of self-described libertarians. And that is the precise problem that O’Hare is taking on.
He summarizes his position as such:
“what’s yours is the value you create less the inputs you use up to make it.”
Do you object to that?
Further: “It is simply not the case that you make your profit (much less your gross) and then the government takes some of it: it is the case that you pay for what you use, private and public, and the rest is yours to have and to hold and to enjoy as you wish.”
Any objection to that?
His argument is that the government, chosen by the people (and subject to dismissal by the people) provides an array of services that underlie our prosperity. It functions as a partner to the free enterprise sector doing all the things that are necessary but not necessarily profitable or feasible by the private sector, and cleaning up its messes. And that this is a fundamentally different conceptual model than the one that libertarians adhere to and promote. The core libertarian conception of the relationship between the individual and the state is simply false. That is not the way the world works, and to continue to argue that it is, or to continue to have these assumptions as the underlying principles to what you argue, is delusional.
Your final paragraph starts with a pretty good summary of the argument, but then ends with what I still see as two huge strawmen. No one is arguing that society owns everything – where do you get that from? No one is claiming that the government has the right to take everything, therefore you should shut up. Name one person who says that!
Some people may be advancing “anti-rich” arguments, but those are entirely within the context of the larger argument that you accept as legitimate – “The debate is over how high they should be, who should pay them…[etc]”. If everyone were taking sides in such arguments, in that context, there would be no problem. The problem is the libertarian ideology that posits a very different context based on an unrealistic conception of the role of the state in relationship to the individual.
That’s only because the rich own (among other things) too much of the argument right now.
Didn’t actually watch Maher, but I find it kind of preposterous that when no one can pay for government, the rich have made the case that they especially should not pay for government.
Why, again, did Mr. Dillinger rob banks?
See also, Richard Thaler (pretty big gun economically speaking) on What the Rich Don’t Need
(I do like the old-school html)
Tell me Jim, are all the tax breaks and vast govt spending programs that benefit corporations the consequence of “individual effort?” Your entire “limitless taxes” construct is a strawman. Effective tax rates in this country are at historic lows particularly for the wealthiest section of the community. When Steven Schwartzman is comparing the proposal to treat carried interest as normal income (rather than a capital gain) with the German invasion of Poland then you know these folks have no sense of reality. The reality as old Bob Bartlett recognizes is that substantive spending cuts are never going to happen. The latest GOP gives no details on how they are to be achieved. The best we can hope for is to contain increases at the level of inflation and the gap on the deficit is going to have to be cured at the revenue end by growing the economy and (cue Jaws music) a modestly higher tax take that is going to take the overall effective rate from the low thirties to the mid thirties. There’s no other way.
It’s “common sense”, Not “common cents” that is in short supply.
The government wants what you’ve got
and they mean every penny
they’ll steal your chicken, take the pot
until you haven’t any
Then this they promise to return
oh what magnanimity
until the electorate stars to learn
to eliminate the enmity!
Three good ‘graphs from my link above:
Heh, I posted at the same time as floyd. Isn’t it funny when the floyds of the world care more about the security of the rich than the Buffets?
On the flip side, though, you sometimes hear the rich say that they “work hard” and that they therefore “deserve” their money, or make similar statements that imply some absolute notion of value and worth.
Frankly, I think that any framing of taxation into some type of moral or ethical consideration is pointless. There is nothing unethical about a 90% taxation rate, nor is there anything unethical about a non-progressive tax.
This “floyd” was orphaned as a child and self supported from twelve.
I have earned my keep and paid much more than my due.
I understand, first hand the plight of the poor and the causes of poverty.
Your accusations are uncalled for, not based in fact, but rather in a false ideology.
Believe what you choose, but don’t dare tell me what I believe.
I KNOW you would not be so bold in person.
Taxation may well be an important necessity ,
but the ideology that entitlement trumps effort is not .
In fact it is destructive to a free society and to social order in general.
Charity can not taken at gunpoint, nor dispensed from someone else’s pockets.
It’s the ideology that ‘s flawed and common sense is the only hope of balance.
It is not now ,nor will it ever be the “top 1%” which carries the load. That load must be shouldered by the sweat and toil of the lower middle class, we pay more in taxes than those above or below us and benefit the least, the carrot has long since wilted leaving only the stick to maintain this budding ersatz utopian Ideology.
Again, while the grain must be tread , the Ox ought not be muzzled in the process.
I clearly recognize that It is not the “rich” who are overburden, but I disagree with Warren on his point, It is the politicians who wage this “class warfare” under false pretense and use government as the instrument to be weiled in it’s efforts, and it is the politicians who benefit obscenely.
Class warfare is merely a means to gain control and deceive the population into the trap of totalitarianism.
Floyed — Let me see if I understand your point: The great tax burden is borne by the lower middle class, so raising taxes on the rich would lead to totalinarianism. Is that about right?
I think you missed my meaning, floyd. I’m asking why, at a time when the very rich are outdistancing everyone else (again, below) they’ve got people with humble beginnings defending them.
And remember, this isn’t like “let’s tax the rich to create a new world order,” we just need to pay our bills. Remember that debt and deficit? What is the plan, wish it away?
And you know, if you know how the rich make their money, that capital gains should be included.
