Joe the Plumber, One

     By now most everyone's seen the video clip of "Joe the Plumber," making the rounds on the e-waves, in his brief conversation with the TV anchoress.  What fascinates me about the interview was that it seemed we were watching creatures from two utterly different universes, or from two different epochs.  The anchoress -- I'm not sure who it was; I don't watch them -- was all smiles, all makeup, with her expensive coif and her neat business suit.  Then you have Joe, nearly bald, stocky, wearing an ordinary sweat shirt and jacket, hardly smiling at all; it was as if he thought that the election hinged upon matters that transcended the moment, and that were certainly more important than his own brief burst of notoriety.

     I'd like to think that Joe may do his part in turning the election -- who knows?  So I've decided to post something each day for the next week on what we can glean from that interview.  The most significant, as I see it: Joe's refusal to take the socialist bait.  We all complain about high taxes; even people I know who pay a small fraction of what I pay still complain about their payments.  That's a part of living in a civilized society.  It can mean as little as idle talk about the weather, or the Red Sox.  Most of us, too, will concede that the idea of taxation is not inherently unjust.  We need government to do some things that we cannot do, or can hardly do, on our own -- to provide for national defense, for instance.  So we agree to pay taxes to enable the government to do that.  It is a contribution (and it should be a modest contribution) to a part (and it should be a modest part) of the common good.

     But what happens when taxes are used not for the sake of something we each have a share in, as roads and armies?  Then we might see the tax code used, for instance, as a powerful weapon of social control -- and examples of this are everywhere to be found in our country; in fact, it's hard for me to determine whether the tax code as it stands is primarily a revenue gathering device for Washington, or a behavior controlling device.  Yet that is not the worst use that taxes can be put to, not by far, even discounting the use of the money for what is downright evil, such as, to use Archbishop Chaput's recent words, the millions of "little murders" that we have committed over the last decades.  One can collect taxes in order to rig up a vision of what a utopian society would look like, regardless of the fact that the vision is not shared by everyone, or that there is no tangible and immediate good that the taxes would purchase, in whose benefit everyone would share (as is the case with roads, and possibly with schools).  And that's no more than state sanctioned theft.

     The notorious eminent domain case coming out of -- where else? -- Chicago a few years ago is a case in point.  Property was seized -- people were compelled to sell their homes -- not so that a new road would be built (roads do have to be built sometimes; that is the sort of thing that the provision for eminent domain was meant to allow for), but so that a private developer could come in, tear down the old homes, build new ones, sell them at a profit, and provide a bigger base of revenue for the city.  If we chop out the middle steps in the series of exchanges, it amounted to nothing more than a claim by Chicago that the people in those homes had to sell them because Chicago wanted more money out of them, period.  And that is analogous to Mr. Obama's statement to Joe the Plumber, that some people should pay higher taxes, not because they need to shoulder a fair share of the burden for building things that contribute to the common good (although, as it's been pointed out in many places, the lower forty percent of tax filers are paying no federal income tax at all), but simply because some people in power believe that it would be a good thing merely to take money from Joe and give it to Ed.  Joe, in their august determination, has money to spare, and Ed would like some of it.  At which point one wonders, morally, what the difference is, if Ed simply decided to cut out the middleman, to spare the taxpayers all the red tape, and maybe even to save Joe a little money too, by robbing him outright of, let's say, half of the money that the revenooers would have taken from Joe (while skimming their take from the top, for the laborer is worthy of his hire).

     Joe understood all this.  Asked by the anchoress what difference it made to him -- since he obviously did not make a quarter of a million dollars a year, he being a lowly plumber, of all things, and not a stylish anchoress reading fifth-grade English from a teleprompter -- if people making above that level were taxed at a higher rate, just an itty witty bit higher, he replied, almost as if his honor were impugned by the very question, that he didn't want their money to be taken from them.  Why should he?  "That's socialism," he said, cutting to the heart of the matter, noting that the rich already pay more in taxes, because they pay according to their higher income.  It never occurred to the reporter, though you could see it was flashing through Joe's mind, that small business owners often file taxes as if they were single taxpayers, and that a quarter of a million dollars in a good year is by no means unthinkable for a contractor or a farmer.  That doesn't make them permanently rich; there are some bad years mixed in with those good years; and there's no guarantee that you'll be able to continue doing that kind of difficult work until your old age.  So, no, he didn't think it was a good idea to take money from his own pocket and stick it in someone else's, or to take money from someone else's pocket and stick it in his, merely because some poobah with authority grossly disproportionate to what he should justly exercise thought it was fine and dandy.  It's as if the thief were to say, "What's it to you, pal?  I'm only taking the cash.  I'm leaving you your credit cards.  The nerve of some people!"

     And through it all I hear the sonorous voice of the Anointed One, the Blessed Obama, intoning that he did not want to punish Joe's success, no, but he did want to "spread the wealth around," he with the brother who lives in a hovel in Kenya, he with the running mate whose idea of charitable giving apparently is to flip a nickel once in a while to the drunk on the streetcorner.  There's such a contrast there, too: the smug and spoiled academic, who has never met a payroll, never got his hands filthy or cut up with tough work, judging from his Solomonic chair just how much of the man's baby should be sliced off for the benefit of somebody else.  "By what authority?" asked Joe, another question that the reporter never considered.  For in this life, the only way to level is with a great big steamroller; we can only be made equal in one respect by means of monstrous inequality in another.  But that's all right; we can all lie prone before the Messiah. 

