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I am a libertarian republican and reside in New Hampshire and I am outraged we put a drunken golf addict in as speaker. This may set us back. Looking forward to REAL CHANGE in 2012. real American patriots in chrage sans John Boener. Cry baby.
What John Boehner was crying about? Tax Cuts? I bet he was laughing when the Senate slapped President Obama's face with not only the Bush Era Tax cuts, but the defeat of the Dream Act that would allow illegal immigrants to seek citizenship and then, he was like celebrating the end of the Don't Ask, Don't Tell policy against Gay in military. Then, he played some golf with Obama's face... That's like slapping in face!
Ad hominem. Liberals think the government can magically produce freebies out of thin air by taking from those who work hard and succeed and rewarding sloths and failures. Let them kill the tax cut. Unemployment and poverty will explode and Barack Obama will be out by 2012 and Either Alan Keyes Ron Paul or Sarah Palin can take his place. I sure hope they can clean up the mess the socialists left behind.
Enjoy losing elections for the rest of your lives libys. In 2012 we are going to change for the better and change back to what our founders intended for this nation. No more hedonism, ungodlyness and political correctness.
Ok lets see here? If we make the top 1% of America pay higher taxes, which actually makes sense since that is how the tax system is SUPPOSED to work, and let those with lower incomes, middle class and below, have more of the money they earn through hard to spend on things like education, FOOD & SHELTER, we'll have a rise in poverty?!
Dude this is not a liberal vs conservative issue. It shouldn't be. The top 1% in this country DON'T give that money back. They keep it and invest it. Where as, a tax cut to the middle and blue collar folk will end up back in circulation because it will, immediately, be spent on necessities such as food, shelter, doctor bills and education of children. What little is left over will go into a bank account but eventually it will be sent back into the system when a emergency arises or when they want to have work done on their home or buy a new car.
The idea that giving tax breaks to the top 1% of America is fundamentally flawed and has been proven to be flawed every time they are given a tax cut during tough times. The recession is a prime example of this. We gave the top 1% tax cuts and did we come out of the recession? No.
As for rewarding sloths? Have you tired being a 20 something, in or fresh out of college, trying to find a decent job recently? Or a factory work that lost their job because the company isn't selling as many of the goods your factory made? Factory workers have very specialized skills and now they have to find a way to feed their families, pay their rent and pay for schooling so they can get a new job.
I myself am a 25 yr old and have been looking for a decent job for that past few years. It is far from easy! I can tell you for a FACT, that I am a hard worker, as are so many of those who are now unemployed. Every a-hole who complains about "rewarding sloths", is one of the lucky ones and doesn't know what it is like to be hard work, who desires to be useful and hates that they currently can't pay their own medical expenses, or rent, or food, morgage. I hope to God people like you get your some poetic justice, get laid off and get a taste of unemployment and the humiliation that comes with it. Lets see what your tune is then.
Now I swore to keep this all civil and such but your comment about supporting sloths is something I take rather personally.
Honestly, the GOP has spent more and done less in the last 10 years than you are willing to admit or remember. Bush's tax cuts, 2 wars & borrowing of money to fund them and rampant spending is nothing for the GOP to be proud of either.
One man's theology ... is another man's belly laugh.
You also forgot to add 20 million illegal aliens, Democrat legislatures on state and local levels spiking tax rates thereby cancelling out the tax cuts in liberal states, the 2 wars, governmet regulations agains small business, the min wage, environmentalism ETC.
enoguh is enough. Obama has done far worse than any president before him unemployment and debt was never this bad before Pelosi in 2007 and Obama 2009.
"Obama has done far worse" is a statement that implies that the downtun of the market was a product of Obama, but let's not forget that
a) Bush was the one who instigated the stimulus in all of the wong spots
b) Obama has been blocked from doing anything by Congress
and c) It really depends on what you think is worse: being perceived to have hurt the economy or actually sending us into two unnecessary wars during which we freed Iran from its cold war with Iraq, lost thousands upon thousands of American lives, killed even more Iaqis and Afghanis and spent an obscene amount...
Also, the "spiking tax rates" are still lower than they were under Reagan.
I always laugh at these cartoons, and this ranks as one of the funniest in all the years I've been on here. Love the 'trickle down' reference as that is exactly how it looks and will feel.
you really hit the nail on the head this time...
A wise man named John Adams once said, "Facts are stubborn things, and whatever may be our wishes, our inclinations, or the dictates of our passions, they cannot alter the state of facts and evidence."