The reason may be a bit confounding to those who trust big government, but for those who don’t, it is clear that the role of rich people and corporations is to provide jobs and opportunities to ordinary people as well as to provide products and services to consumers at competitive rates.
It is the role of government to provide a fair and level playing field and to enforce it with regulations and treatys which favor it’s people to a reasonable degree.
Excessive taxation and government supplied jobs or sustenance are , by nature, a drag on the system.
A safe work place, a living wage, and tolerable work conditions should be demanded by government of anybody who does business here, and an equivalent tariff on those who do not meet these standard elsewhere, and want to sell their goods here.
If government did it’s appropriate job, it would naturally reign-in excess profits while the resultant general prosperity would reign-in the threat of overreaching big government.
American workers pay much more of what they produce to government, through taxes, than any serf paid on average to their lords, this stiffles productivity and enforces poverty.
The problem is excess and incompetent government. Excess profits and any unbalance in the distrubution of weath is merely a symtom, of this disease .
While there should be a humane safety net for the inevitable failings of any social contract ,
no worker should ever have to look UPWARD from his toils to see others using it for a hammock.
Floyd —” Let me see if I understand your point: The great tax burden is borne by the lower middle class, so raising taxes on the rich would lead to totalinarianism. Is that about right?”
I went to some effort to give you a civil response to your inqury earlier this evening, only to find it missing from the entries here upon my later return to my desk . Whether it was my error or a glitch in the system , you must now ,sadly, be deprived of it’s myriad benefits.
However, since it was clear, to me at least, that your purpose was to mischaracterize what I had said and the question was incidental and disingenuous, I will respond to it directly and succinctly as follows…..
floyd, I agree with a lot of that, but think a budget gap trumps it.
We need to tax the rich because we need to pay the bills.
Maybe I should restate what bugs me:
We need to tax someone, and people say hands off the rich, which means tax everyone else that much more.
… unless you got magic money from somewhere.
I understand your perspective, but I believe that if you have been doing something wrong, more of it is not the answer.
There is a price to be paid, but if you are ten miles off of the right path …. It’s ten miles back.
Giving more money to government is about on par with giving booze to an alcoholic to solve his problems.. “just one more teensy weensy sip will not do it, no matter the whining”..
The shakes and the appetite will return with a vengence.
What is happening here is the same old song with a different piper…..
Carter claimed that “rich” started at $11,500. This is like the old joke about…
“”Now we are only haggling over the price””
I don’t buy either of the barbell positions, that the gap has to be closed with all tax increase or spending cut.
I’m hearing “save the rich” as defending a ridiculous extreme.
We’ve got a lot of changes to make, to bring the debt back toward balance, but we can’t cause the rich any discomfort. We can’t even tax them at historic American norms.
“And read the Bill Maher and other screeds against the op-eds and you’ll see that there is very much a visceral anti-rich argument that’s quite mainstream.”
I’m just guessing, but isn’t Bill Maher rich himself? To read his screed and think it’s a “visceral anti-rich argument” is missing the point. By a mile. Oh, he delivers a few low blows — Maher is a dirty fighter, after all — but he’s not making an argument about why the rich shouldn’t be rich but rather an argument for why they should quit whining about tax rates.
Actually, I’d guess that the lower your income, the more of an advantage you have with government services. Typically, the rich send their children to private schools while paying the property taxes that support public education. Typically, poor areas tend have higher crime, resulting in a larger police presence than is needed in a wealthier area. Police services are usually paid for via property taxes. Property taxes are based on the assessed value of the property in question, resulting in the wealthy paying higher property taxes than those less economically advantaged, while using less of those services. The fire department (also paid for via property taxes) doesn’t respond any faster to an expensive house burning than it does to a more modest residence. Garbage is picked up in each area with the same regularity. In each of the situations, the wealthy homeowner is paying a higher property tax than his fellow citizen of lesser means, while receiving the same, or less in services.
This idea carries out in a number of ways in our tax code. Make over about 155K per year? Well, you are going to start losing the child tax credit. Want a tax credit for that college tuition that you are toting the entire note (no need based scholarship for your kid) for? Tough – it is also being phased out at that point. Have a child in daycare because you are a dual income couple in order to reach that income plateau? Well, that starts getting phased out too. Have a lot of deductions (charity, property taxes, medical bills, etc.l)? Well, you can’t take all of them, because you make too much money and those will be reduced on a sliding scale based on your income. How about your exemptions? No, you don’t get the full amount on those either. Once again, you make too much money. Remember the stimulus checks that went out in early 2008? You didn’t get one of those either, because you made too much money. No, you don’t get a lot of the goodies that those making less than you do, but in return, you get to pay a higher marginal tax rate.
Definitely related: The Great Income Shift
Lynne, are you really complaining that the rich don’t get as much assistance as the poor?
No, I’m arguing that the rich do not receive a disproportionate share of government services. That they, in fact, utilize less in government services than the poor or middle class.
That’s the way we’d want it, though there is the problem that if you get rich enough government might start running policy for you. That’s a benefit.
I’d expect that ethanol subsidies benefit the rich, as do sugar tariffs.
Oh, rice subsidies, don’t forget rice subsidies …
(I hope we have cleaned up a bit since then, but it works as a historical note.)