    

Comments

[Stuart Koehl]

What do you expect when, already, 43% of all workers pay NO income taxes whatsoever, and when the top 10% of income earners pay close to 60% of all taxes. One can easily foresee the day when, thanks to Obamian largesse, 51% or more of the population will not pay income taxes, at which point politicians will spend all their time pandering to the majority by offering them more and more benefits to be paid for by fewer and fewer people (I have to say that Jerry Pournelle foresaw this in his Co-Dominium stories, in which the bulk of people in the U.S. are "citizens" living on the dole, paid for by a declining and increasingly oppressed elite of "Taxpayers"). As Cicero noted, democracies die once the people realize they can vote themselves money. Barack Obama is doing a lot to advance that day.

[Bob]

I have a hard time believing that 43% of workers pay no federal income tax. If that were the case, surely I would not have paid any for years, but I did. I still do, and I don't make that much.

[Matthias]

Bob, check out http://www.taxfoundation.org/research/show/1410.html

[Stuart Koehl]

No, Bob, it's true. The following are for tax year 2006 (Source; Internal Revenue Service):

Percentile Income Threshold % of Federal Income Tax Paid
Top 1% $328,049 36.89%
Top 5% $137,056 57.13%
Top 10% $ 99,112 68.19%
Top 25% $ 60,041 84.86%
Top 50% $ 30,112 96.70%
Bottom 50% <$ 30,112 3.30%

In other words, people making more than $100,000 paid about two thirds of all income taxes. People making between $60,000-100,000 paid about 17% of all income taxes. People making between $30,000 and 60,000 paid about 12% of all income taxes, and people making less than $30,000 paid about 3% of all income taxes. Most of those in the bottom 50% who do pay income taxes make between $25,000-30,000. Which means that all those making less than 25,000 per year--about 43% of all workers--pay zero, zilch, nada.

The progressivity of the tax system has created a large body of people who benefit from Federal largesse but who do not pay for it and thus have no stake in the system. They are, for all intents and purposes, wards of the state.

[Clifford Simon]

"Therefore I will throw downe these mountaines hie,
And make them leuell with the lowly plaine:
These towring rocks, which reach vnto the skie,
I will thrust downe into the deepest maine,
And as they were, them equalize againe.
Tyrants that make men subiect to their law,
I will suppresse, that they no more may raine;
And Lordings curbe, that commons ouer-aw;
And all the wealth of rich men to the poore will draw."

"Of things vnseene how canst thou deeme aright,"
Then answered the righteous Artegall,
"Sith thou misdeem'st so much of things in sight?
What though the sea with waues continuall
Doe eate the earth, it is no more at all:
Ne is the earth the lesse, or loseth ought,
For whatsoeuer from one place doth fall,
Is with the tide vnto an other brought:
For there is nothing lost, that may be found, if sought."

...

Like as a ship, whom cruell tempest driues
Vpon a rocke with horrible dismay,
Her shattered ribs in thousand peeces riues,
And spoyling all her geares and goodly ray,
Does make her selfe misfortunes piteous pray.
So downe the cliffe the wretched Gyant tumbled;
His battred ballances in peeces lay,
His timbered bones all broken rudely rumbled:
So was the high aspyring with huge ruine humbled.

[Steve Nicoloso]

The progressivity of the tax system has created a large body of people who benefit from Federal largesse but who do not pay for it and thus have no stake in the system. They are, for all intents and purposes, wards of the state.

That overstates the case by quite a bit, Stuart. Using this argument, it may be fairly said that no person in America prior to 1913 had a "stake in the system". Doubtful. Moreover, federal income taxes are not the only taxes people pay. FICA applies to every one, and because of the partial cutoff is actually regressive. This is to say nothing of state income, sales, and property taxes. And *not* paying income taxes does not make you a ward of the state; on the contrary, it sounds positively good and just.

[Joe Long]

Rudyard Kipling, "The City of Brass", 1909:

They said: “Who has hate in his soul? Who has envied his neighbour?
Let him arise and control both that man and his labour.”
They said: “Who is eaten by sloth? Whose unthrift has destroyed him?
He shall levy a tribute from all because none have employed him.”
They said: “Who hath toiled, who hath striven, and gathered possession?
Let him be spoiled. He hath given full proof of transgression.”
They said: “Who is irked by the Law? Though we may not remove it.
If he lend us his aid in this raid, we will set him above it!
So the robber did judgment again upon such as displeased him,
The slayer, too, boasted his slain, and the judges released him.

[Tony Esolen]

Thanks for that, Clifford. I am a great admirer of Spenser's dissection of this particular form of abuse of the rich (and the poor, too!), in the episode of Artegall and the egalitarian Giant, in Faerie Queene, book 5 (canto 2, if I remember). That episode is worth reading in its entirety. It completes the canto, balancing the first half, which is devoted to an episode in which Artegall, the knight of justice, slays a lord and his minions who essentially corner a market -- symbolized by a bridge / turnpike -- and use their monopoly to squeeze the poor. It would be a nice thing to do, to enumerate the ways in which socialism (which is NOT the same thing as a small community's sharing of duties and goods, for instance in a family or a congregation) abuses the very people it is supposed to assist, the poor. Spenser adumbrates several of those ways, too. Most obvious among them is that you make yourselves peons of the egalitarian Giant.