Here are the facts:
1) Tax rate cuts do NOT equal tax revenue cuts. Have you ever heard of the Laffer Curve? If tax rates are 0%, tax revenues will be $0, because zero multiplied by any number is zero. Likewise, if tax rates are 100%, tax revenues will be $0, because no one will have an incentive to produce any income in the above board economy. Like the Italians (and other socialist societies), much of the economic activity will move to the black market. (It has been estimated that 30% of Italy's GDP takes place in the underground economy, thanks to the confiscatory tax rates imposed by its government.) Therefore, a priori, there is a tax revenue maximization point somewhere between 0% and 100%. The question becomes, where exactly? Since there are numerous factors leading to economic growth, studies which focus on tax rates alone cannot answer this question. However, there is one empirical study which should give the leftist / Marxist / wealth redistributer some pause. Consider Hauser's Law ( http://www.hoover.org/publications/hoover-digest/article/5728 ) and the fact that no matter how high the top margin tax rate has been (going all the way back to 1950), the federal government has never been able to raise tax revenues above 21% or 22% of GDP. Now, ask yourself: If all other variables are held constant, is GDP likely to be higher when tax rates are lower, or vice versa? Common sense tells us that people work harder when they get to reap more of what they sow.
2) The so-called "rich" pay a disproportionate amount of taxes relative to the income they earn. Here are the facts:*
Top 1%: Paid - 38.0% of all federal individual income taxes / Earned - 20.0% of adjusted gross income (AGI). Average / effective tax rate: 23.3%.
Top 5%: Paid - 58.7% of all federal individual income taxes / Earned - 34.7% of adjusted gross income (AGI). Average / effective tax rate: 20.7%. (In other words, the top 5% paid more taxes than the bottom 95% of income earners combined!)
Top 50%: Paid - 97.3% of all federal individual income taxes / Earned - 87.3% of adjusted gross income (AGI). Average / effective tax rate: 13.7%.
Bottom 50%: Paid - 2.7% of all federal individual income taxes / Earned - 12.7% of adjusted gross income (AGI). Average / effective tax rate: 2.6%. (In other words, almost half the population is riding in the welfare wagon, which is being pulled by the other half!)
* Tax year: 2008. Source: Tax Foundation - http://www.taxfoundation.org/news/show/250.html , see Table 1.
3) Don't try to claim that I have failed to include payroll taxes in my analysis (as Warren Buffett tries to do). The purpose of Social[ist] Security and Medicare taxes is to force people to save for their own retirement. Thus, the taxpayer is the direct beneficiary (at least, in theory). The fact that the federal government has consistently raided these so-called "trust funds" and wasted the money on other functions of government is an entirely different issue. While this is a bi-partisan problem, it does not change the fact that payroll taxes were designed to be a forced savings program for each and every American, and not a tax for general use.
4) You might not be a believer in supply side economics, but when was the last time you read an income statement (if ever)? Ask yourself, who gets paid first and last? Do the employees get paid before the shareholders, or vice versa? It is the "rich" owners of the business who get paid last, yet they are the people who have put their capital at risk in order to turn a profit. I don't know about you, but I have never been offered a job by a poor man.
5) Progressive taxation is legalized plunder, no matter how a leftist might try to spin it. What gives the voter the right to go into a voting booth and impose a higher marginal rate of taxation on another man's income, when doing so is morally equivalent to stealing money out of that man's pocket? The entire leftish ideology fails on the following moral principle: No man has the right to delegate to his government a power which he does not possess as an individual. Since no man has a right to steal what belongs to his fellow man, he does not have the moral authority to conscript Uncle Sam to be his accomplice in this crime. It doesn't matter if the money which has been stolen is intended to help someone less fortunate, or a fat-cat Wall Street bankster (i.e., white-shoe gangster). It is theft either way. Consider the following analogy: I point a gun at a "rich" man's head and give him the false choice of: "Your money or your life." I then steal his wallet and give the money to an indigent man sleeping in the gutter. Would you consider this to be morally acceptable behavior? No? Then what makes this behavior morally acceptable when a government agent has been enlisted to do the same thing?
Frederic Bastiat was right when he wrote, "It is impossible to introduce into society a greater change and a greater evil than this: the conversion of the law into an instrument of plunder... When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that glorifies it."
