The Second Ricochet Line of the Week
Peter Robinson ·
June 11, 2010 at 3:30am
The real goal for the Obama administration here is to create two tiers of citizens, those who pay in excess of 50 percent income tax and those who pay...nothing.
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May '10
Re: The Second Ricochet Line of the Week
And after the tax rate is altered to tax fifty percent of our population to pay for the other fifty percent, the federal government will find to its own astonishment that 51% of our population is in the 49th percentile. Such is the power of incentives and a 17,000 page tax code.
May '10
Re: The Second Ricochet Line of the Week
Well, I've now come full circle. Two months ago my first ever post on Ricochet (on tax day) was to make the following point: Pat, your concerns above are overwrought. Your mistake is the following: You are succumbing to what T. Sowell calls the fallacy of "mistaking statistical categories for actual flesh and blood human beings." That is, a typical American life is a progression from low-earner (net receiver) to high-earner (net contributor). Notwithstanding a small permanent underclass and a shameful gov't class, your vision of an America divided between receivers-for-life and contributors-for-life is mistaken. Most low earners understand that eventually they will be earning more--and therefore paying more taxes--and therefore those incentives you fear are not quite so strong. (and Duane, if you engage me on this issue like before, I'm going to drive out to Minnesota and egg your house, because I don't have the mental energy to go through that again.)
May '10
Re: The Second Ricochet Line of the Week
Scott Reusser: Well, I've now come full circle. Two months ago my first ever post on Ricochet (on tax day) was to make the following point: Pat, your concerns above are overwrought. Your mistake is the following:
Scott, I do not reject your argument and in fact embrace it. The tax code will not stop citizens from advancing throughout their lives. However, the more onerous the tax burden and the greater discrepancy between tax classes, the greater incentives exist to avoid the burdens. This does not necessarily mean people cease to build wealth but it does incentivize altering economic behavior to avoid additional tax burdens. Whether it be seeking more (and new) deductions and credits, investing in tax-friendly financial devices, or changing compensation categorization to avoid reporting earnings, a 50-50 tax divide with our tax code pushes citizens into less than optimal economic decisions.
I am not saying everyone will stop at the 49th percent, but that many or most will find ways to report that they are at the 49th percent. In so doing, economic decisions will be driven not by consumer demand but more and more by the politicians who decide what actions deserve to be non-taxable.
May '10
Re: The Second Ricochet Line of the Week
Pat: Gotcha, and I concur. And, in fact, when I re-read your post, I see I was actually talking about a different set of incentives than you. I was more dismissing as overwrought the incentive a low earner would have to vote for higher taxes on the higher earners, since he knows that he will soon enough be a higher earner himself. This, in fact, is exactly what we saw with the Joe the Plumber incident. Joe's fear of Obamanomics was for its impact on him when ONE DAY he would own his own plumbing business. At the point at which he made the comment, he was a fairly low earner. Obama's gaffe was in assuming the lowly plumber was incapable of stage-two thinking and therefore would be receptive to "spreading the wealth." Not so. So it sounds like we basically agree.
May '10
Re: The Second Ricochet Line of the Week
Hmm, Scott, send me a message at Facebook if you need the address and a map. Since you are a building trades guy, and I am a capitalist, I'll even hire you to pressure-wash the stuff off while you are in the area (sort of like the WPA, isn't it?).
Of course, being a legal-type guy (among other things; I really have worked for a living) myself, I'll then sue you for the cost of the clean-up!
But, truth be told, I don't remember the details of our earlier exchange, because I am as fatigued as you are, and too lazy to go try to find it to refresh my memory.
You durn-burn redistributionist, progressive taxing communist! ;-)
Re: The Second Ricochet Line of the Week
Well, at the risk of Scott's eggs -- and Duane, I like your style here: sue him! -- I'm not so sure. Look, in a high-tax environment, people stop dreaming about being rich. They stop dreaming about moving up the ladder. Society gets pretty static -- just look at the high-tax environments in heavily socialist places in Europe. People there aren't voting for a low-tax economy. They're perfectly happy soaking the rich. Because they don't expect ever to be rich. In some countries, they've been tracked and planned and tested into what are basically earning categories since 9th grade, when the smart kids go off to the lyceum and the slower kids get sidled off into what nice people call "the manual arts."
Low taxes, entrepreneurial capitalism -- these aren't just economic conditions. They're the bedrocks of a culture that encourages dreamers and risk-takers and productive ambition.
If we lose that, we lose everything. And I don't think there's any tripwire there, any built-in reason why it can't happen here. Not at the rate we're spending, that's for sure.
May '10
Re: The Second Ricochet Line of the Week
Rob: agreed. Duane: I'll pass--and to refresh, our exchange evolved into a discussion on the merits of the flat tax, which you advocated for (and quite well), but which I wasn't too keen on because I thought it was unnecessarily hard on young families when they were making those how-many-kids-do-we-have-or-should-we-just-defer-adulthood decisions. It stood out in my memory because it was my introduction to Ricochet and this terrier named Duane. I think we both gave as good as we got, but I ain't goin' there again.
May '10
Re: The Second Ricochet Line of the Week
I wonder... what if the U.S. tax code were like membership in the Screen Actors Guild? Each earner pays an initial fee at the beginning of their earning career with subsequent yearly dues plus a percentage of their earnings each year. However, unlike the U.S. tax code, the higher up the income scale one goes, the smaller the percentage of taxes collected.
Or, to turn this scenario on it's ear, how about SAG changes it's dues structure to reflect the U.S. tax code? The lowest earners in the guild pay nothing while the higher up the tree one goes, the more the percentage of earnings are taxed. I wonder if suddenly all of those celebrity Hollywood socialists would suddenly become quite libertarian in their view of the tax code.
May '10
Re: The Second Ricochet Line of the Week
The tax question is not progressivity, or fairness (e.g., who "needs help"). It is much more basic, and much more human than that:
"What is the point where the tax rate curve persuades a worker that (s)he would rather sit and drink Kool-Aid than work to earn another buck?"
That is not a moral question- though you can make moral cases and argue them ad infinitum. It is both a practical question and one of societal breakdown. How do we raise revenue, while preventing society from diverting away from honest reporting of income- into underground economic activity?
Every civilization gets one shot at that- because once it has lost its conscience and integrity related to tax reporting it tends not to be able to pull back from the larger forms of breakdown, which manifest themselves in the end of property rights, contracts governed by who paid off the judge, and dishonest elections. None of these occurs in its own insular and isolated state- they interrelate.
Is it an accident that the most corrupt political machines tend to match the highest state tax rates? I think not. Where productive activity ends because you gain more by being a government insider.