[Tim]

>>>For in this life, the only way to level is with a great big steamroller; we can only be made equal in one respect by means of monstrous inequality in another.<<<

I kind of hate to go here, but the picture painted seems to be similar to the one painted by Ayn Rand in Atlas Shrugged, where "the people" increasingly demanded that the achievers support them with more and more of the profits the achievers earned from their achievements. Of course Rand pegged the source of this "egalitarianism" as emanating from what she saw as the "blessed are the poor" teachings of Christianity, meaning she interpreted, I think, that Christianity at its core was saying that the poor are just as righteous as the rich (if not more) and that therefore Christian based societies were anti-achievement and would "steamroll" those at the top in order to put things right/equal ultimately grinder "progress" to a halt (in her novel case with the achievers refusing to achieve). I think she was right that this sentiment exists, but I think she was wrong to place it with Christianity, the Faith. Unfortunately, it's probably not that hard to make such an assumption, though. Having recently emigrated from a liberal church I can testify that such sentiments are prevalent there, at least in the liberal wing of the TEC (is there any other wing left?). What took me a while to see whilst in that water, though, was that these sentiments were not actually indicative of core Christian Faith, but a new religion based upon humanitarian socialism (the only time I heard the Nicene Creed in the last 10 someodd years there was when non members came to get their babies baptized). Which, of course, was what Rand, the anti-communist, fled from in Russia.

I suppose that it was understandable that Rand would mistake Christianity for humanitarian socialism as there seemed to be so many "progressive Christians" spouting essentially the same things as the communists.

I wonder if it is easier or harder to misunderstand today's Christianity that way. ?

[Bob]

Thanks for the figures, guys. All the same, I could swear there were years when I made less than 25k and still didn't get back all I'd paid in taxes that year. Well, either chalk it up to my memory or maybe I'm just missing something glaringly obvious. Probably the latter.

[Tim]

make that ...

would "steamroll" those at the top in order to put things right/equal, ultimately grinding "progress" to a halt (in her novel case with the achievers refusing to achieve).

[Matthias]

Steve N.: Things are quite different today than in 1913. There wasn't much of a federal system to have a stake in: federal spending has grown from about 2% of GDP then to about 18% of GDP now. More importantly, most people earning less than $25K / year receive some sort of cash or cash-equivalent subsidy from the federal government, such as the Earned Income Tax Credit, food stamps, or Medicaid.

As to FICA, it is not supposed to be a tax: it is a payment into a benefit system that is supposed to pay out later based on how much you pay in. While payments do cut off at high incomes, so do benefits, so casting it as a regressive tax is a little over simplified. (Although if the system goes completely bankrupt as some predict it will prove in hindsight to have been that. I am not quite that pessimistic about it.)

On the whole I think Stuart's point is valid.

[tiro3]

"Which means that all those making less than 25,000 per year--about 43% of all workers--pay zero, zilch, nada."

Does anyone have any idea how difficult it is to live on less than 25,000 a year. At least here in Hawaii its nigh impossible unless you are living at home or sharing expenses. And frankly, I've made less than 25,000 and still paid taxes. Even if I got a refund (and remember that refunds are taxed), still most of the money I sent to the government was kept by the government. I think the dollar amount is lower before someone doesn't pay any taxes at all.

Are you aware that even on social security income, which is not enough to live off of, we are still taxed.

[W.E.D. Godbold]

It is certainly possible, if you don't have kids, to pay taxes even while in the lower tax brackets. Kids (and a mortgage) help a lot though.

[Stuart Koehl]

>>>That overstates the case by quite a bit, Stuart. Using this argument, it may be fairly said that no person in America prior to 1913 had a "stake in the system".<<<

No, prior to 1913, everybody had a stake in the system, since all Federal revenues were derived from excise taxes, which everybody paid, either directly or indirectly.

>>>Moreover, federal income taxes are not the only taxes people pay. FICA applies to every one, and because of the partial cutoff is actually regressive. <<<

I like regressive taxation. It incentivizes people to make more money.

>>>And *not* paying income taxes does not make you a ward of the state; on the contrary, it sounds positively good and just.<<<

Only if you don't consider the long-term consequences of the people being able to vote themselves more money. Which is going to happen.

[Stuart Koehl]

There's also the law of diminishing returns--the top ten percent already pay more than two thirds of all income taxes. So what would be more just? 75%? 90%? 100%? At some point, you find yourself in the position of Sweden, with 100% marginal tax rates on all income over some arbitrary level set by politicians (actually, in Sweden it was 110%, and it kicked in somewhere around $36,000). The result was predictable--the smartest, most ambitious, most capable Swedes started leaving home for more hospitable climes. Even the author of Pippi Lonstocking up and left (not to mention Bjorn Borg). Punish success, and you get less of it. Subsidize failure, and you get more of that. This is why France and Germany are so enamored of "tax harmonization"--they can't compete with low tax countries like Ireland, Portugal, Poland and even Romania, so they want to drag them down to their level.

[Michael D. Harmon]

Mr. Long: I have had "The City of Brass" running through my mind for months. It is a long poem, but available online (http://whitewolf.newcastle.edu.au/words/authors/K/KiplingRudyard/index.html) and I recommend it to all Touchstone bloggers. Oh, and "The Gods of the Copybook Headings," too...

"And the hate that was taught through the state brought the state no defender,
And it passed from the roll of the nations in headlong surrender."

[Stuart Koehl]

Don't forget "Recessional".

[Ranee @ Arabian Knits]

Even if I got a refund (and remember that refunds are taxed)

I must be missing something. We usually do get a refund (we make more than 25K, but we have six children, and one income), we don't qualify for things like EIC, but we have never been taxed on our refund. It comes in the exact amount shown, and we've never had to report it as income. What do I not understand?

[labrialumn]

Can't say "socialist" anymore. The PC Apparatchiks have declared that it is a code word for "black", just as being in favor of any other candidate that Baraq Hussein Obama is 'racist'

Recently Baraq had a chance to deny that he is the messiah on an interview, and he did not take up that chance. He simply said that it is going to take time to fulfill those expectations.

He will not repudiate his followers calling him 'messiah'.

If that doesn't trouble you, what would?

What is the earning level when one starts to pay taxes? It would be curious to see what these 43% are making less than. 25,000? How does that compare to a living? What tax could they carry without being made homeless or unable to get by on their own?

