Friday, December 03, 2010

Revenue, Taxes, and "Fair Share"

My mother in law is in her 90's. In her own personal life, she's a fiscal conservative. But she's and old-school FDR Progressive when it comes to the government.

Still, her husband did well, and she has enough money to easily get her through the rest of her life on her own. She frets over how much she spends, though, because she wants to leave some for my wife and the boys.   I appreciate that, but ...

We keep telling her, "It's your money. We are expecting nothing. Spend it."

This morning we had Fox and Friends on, and Geraldo Rivera ... who is often on as a guest -- was there plugging the compromise on the extension of the Bush Tax Cuts to only people making $1,000,000 a year or more, instead of the $250K limit the administration wants. He said hey, it would be a great compromise, and asked how you could justify not raising some taxes on people who make that much.

Then there was a segment on some millionaires and billionaires that are supposedly "begging" the government to raise their taxes (to whom I would like to say, "fine, write out a check to the IRS. in any amount you'd like.")

And yesterday I saw this from Morgan on Facebook:

"Tax cuts are not an expense. Anyone who says anything to the contrary, is selling male-bovine-used-food, period, end of story, full stop."
It was all rolling around in my mind, and I'm sure I've said this before, but I'm always looking for new, better ways to get the message across to people.  (I'm not sure I'll succeed here, but this blog often consists of me working my thoughts out "out loud".)

The attitude that the "we need to tax the rich more to pay for all this" crowd is that 1) we need all of this, and 2) we must get the money from some[one]where.

We keep getting the argument from the other side that "The Rich" aren't paying "their fair share". Well what is fair? Would it be, say, if the top 5% paid over half the taxes? Becuase that's what it is, currently.

My wife and I pay 25% of our income in Federal Income Tax. People making over $250K pay 33% of their income in Federal Income Tax. They pay 8% more of a much larger number. And people making over $375K pay 35% of their income in Federal Income Tax. So it sounds to me like they are already paying more than "their fair share".

But it's really not about "fair shares". It's about people wanting something, seeing someone who has the means to give them what they want, and getting their grubby hands on the levers of government power to force those other people to cough up more of their dough. Not only are they already giving more dough, they're giving a bigger percentage of their dough for the cause. At what point will it become "fair" if it is not "fair" now?

The answer is never.

That's because the question for the big government types is never, "what are people willing to pay for?", it's "who can we force to pay for this stuff we think we need?" Or, for the politicians, "Who can we force to pay for this stuff we promised people to get their votes?"   As long as they can get someone else to pay for their wants or for "their" lagesse .... they'll just keep taking more.

They're in a constant state of tax-mining. Constantly scouring the country for the next group of people they can convince 51% of America, or 51% of American politicians -- that it's ok to take more money from them, for whatever reason. They're too rich. They have "bad" habits. It's for their own "good". Those are the biggies. From whom can we take money such that the number of people who object will be sufficiently small or can be socially marginalized -- so that voting to take more of their money is politically feasible.

Smokers. Drinkers. Millionaires. People who consume too much sugar. Fat. Meat. Non-Green energy sources. It's not only more money they're looking for, it's more places to establish money streams.

Of course, then they talk about things like, as Morgan pointed out, tax cuts "costing" money. No ... spending costs money. The only way something can "cost" you money is if the money is already yours, and you spend it on something. But future tax revenues aren't already "the government's". Higher taxes on you cost you money, because the money was yours.

It won't cost us a dime if my mother-in-law spends all of her money. We might, at some future date, GET more money if she doesn't ... but that is not the same thing. We are not entitled to any of it, and we expect none of it. If she wants to give it to us, that's great. But it's her decision.

When "the rich" get to keep more of their money, they create more jobs and make more people rich by expanding the economy. And that's a great point -- but ultimately not the real underlying point. That point is that it's their money is not our money. We have no more right to it than they have to ours.

Taxes are necessary to run the State, no question about it. But the State should be thought of as sort of a necessary evil, and treated as such. When it wants money, we should be highly suspicious from the outset, and be stingy about letting the Government do things that can and should be done by private citizens and groups of private citizens.

Most social programs fall into that category.


mkfreeberg said...

Thanks again for the link.

If you're looking for more ways to get the message to people, particularly without being offensive about it, in some situations it is productive to explore the stream of income that is enjoyed by these class-baiters. They get to, as you say, "[scour] the country for the next group of people they can convince 51% of America...that it's ok to take more money from them, for whatever reason." They make handsome livings from this...

...and out of the people who help them in this effort, the vast majority are unpaid volunteers. Which, of course, makes them dupes. Chumps.

Did I say this was inoffensive? Well it can be -- but you have to handle it just right. Let them come to the conclusion themselves, that someone else is making huge bank off this and it isn't them. Hey, if they were cool with that, they wouldn't be taking the position they were taking...

Bigvic said...

This would be hilarious if it were not so sad. First you write that when the rich keep their money they create jobs. Anyone who understands the ADAS models knows that this is patently false. You speak of fair, but you make value judgments of what is fair. With out defining what is fair. You speak of a 51% trying to dispossess the other 49% without speaking of how such 49% gained these possessions. It is fine of course for you to make value judgments on fairness, while at the same time railing against value judgments on those who "marginalize" those with "bad habits".

philmon said...