Mark - If you took the time to think things through, I have no doubt you would become a true liberal of the classical or libertarian variety. Not a pseudo- "liberal" who is really a statist in sheep's clothing. I only wish you would apply your immense talents as an editorial cartoonist to fighting for true liberty, properly understood. Which is to say, freedom from the force and fraud of others; most notably, the government itself.
Very good points, however.
i) I agree with your first point that the revecnues received from collecting taxes decreases with an increase in the tax rate: however, we are not at that tax rate yet: as the tax rates at the top are the lowest they have been since before FDR. I don't know how much less hard someone is going to work if they are making $10 million a year instead of $50 million a year (and the taxes are not that high)
ii) Yes, the rich pay more of the taxes, and yes the bottom portion of the economy is actually collecting money or not paying taxes: but at the same time, how can one expect those who barely have enough to get by to be able to afford to pay taxes on top of their existing poblems?
Also, the Wealthiest 1% does also make much more than the bottom 50%...
iii) I actually agree with you on this one
iv)The wealthiest are able to take enterpreneurial risks because they are able to take enough so that on ballance, they will come out ahead (not only that, but the risk of losing 1/5th of your wealth when you do not have any day to day financial stress is much less than the risk of losing 1/20 th of your wealth when you have some).
v)Once again, I disagree. I know that prima facie, this does not appea to be fair: but at the same time, how will public goods be provided? The higher marginalized tax rates seve to create a truly equivalent potion of income: so that as I stated before, taxes don't leave one man devastated and another unphased (ideally, they would leave both unphased, but that is not always possible: especially when one feels that wars are necessary)
"I don't know about you, but I have never been offered a job by a poor man."
What about the job of taking care of him?
I just hate the rich because they are rich and I am not. I want them to be as poor as me so I don't have to feel inferior to anyone because they have something I don't. I hate smart and educated people for the simmilar reasons, they can thing deeper thoughts than I can and that makes me feel inferior. I hate people who are less intellegent than me too because they are so boring. We need more laws against all this stuff I don't like, rich people, smart people, stupid people and anyone else who is not exactly like me. Can there be laws that force us all to be cynical, jaded, contrair, and obstinate too?
"Imagine that a genie magically appeared and offered to grant you one wish — and, being a decent sort, you wished that everyone's income would be doubled. That could bring down on you the wrath of the political left, because it would mean that the gap between the rich and the poor had widened. That is basically their complaint against the American economy."
"I am so old that I can remember when other people's achievements were considered to be an inspiration, rather than a grievance."
- Thomas Sowell
Just a bunch of fuzzy math from some right wing hick sites.
Look, we got a situation here. these CEOS are ruining the country and abusing their wealth. They benefited the most from the economy so they need to give a portion of it back in return to help those in need. They can cut loose with a few million and still be better off. We don't want to perpetuate poverty starvation and inequality now do we.
Jesus himself said to whom much is given, much is required.
"Jesus himself said to whom much is given, much is required." Really? Is this your deus ex machina?
The "rich" don't owe anyone a damn thing, so long as they earned their money through voluntary, free-market exchanges between mutually consenting parties to a transaction.*
As a good Christian, I think you should send a Christmas card of thanks to the "rich" man who provided you with a product or service you gladly paid for. Why did you freely pay for this item? Because you valued it more than the price you paid for it, otherwise you would not have agreed to the exchange. This is what free-market capitalism is all about: mutually beneficial, win/win trades of value for value.
* NOTE: I will not defend the thief who earned his money by enlisting government as his co-conspirator, so there is no need for you to invoke the "crony capitalism" non sequitur. I despise rent-seeking and government give-aways more than anyone. "Crony capitalism" is not to be confused for the real thing, and you should know the difference.
Number Lie, they can dance and sing too if you really work at it. Just look at what the GOP has done with them.
Very funny! : )) This is the most laughable, semi-educated argument I have read in a long while... Howie should be fined for flooding.
If my argument is "semi-educated," then you should have no trouble refuting it. I eagerly await your retort. Please, by all means, enlighten me.
Well done howard! i liked your post! i especially like how all the liberals went around stuttering and caterwulting without making any honest refutation. the Laffer curve proves beyond a doubt that socialism and progressive taxation fails. when Bush's tax cuts expire we will see the results first hand.
Aqvila non capit musca.
Vos es certus non aquila.
Not that I'm a leftist by any means, but the idea of progressive taxation stems from the (not unreasonable) belief that a person's intrinsic value to society isn't proportional to their income.