And there are sales taxes and driver's license taxes and on and on. Perhaps infants in our society pay no taxes, zero, zip, nada. But not 43% of the population.

It is hard to be 'incentivized' when you are dead. I would think that consumerism was a sufficient incentive for most of the poor and middle-class.

As I've said before I prefer something like a national sales tax instead of an income tax, or some other 'fair tax' schema. Put the IRS out of business, even.

Indeed, Stuart, if the destitute were not helped, we would have fewer of them - they'd be dead. I believe Ebenezer Scrooge said something quite similar.

[Ashby Lynch]

When I had two children under 16 years old in the house, I think I could have made well over $40,000 dollars a year without paying taxes. I worked for a Christian mission for five years and never made over $35,000, and never paid federal income taxes. However, I started paying taxes after my oldest turned 17. As one person noted, federal income taxes are only the beginning of taxation. I paid property taxes, sales taxes, gas taxes, and probably others that I didn't even realize. Social security tax of course doesn't strictly count, but it and insurance are huge factors in job creation. My job at the mission cost $10,000 in insurance and $4,500 in SS tax in addition to my pay. Of my total pay package, insurance and social security constitued one third.

Was I a ward of the state? I suppose you could make that case. However, I was involved in a mission project that provided home repairs to people who really needed them and really could not afford them, and without government money. All the funds were provided by the groups that came to work. We were capitalist in the sense that if we didn't to a good job, groups would quit coming and I would be out of a job. My wife taught our children at home, so we didn't burden the school system. My home loan was 20% down and 7% intrest (for a $50,000 house). If I was a ward of the state, at least I wasn't an overly demanding one.

[James the lesser]

Here in Wisconsin Federal tax refunds have to be declared as Wisconsin income.

[Stuart Koehl]

>>>What is the earning level when one starts to pay taxes? It would be curious to see what these 43% are making less than. 25,000? How does that compare to a living? What tax could they carry without being made homeless or unable to get by on their own?<<<

There are several different types of people making $25,000 or less. These include entry-level or part-time workers, including young people in or just out of school, as well as retired people looking to supplement pension income. In both cases, they do just fine because they have relatively low expenses, and in the case of entry-level workers, the prospect of moving up.

There are also places in the country where $25,000, while not well to do, is not starvation, either. A look at the locality differentials for the GS schedule will show you how costs of living stack up. I'd starve on $25,000 in Northern Virginia, but could live in relative comfort in places like North Texas, Mississippi, Alabama, West Virginia, etc.

There are those in that income bracket who indeed are experiencing real hardship and poverty. These same people also qualify for the earned income credit, as well as a plethora of government benefits, which, taken together do much to alleviate material need--assuming that people are smart enough to take advantage of them. Many do not.

>>.And there are sales taxes and driver's license taxes and on and on. Perhaps infants in our society pay no taxes, zero, zip, nada. But not 43% of the population.<<<

Did you not pay attention? We were talking specifically of the Federal Income Tax, which provides the Federal government with the majority of its general revenue funding. All those other things apply at the state and local level--where, by the way, they have a much better chance of being used to benefit the people and communities that pay them.

[Stuart Koehl]

>>>Here in Wisconsin Federal tax refunds have to be declared as Wisconsin income.<<<

They are not counted as income, but rather you are not allowed to count it as a deduction from income. Since there is a lag of one year, in effect you are counting the previous year's Federal refund because you are allowed to deduct the present year's Federal withholdings. It's confusing, but that's how it works, here in Virginia as also in many other states. There are still a few enlightened states that do not employ the nefarious taxing of income.

And those of you who are big into cutting down on needless consumerism should also oppose taxation of income (personal and corporate, since corporations merely pass on the tax to their customers, which makes them tax farmers for the government). Instead, you should promote excise and sales taxes that penalize consumption. That is, if you believe that tax policy should be used to shape social behavior, and not merely to meet necessary government expenses.

[Tony Esolen]

One stated purpose for setting tax rates high was that it would compel women to leave the home. That, I believe, was the goal of the deeply confused Miss De Beauvoir. Consider it a horrible circle: use revenues to pay for day care, and set tax rates so high that you compel people to use day care, whether they like it or not. Then step in with government funded day care, and make everyone a chump who doesn't use it.

[Stuart Koehl]

>>>One stated purpose for setting tax rates high was that it would compel women to leave the home. That, I believe, was the goal of the deeply confused Miss De Beauvoir. <<<

I don't believe that was ever the intention here in the United States, but merely an inevitable outcome. Americans are, as a whole, deeply opposed to heavy taxation (remember how we got started?), but beginning with FDR and really taking off with LBJ came the notion of using the power of the state to resolve deep-seated social problems (since James doesn't post here anymore, I can safely refer you to Jonah Goldberg's "Liberal Fascism" as well as Amity Schlae's admirable "The Forgotten Man"). As the government moved into the social services arena the demand for revenues rose; as the demand for revenues rose, so did taxation, though the most insidious tax hike occurred in the late 1970s, due to Jimmy Carter's high inflation rates and the fact that tax brackets at the time were not indexed. People who had never paid income taxes before now found themselves in taxable brackets; people whose taxes had been low found themselves paying marginal rates of 30-40% (Reagan later indexed tax brackets as well as rolling back and simplifying the bracket structure--which, interestingly, raised revenues significantly). The personal exemption also was not indexed, and so lost a lot of its value; if it were worth today what it was worth in 1956, it would be somewhere around $8000.