Ah, I see you are of the "wealth pie" persuasion. These people believe there is a fixed amount of wealth in the world, and that anything one gains was necessarily gained by taking it from someone else.

This is what is patently false.

Anyone who understands the ADAS model (whatever the hell that is) understands just that. A model.

Things I Know #4: Models are not reality. Models are expressions of belief about reality.

They will always tell you exactly what the modelers told it would be true.

As a very simple thought exercise that a 4th grader could understand, if the amount of wealth in the world were fixed, we should all be starving. After all, there were only about 2 billion people in the world, give or take a little, in 1900, and there are over 6 billion now.

We should all be at least 3 times poorer. But we're not. That is because wealth is created, not merely shunted around. It is created by people who produce something that is useful or desirable to someone else.

Some of us are much, much wealthier than the average person was in 1900. The rest are at worst the same as they were back then, but in reality, even they are typically better off.

The disparities can be glaring, to be sure. But to buy the idea that if the wealthy have wealth it must be because they took it from someone else is probably merely trying to cope with envy or guilt.

Yeah, I make value judgements. Is that wrong? (Think about that for a couple of minutes before you continue)

Here's what I think is fair. It is fair to produce value and keep the difference between what you started out with and what someone else was willing to give you after you added whatever value to it with your labor or ingienuity. It is fair for you to accumulate as much as you can by doing this. This is called "property rights". It gives you the opportunity to improve your lot in life. With out it, incentive to produce, do work, farm, cook, clean, make beds, computers, or cars ... drops to almost nothing.

Technically, it drops to nothing. For when you are hungry why gather food if it cannot be guaranteed to be yours, and why bother cooking it when if you do someone else can claim a right to it?

From this derives our core "values" ... that each of us is endowed with the inalienable rights to life, liberty, and property (interpreted as above as "the persuit of happiness").

And for the record, what I spoke of was special interests and politicians (but I repeat myself) of trying to persuade 51% of the population -- and it's not always the same 51% ... that their cause (money, political power, ant-smoking, drinking, pot, bridges to nowhere, paying someone to pee in a jar and drop a crucifix in it and call it "art") that they're stupid or mean or just plain evil if they don't vote to enforce your, ahem, "values" on everyone using the coercive power of the government.

philmon said...

A link from a discussion about this on facebook.

Bigvic said...

I am looking for where I wrote that there is a fixed amount of wealth in the world. Oh that is right, I never wrote that, that is the straw man argument that you created to argue against.

You speak of wealth creation and yet have no understanding of the Aggregate Demand Aggregate Supply model (ADAS), and you sure seem proud of it. Well fine if it just proves what the model builders want us to believe, can we take Milton Friedman's Nobel Prize back, since he did use the Dynamic Aggregate Demand Aggregate Supply model (ADAS with the rate of change of price instead of prices, i.e. the derivative of price over time which is inflation) to prove that inflation is a monetary phenomenon, along with Bodin's quantity theory of money. Save yourself the embarrassment of being so proud as not to understand very basic macroeconomics.

Since you speak of wealth creation, but seem to have a very small grasp on it, here is a question that a 3rd grader could answer, where do I ever say that wealth is fix? Please save your elementary school thought exercises for those who are impressed with elementary thinking. You just mention wealth creation with out any causal explanation for it at all.

Let me help you out. What you call wealth, is nothing more then the total amount of "valued" capital in society. Capital is a product of other capital and labor. Taking a reductionist approach, Capital is a product of Labor, i.e. Ricardo and Smith's Labor Theory of Value. But labor can be reduced to work, which is a function of the caloric intake which we converts to Joules or KW/Hr. It is investment and development in the efficiency of energy transfers that has created wealth. This is exactly why the notion that giving money to rich creates jobs is not only preposterous but absolutely baseless.

The point is not to rail against you for making judgement values, the point is to point out that you are a hypocrite for railing against those who make and enforce judgement values, while you think it is fine for yourself to make and enforce them.

You speak of fairness, but let me disprove two of your premises here with very basic examples.

Your first premise is that "is fair to produce value and keep the difference between what you started out with and what someone else was willing to give you after you added whatever value to it with your labor or ingienuity (sic)." No, actually, that is exactly what I am arguing. What you fail to realize is that this is not what happens. I am the manager in a restaurant and my friends are the cook, we make all the food and produce all the value to the place, at the end of the day we barely make over minimum wage and the owner who is no where to be seen makes a hefty profit. According to you, we added labor and produced value but no profits.

Your second premise is that "It is fair for you to accumulate as much as you can by doing this. This is called "property rights". It gives you the opportunity to improve your lot in life. With out it, incentive to produce, do work, farm, cook, clean, make beds, computers, or cars ... drops to almost nothing." Well one example will have to do, the Soviet Union. They had no Property Rights, and the fast growing economy from 1930 to 1960.

philmon said...

I have no reason to be embarrased, so don't worry about li'l ole me there.

My reply, alas, is too big for Blogger's comments without breaking it up. So it gets a post of its own.