For example, a lawyer pulling in $250,000 might provide no tangible benefit to society at all and yet be compensated at a rate five times that of an accomplished plumber. The $250K salary reflects the fact that law is a much more exclusive profession than plumbing, but the exclusion is largely artificial (i.e. based on extreme restrictions on how many people are allowed to train to become lawyers) and, the left would argue, these restrictions are almost exclusively dictated by "the rich".
Put more simply: the richer you are, the more power you wield to inflate your nominal net worth beyond your actual worth.
In an era when CEOs make several hundredfold the income of their most industrious employees whilst running their corporations into the ground, the income/worth disparity has been more "in your face".
Progressive taxation is one of the simplest and cleanest measures for counteracting the disparity.
I dare say that no man, regardless of his contributions to society, is actually "worth" more than $1 M per year. Perhaps a handful of individuals throughout history would fit the bill.
If it were up to me, taxation would be far more top-heavy than it currently is. Your nation is in crisis, sir. I hope you understand that.
The problem with "top heavy" taxes is the really rich just leave your country and go somewhere more friendly.
Two things of note, though.
If they want to go elsewhere, let 'em.
Personally, I endorse the expiry of the tax cuts because the US is a hulking debt-infested sovereign default waiting to happen.
If you despise a "rich" man for his success, you are free to vote with your wallet by purchasing the products and/or services he sells from someone else. If you are unwilling to do this, because you cannot find a better value for your dollar elsewhere, then stop complaining! The worth of man's work is determined solely by the purchaser of his services. If you are not the buyer, you have no say in the matter.
Do you think Steve Jobs should not be paid more than $1 million per year given all the consumer surplus he generates? Look up the term, "consumer surplus," if you don't know what I am talking about, and educate yourself on why Mr. Jobs is worth every penny he EARNS. (See - http://en.wikipedia.org/wiki/Economic_surplus .)
I do agree with your comment that lawyers (and many other professionals) have been able to inflate their salaries by restricting the supply of their services through licensure laws. But this is an entirely different issue. The crime here is that a government agency has overstepped its proper authority by imposing a restriction on a man's right to practice his profession.
Licensure laws do not protect the consumer. They harm him by limiting his choices. A man should be able to contract with another man freely, with the only restriction being that there is no harm imposed on a third party not privy to the transaction (i.e., a negative externality). If you worry about the competence of the professional you plan to hire, then ask for references, consult a private rating agency, and perform your own due diligence.
> If you despise a "rich" man for his success...
Progressive taxation isn't "despising success". It's a means of counteracting representation biases in a capitalist democracy. That was my point.
> The worth of man's work is determined solely by the purchaser of his services.
...which fails to work in cases as simple as monopolies or price consortia. If the statement were true, there'd be no need for antitrust laws. A single monolithic corporation controlling all of the U.S.'s oil and gas interests could "fairly" charge $300.00 per barrel of crude oil. A city could charge $250,000.00 for an ambulance ride.
> Do you think Steve Jobs should not be paid more than $1 million per year given all the consumer surplus he generates?
To Apple, Steve Jobs is worth a fortune.
As for society, I'll ask you this: if Steve Jobs had never been born, would we be considerably worse off?
I contend that somebody else would have pioneered the first GUI-based OS. Somebody else would have come up with the "OS for Dummies" concept. Somebody else would have plugged up the cell phone market with another competing phone.
Steve Jobs happened to be the fellow who came up with the lucrative "Tech for Dummies" idea first. Even so, it's ludicrous to think that computers, cell phones, etc. wouldn't be every bit as sophisticated today had he never existed. His "worth" to society is the little bit extra he adds compared to whoever would have been next in line. That's nowhere near a million dollars per year.
If you don't agree with me, I suggest you try to discover who invented the wheel. By your logic, he's the greatest inventor who ever lived... and worth every penny of the trillions in royalties he'd be pulling in.
> ...by imposing a restriction on a man's right to practice his profession.
Hardly. If being taxed at 30% instead of 25% makes the difference in your wanting to be a doctor, you aren't morally qualified to be a doctor.
If getting taxed at 40% on a $150K senior engineering job instead of 30% on a $75K junior job makes you stick with the junior job, you don't deserve to be a senior engineer.
> Licensure laws do not protect the consumer. A man should be able to contract with another man freely...
When that happens in the real world, I'll certainly reconsider my opinions on progressive taxation.