This just happened to coincide with the women's liberation movement--it did not cause it, nor was it intended to foster it, but that was the general effect: to pay higher taxes and maintain their standard of living, middle class women had to enter the work force. This in turn generated demand for more social services, such as subsidized day care, subsidized child health care, subsidized early childhood education and so forth, which demanded more taxation, which forced more women into the workplace, etc., etc.

Not a conspiracy, just a coincidence of forces and events which happened to come out where Simone, herself a socialist, would have wanted. Of course (and thankfully) she and Jean-Paul never spawned (Steven King could write a book on that), but managed to live very comfortable bourgeois lives together (mostly) until they died (and now mostly forgotten and irrelevant). Paul Johnson really did a number on them in "Intellectuals", which is a cackling good read when frustrated by stories of Conservative racism, fascism, superstition and whatever.

[Stuart Koehl]

Jim Geraghty points out another problem with the "soak the rich" strategy--just who qualifies as "rich"?
********

Krugman, When You Write Like That, I Want To Give You a Nobel Prize

Paul Krugman, in today's New York Times column:

What about the claim, based on Joe the Plumber’s complaint, that ordinary working Americans would face higher taxes under Mr. Obama? Well, Mr. Obama proposes raising rates on only the top two income tax brackets — and the second-highest bracket for a head of household starts at an income, after deductions, of $182,400 a year.

Wait, we've been hearing endlessly that Obama will never raise taxes on anyone making less than $250,000!

Then I recalled this item in the Wall Street Journal:

Back in 1992, Bill Clinton also campaigned for a "surcharge" on millionaires. Cut to February 1993. Here is the lead sentence in the Reuters story about his first big economic speech after winning election: "U.S. President Bill Clinton's plan to seek higher taxes from everybody making more than $30,000 a year means even George Bush underestimated how far Clinton would take tax hikes if elected." His tax proposal ended up slapping his "millionaire surcharge" on anyone who earned more than $250,000.

Jim McGreevey wanted to enact a "millionaire's tax" on those making $500,000 per year.

From $1 million to $500,000 to $250,000 to $182,400 — the definition of "rich" keeps slipping lower and lower...

[Rob G]

"This just happened to coincide with the women's liberation movement--it did not cause it, nor was it intended to foster it, but that was the general effect: to pay higher taxes and maintain their standard of living, middle class women had to enter the work force."

I think that Allan Carlson and others would argue otherwise -- not that it was a conspiracy, but that the means and ends were part and parcel of the progressive movement.

"And those of you who are big into cutting down on needless consumerism should also oppose taxation of income (personal and corporate, since corporations merely pass on the tax to their customers, which makes them tax farmers for the government)."

Many of us are.

"Instead, you should promote excise and sales taxes that penalize consumption. That is, if you believe that tax policy should be used to shape social behavior, and not merely to meet necessary government expenses."

In this context 'penalize' is a loaded word and is, in fact, the wrong one. Furthermore, the second sentence does not follow from the first. One can support a national sales tax without believing that taxation should influence behavior. I would support such a tax in place of the income tax, but I oppose such things as luxury taxes and the inheritance tax.

[Stuart Koehl]

Well, I personally believe that the government should be able to get by on import tariffs, but then, I believe the Federal Government should limit itself to enumerated powers and leave the rest to the states.

[Joe Long]

Stuart and Rob G., compatriots at heart - for States' Rights. Together with me, now, gentlemen:

"Hoorah! Hoorah! For Southern Rights, hoorah!
Hoorah for the Bonnie Blue Flag, that bears a single star!"

And I'm with you, of course. But we will never see the Federal government reduced to its enumerated powers - we'd do well, in fact, to even keep it restricted to the amount of extra-consitutional authority it has right now, but are more likely to see its powers grow even more.

Can either of you gentlemen contradict me from history - give me an example of power flowing back outward, away from the center - particularly in a time of crisis?! The Magna Carta, maybe? I hope there's precedent somewhere for a restoration of the balance - or rather, I wish there were.

[DGP]

>>Can either of you gentlemen contradict me from history - give me an example of power flowing back outward, away from the center - particularly in a time of crisis?!

The breakup of the British Empire, the centrifugal fate of the East African Union in response to Idi Amin, the breakup of the USSR, the more or less complete dissolution of Somalia.

[W.E.D. Godbold]

But I don't like those examples.

[Steve Nicoloso]

Can either of you gentlemen contradict me from history - give me an example of power flowing back outward, away from the center - particularly in a time of crisis?! The Magna Carta, maybe? I hope there's precedent somewhere for a restoration of the balance - or rather, I wish there were.

Another example you might not like: 5th century Rome.

[Steve Nicoloso]

[Stuart] "Instead, you should promote excise and sales taxes that penalize consumption. That is, if you believe that tax policy should be used to shape social behavior, and not merely to meet necessary government expenses."

[Rob] In this context 'penalize' is a loaded word and is, in fact, the wrong one. Furthermore, the second sentence does not follow from the first. One can support a national sales tax without believing that taxation should influence behavior. I would support such a tax in place of the income tax, but I oppose such things as luxury taxes and the inheritance tax.

A tax is going to penalize something. What would be more prudent to penalize: Consumption or earning? Both are subject to vice, but one clearly more than the other. On that basis alone, sales/excise/VAT taxes are more just than income/inheritance/property taxes. But, of course, the latter aid in the redistribution of wealth and militate rather against the development of virtue (civic or otherwise), which makes them quite popular.

[Rob G]

Hey Joe, ever read Higgs' 'Crisis & Leviathan'? I bought a copy when it first came out some years ago, and dipped into it here and there, but never really read it. Somewhere along the way in my several moves it got lost, and I've recently reordered a copy.

His thesis makes a lot of sense to me -- each time there's a crisis in goverment the state gets larger, and then after the crisis is over, the government never returns to its original size. It's a sort of ratcheting effect.

[Rob G]

"A tax is going to penalize something. What would be more prudent to penalize: Consumption or earning?"

I guess you're using the word 'penalize' in a looser sense than I would. But I agree with your point.

[Stuart Koehl]

if you are going to have a tax policy at all, then the policy should aim at intergenerational building of wealth through investment, savings and deferred gratification. This means one does not tax income, or capital gains, or estates. It rewards long-term thinking and builds a firm foundation for the future. All income taxes, to the extent that they are not simply seen as the fastest way of confiscating money for government use, penalize productivity and force capital into non-productive shelters where it neither contributes to growth or creates wealth for future use. Such taxes also inhibit innovation and draw off human capital to places where a more receptive environment exists.

[Stuart Koehl]

Here's a link to a very interesting Tax Foundation report on the subject:

http://www.taxfoundation.org/publications/show/23631.html

[labrialumn]

Stuart,
I know you were trying to limit the discussion to the Federal income tax because that helped support your point. I considered that skewing the data, and chose in include other relevant information which you had left out.

Surely we all know that FICA doesn't go into a savings account, but goes into the general kitty and is spent by Congress every year? For all intents and purposes it *is* income tax.

Tony, and of course Barry Soetoro wishes to have federal day care from the age of 3 on up (you can bet it will be compulsary). Studies show the importance of shaping personality in the first five years, and the social engineers in the teacher's unions have been frustrated for a long time in not being able to get those very young children and mold them differently than the parents would prefer.

This 250,000 or 182,000 or whatever that is supposed to be the lowest end for tax increase: is that gross or net? Before or after the cost of production? If it is gross, it will be a tax on some of the poorest as well. Cost of production tends to be the vast majority of intake, whether it be farming or a small business. If gross, you could be under the federal poverty level and face higher taxes, eating up what is left of your profit margin, forcing you to go out of business, or lose your ancestral home.

Another example: the American war for independence.

Stuart, your 11 o'clock post gives the reasons why I would favor a federal sales tax (though not on essentials, unless you had welfare to rebate that, which I think would be less efficient and potentially problematic).

l

[Stuart Koehl]

I cut myself off. Here are some of the main conclusions of the report:

Quite aside from the fact that these refundable credits remove millions from the roster of Americans who support the government by paying the income tax, these credits have some undesirable effects.

Added complexity. The explosion of tax credits has added a tremendous amount of complexity to the tax code, especially for low-income Americans who are the supposed beneficiaries of the programs. The EITC is so complicated that more than three-quarters of those claiming it pay a tax preparer to complete their forms.

Punitive marginal tax rates. To withhold the benefit of these credits from "rich people," the definition of which changes from law to law, each of these credits has a phase-out range—that is, a range of income where the taxpayer has to pay back the credit that he no longer qualifies for. As a result, taxpayers in the phase-out range face unexpectedly high effective marginal tax rates, in effect a severe tax penalty for every new dollar of income they earn. The President's Tax Reform Panel found that taxpayers in the phase-out range of the EITC face a higher effective marginal tax rate than even the most affluent Americans.

Narrowing the tax base makes revenue volatile. Expanding existing credits or adding new ones pushes people who used to pay taxes into the nonpayer range, shrinking the tax base and requiring higher taxes on everyone else. Undesirable volatility in federal revenue is the likely result, as the incomes of higher-income taxpayers include more business, dividend, and capital gains income which fluctuate much more wildly than wages. California has been a case study of this rollercoaster budget problem. The state receives 84 percent of its income tax revenue from taxpayers earning more than $100,000 annually, and its 66 percent drop in income from stock options and capital gains between 2000 and 2002 contributed to a $10 billion-plus budget gap.

Expanding the role of the IRS. By most accounts, the task of the Internal Revenue Service is to administer the nation's tax code and collect the expected amount of taxes the system is supposed to raise to fund government programs. Should the IRS also be required to administer all the subsidies that Congress enacts? Collectively, these credits have made the tax code impenetrable for taxpayers and far more difficult for the IRS to administer.

[Stuart Koehl]

Adam Lerrick in the Wall Street Journal also looks at the perils of making a majority of the population net beneficiaries of higher taxes.

Obama and the Tax Tipping Point
How long before taxpayers are pushed too far?

By ADAM LERRICK

What happens when the voter in the exact middle of the earnings spectrum receives more in benefits from Washington than he pays in taxes? Economists Allan Meltzer and Scott Richard posed this question 27 years ago. We may soon enough know the answer.

Barack Obama is offering voters strong incentives to support higher taxes and bigger government. This could be the magic income-redistribution formula Democrats have long sought.

Sen. Obama is promising $500 and $1,000 gift-wrapped packets of money in the form of refundable tax credits. These will shift the tax demographics to the tipping point where half of all voters will receive a cash windfall from Washington and an overwhelming majority will gain from tax hikes and more government spending.

In 2006, the latest year for which we have Census data, 220 million Americans were eligible to vote and 89 million -- 40% -- paid no income taxes. According to the Tax Policy Center (a joint venture of the Brookings Institution and the Urban Institute), this will jump to 49% when Mr. Obama's cash credits remove 18 million more voters from the tax rolls. What's more, there are an additional 24 million taxpayers (11% of the electorate) who will pay a minimal amount of income taxes -- less than 5% of their income and less than $1,000 annually.

In all, three out of every five voters will pay little or nothing in income taxes under Mr. Obama's plans and gain when taxes rise on the 40% that already pays 95% of income tax revenues.

The plunder that the Democrats plan to extract from the "very rich" -- the 5% that earn more than $250,000 and who already pay 60% of the federal income tax bill -- will never stretch to cover the expansive programs Mr. Obama promises.

What next? A core group of Obama enthusiasts -- those educated professionals who applaud the "fairness" of their candidate's tax plans -- will soon see their $100,000-$150,000 incomes targeted. As entitlements expand and a self-interested majority votes, the higher tax brackets will kick in at lower levels down the ladder, all the way to households with a $75,000 income.

Calculating how far society's top earners can be pushed before they stop (or cut back on) producing is difficult. But the incentives are easy to see. Voters who benefit from government programs will push for higher tax rates on higher earners -- at least until those who power the economy and create jobs and wealth stop working, stop investing, or move out of the country.

Other nations have tried the ideology of fairness in the place of incentives and found that reward without work is a recipe for decline. In the late 1970s and throughout the 1980s, Margaret Thatcher took on the unions and slashed taxes to restore growth and jobs in Great Britain. In Germany a few years ago, Social Democrat Gerhard Schroeder defied his party's dogma and loosened labor's grip on the economy to end stagnation. And more recently in France, Nicolas Sarkozy was swept to power on a platform of restoring flexibility to the economy.

The sequence is always the same. High-tax, big-spending policies force the economy to lose momentum. Then growth in government spending outstrips revenues. Fiscal and trade deficits soar. Public debt, excessive taxation and unemployment follow. The central bank tries to solve the problem by printing money. International competitiveness is lost and the currency depreciates. The system stagnates. And then a frightened electorate returns conservatives to power.

The economic tides will not stand still while Washington experiments with European-type social democracy, even though the dollar's role as the global reserve currency will buy some time. Our trademark competitive advantage will be lost, and once lost, it will be hard to regain. There are too many emerging economies focused on prosperity and not redistribution for the U.S. to easily recapture its role of global economic leader.

Tomorrow's children may come to question why their parents sold their birthright for a mess of "fairness" -- whatever that will signify when jobs are scarce and American opportunity is no longer the envy of the world.

Mr. Lerrick is a professor of economics at Carnegie Mellon University and a visiting scholar at the American Enterprise Institute.

[Stuart Koehl]

>>>This 250,000 or 182,000 or whatever that is supposed to be the lowest end for tax increase: is that gross or net?<<<

AGI

[Another View]

According to the Tax Foundation, the effective total tax rate (that is the percentage of total money income paid by each group for all taxes, federal, state and local) in the U.S. by income quintile is as follows:

Highest income quintile: 35%
Second-highest income quintile: 31%
Middle-income quintile: 28%
Second-lowest income quintile: 23%
Lowest income quintile: 13%

[Stuart Koehl]

>>>Highest income quintile: 35%
Second-highest income quintile: 31%
Middle-income quintile: 28%
Second-lowest income quintile: 23%
Lowest income quintile: 13%<<<

I merely note in passing that God himself only wants ten percent off the top.

[David R.]

The sequence is always the same. High-tax, big-spending policies force the economy to lose momentum. Then growth in government spending outstrips revenues. Fiscal and trade deficits soar. Public debt, excessive taxation and unemployment follow. The central bank tries to solve the problem by printing money. International competitiveness is lost and the currency depreciates. The system stagnates. And then a frightened electorate returns conservatives to power.

Would that the present "conservative" US government lived up to this. Fiscal and trade deficits soar... that sounds familiar somehow...

[Michael]

>>According to the Tax Foundation, the effective total tax rate (that is the percentage of total money income paid by each group for all taxes, federal, state and local) in the U.S. by income quintile is as follows:<<

What are those quintiles? $250,000+ is number one, I know. But the next 20%? And the next? I'm curious to know precisely where my family falls...

>>I merely note in passing that God himself only wants ten percent off the top.<<

God Himself only commands 10% off the top, but I believe the God of compassion would be quite pleased if we happen to give more... Just saying.

[Stuart Koehl]

Don't confuse budget and trade deficits. The two are not coupled and have no correlation to each other or to economic performance. The U.S. has in fact run a trade deficit for most of its existence, and out country was built on the back of foreign direct investment.

[Stuart Koehl]

>>>God Himself only commands 10% off the top, but I believe the God of compassion would be quite pleased if we happen to give more... Just saying.<<<

Charity, to be charity, has to be freely given by individual persons. Money given to the government under threat of coercion hardly qualifies as charity--and in fact, there seems to be an inverse correlation between charity and taxation. This is true in the United States, where low tax states almost always have higher per capita rates of charitable giving, and also in Europe, where the social welfare state has almost completely displaced and suppressed private charities; such as do still exist get most of their funding from the government, and so are actually nothing more than contractors doing outreach in place of civil servants.

[Er. . .]

God commands what now?

[Another View]

Here's another way to look at the relative tax burden, as distributed by wealth rather than annual income:

The top 1% pay 36.9% of federal income tax and hold 32.7% of the nation's wealth
The top 5% pay 57.1% of federal income tax and hold 57.2% of the nation's wealth
The top 10% pay 68% of the federal income tax and hold 69.8% of the nation's wealth
The bottom 50% pay 3.3% of the federal income tax and hold 2.8% of the nation's wealth

[Michael]

>>Charity, to be charity, has to be freely given by individual persons. Money given to the government under threat of coercion hardly qualifies as charity--and in fact, there seems to be an inverse correlation between charity and taxation. This is true in the United States, where low tax states almost always have higher per capita rates of charitable giving, and also in Europe, where the social welfare state has almost completely displaced and suppressed private charities; such as do still exist get most of their funding from the government, and so are actually nothing more than contractors doing outreach in place of civil servants.<<

I'm with you, Stuart. I'm just saying equating tithe and taxation aren't perfect analogues. Render unto God; render unto Caesar. Tithing isn't exactly a God-imposed tax. But it is something He commands of us. I'm not soon to give the government 40% of my income when they only demand 25% of it (I don't know my actual tax rate...hm...), but I'm happy to give to charity when I have money available even after tithing. Isn't that how it's supposed to be?

[Another View]

There also appears to be an inverse relationship between wealth and income, on the one hand, and charity on the other, with Mississippi, one of the poorest states being the most generous and Massachusetts, one of the wealthiest, being the least generous. Of course, our Lord observed the same phenomenon with the widow giving her mite when others were giving out of their surplus.

[Another View]

Michael,

The quintiles were as follows as of 2007 per the U.S. Census Bureau:

Top 20% began at $97,030
Second 20% began at $60,000
Middle 20% began at $37,771
Fourth 20% began at $20,032
Bottom 20% were all households below $20,032

BTW, the top 5% began at $174,000 (not $250,000 per Obama).
The top 1% began around $315,000.

[Francesca]

>>The sequence is always the same. High-tax, big-spending policies force the economy to lose momentum. Then growth in government spending outstrips revenues. Fiscal and trade deficits soar. Public debt, excessive taxation and unemployment follow. The central bank tries to solve the problem by printing money. International competitiveness is lost and the currency depreciates. The system stagnates. And then a frightened electorate returns conservatives to power.<<

I think I'll pick Krugman over Lerrick as my economist of choice.

What planet is Lerrick living on if he's trying to convince voters that Obama -- and not Mc-90%-Bush-Cain -- is going to have the effects described above? Eight years ago, Bush inherited a budget surplus and a national debt of a little over $5 trillion. The mess he leaves behind includes a budget deficit approaching $500 trillion. The American economy has lost 605,000 jobs this year. It seems to me, judging by the polls, that "a frightened electorate" is about to give Bush/McCain economic policies the boot.

McCain's corporate tax plan would allow some corporations that currently pay little to no taxes to get a check back from the government. Corporate welfare is fascism, not socialism.

And yes, Joe the Plumber (actually Samuel J. Wurzelbacher, not a licensed plumber, and the divorced father of a 13yo son) doesn't like taxes, which is probably why he has a tax lien against him by the state of Ohio, but let's hear what the plumbers union has to say. Steve Kelly, Assistant General President of United Association of Journeymen and Apprentices of the Plumbing
and Pipe Fitting Industry, released the following statement the day after the third Obama-McCain debate:

"Last night John McCain made Joe the Plumber a household name. His manufactured outrage on behalf of Joe would be a lot more believable if his economic plan had anything to do with helping working people deal with the economic crisis. Instead, it washes the middle class down the drain. McCain's plan gives massive tax giveaways to CEOs and mega-corporations while leaving working families out in the cold. At a time when our economy is bleeding jobs, McCain also opposes investment in infrastructure spending, which would create good jobs and help put our economy back on solid footing.

As the first union to endorse Barack Obama for the presidency, the UA looked long and hard at which candidates would put the needs of all the Joes in America first. Barack Obama has a plan to cut taxes for working people while investing in good jobs and lifting wages. Unlike McCain's, Obama's outrage for the middle class is real. He will turn us in a new direction, not keep us on the same, tired old path of the Bush years."

[Tony Esolen]

Another View,

I'm not buying those statistics. The rates seem too low. When I go through all I pay in taxes, including

sales taxes
nuisance fees (DMV fees, for instance)
property taxes
real estate taxes
social security taxes coming out of my paycheck
social security taxes that don't make it to my gross pay
same things for Medicare taxes
state income taxes
federal income taxes
gasoline taxes
other taxes hidden in what I purchase,

I figure that my tax freedom day is somewhere in the second week of June. In other words, I am paying well over 40 percent of my income in taxes. And let me tell you, I use every deduction I can to keep the total low.....

[Orthodox music fan]

"Charity, to be charity, has to be freely given by individual persons. Money given to the government under threat of coercion hardly qualifies as charity."

Not in a participatory democracy. When you have politicians trying to win you over by promising to lower taxes at the expense of social service, ignoring the temptation to keep more of your paycheck and continuing to vote for politicians in favour of high taxes is just as much a contribution to charity as directly donating money yourself.

I take issue with Anthony Esolen's statement in his post, "We all complain about high taxes". I wish Mr Esolen would speak for himself. I live in a welfare state, and I find the high taxes no burden at all. Nor do my acquaintances here. The taxes could even be raised, and we would still long have more than enough money to be content with.

[Orthodox music fan]

"Charity, to be charity, has to be freely given by individual persons. Money given to the government under threat of coercion hardly qualifies as charity."

Not in a participatory democracy. When you have politicians trying to win you over by promising to lower taxes at the expense of social service, ignoring the temptation to keep more of your paycheck and continuing to vote for politicians in favour of high taxes is just as much a contribution to charity as directly donating money yourself.

I take issue with Anthony Esolen's statement in his post, "We all complain about high taxes". I wish Mr Esolen would speak for himself. I live in a welfare state, and I find the high taxes no burden at all. Nor do my acquaintances here. The taxes could even be raised, and we would still long have more than enough money to be content with.

[David R.]

Don't confuse budget and trade deficits.

Fair enough. My point is that I don't believe a government which causes the national debt to increase from ~5.5 trillion to ~10 trillion (I imagine one could add another trillion over this bailout debacle...) has any business being called 'conservative'.
If you're going to raise spending you should have the ability and courage to ask your country to sacrifice, as opposed to cutting taxes while running massive deficits, pretending that somehow it's free, all the while passing the pain to future generations. I can deal with Bush's foreign policy, but in terms of the economy I think he's added a new dimension to the word disaster.