Good to see a fellow conservative on the site. ;)
First of all, I am not a conservative, so please do not insult my intelligence. I don't even know what it means to be a conservative anymore. Conserve what? The status quo, semi-socialist, "mixed economy" we have now? I don't think so! I am a liberal in the true sense of the word, which is to say I am a libertarian. I could care less what Democrats and Republicans claim to stand for, because both parties are incorrigible.
You really do need to take some time to understand what is meant by the term, "economic surplus," including its two sub-components: 1) Consumer surplus and 2) Producer surplus. The value of any product or service should be determined solely by market participants, each acting in accordance to his own self-interest. And who do you think constitutes the "market," exactly? It is all the buyers and sellers out there, which includes people like you and me. What makes you think that some higher authority like the government should supersede the prices which are determined by free men acting voluntarily through mutually beneficial trade? And when and where has central-planning ever been proven to work effectively? Read "The Use of Knowledge in Society," by F.A. Hayek ( http://www.econlib.org/library/Essays/hykKnw1.html ) and/or his Nobel lecture, "The Pretence of Knowledge" ( http://nobelprize.org/nobel_prizes/economics/laureates/1974/hayek-lectur... ). It will help you understand why dirigisme is a sure path to economic ruin.
You criticize monopolies, but you probably couldn't name a single example of one in an open and free market. Wherever there have been large concentrations of market power (either via outright monopolies or oligopolies), they have invariably either been: a) Short-lived, or more commonly, b) The direct result of artificial barriers to entry having been created by government. Examples of "artificial barriers to entry" include (but are not limited to): i) Tariffs or quotas on foreign goods and services, ii) Licensure laws, iii) Overly burdensome rules and regulations which make it nearly impossible to start a new business and/or raise capital (e.g., Sarbanes – Oxley), and iv) In the case of healthcare, the federal government's restriction on selling health insurance across state lines. (NOTE: The Commerce Clause in the U.S. Constitution was specifically established to insure that free-trade would take place between the states. It was never intended to restrict it. Read the "Federalist Papers" if you have any doubts. The Founding Fathers were worried that trade wars between the states would degenerate into outright military wars.) And keep in mind that this is only a partial list of the possible government actions which can enable monopolies to exist. "Big businesses" are some of the most hostile organizations you will find toward free-market principles. "Big labor," of course, is also strongly opposed to any policies which foster greater choice and competition.
And then there is anti-trust law..., which you think is necessary and proper to a well-functioning market. But if you took the time to think more deeply, you would realize that the Sherman Antitrust Act (1890) gives the federal government nearly carte-blanche authority to destroy pretty much any business it wants to. All the government bureaucrats have to do is define the offending company's "industry" narrowly enough, and they can accuse it of being a "monopolist." Next, the apparatchiks can point to the prices being charged by the so-called "monopolist," and they will either be: 1) Higher than the industry average - which can be used as evidence that the company has the market power necessary to keep its prices high, 2) The same as the industry average - which can be used as evidence to accuse the company of price collusion with its competitors, or 3) Lower than the industry average - which can be used used as evidence of "predatory" pricing in an attempt to destroy its competitors. As you can see, there is no defense against these accusations, because the government can choose any one of the above three options, and this is an all-inclusive list! A far better alternative is to do nothing. It won't be long before some form of "creative destruction" will take place and the monopolist (assuming one exists) will be supplanted.
Regarding Steve Jobs... Do you really believe that if he didn't invent the products he sells, someone else would have? Perhaps, but imagine if we could go back in time and kill (or prevent the conception of) Sir Isaac Newton, Wolfgang Amadeus Mozart, Charles Darwin, Thomas Edison, Albert Einstein, Henry Ford, or William Bradford Shockley, Jr. before they achieved their greatness? Would all of their inventions and achievements been accomplished by others? And if so, how many decades or centuries later? There is a novel you may have heard of which imagines what such a world would be like, and it is "Atlas Shrugged." The "Atlases" are not killed in the story, but they do go on strike, and the rest of society suffers greatly as a result.
You say that a man who quits his job over a small change in tax rates is neither "qualified to be a doctor" nor "deserve[s] to be a senior engineer." But that is exactly where economics takes place; at the margins. At some point the old adage about "the straw breaking the camel's back" will become a reality. Just look at California, which is experiencing a "brain-drain" due to its high taxes, red-tape, and generally anti-business climate.
But let's assume you are right and the motive matters most (a Kantian argument). Would you rather have Mother Teresa (bless her heart) perform brain-surgery on you, or the man who is one of the most highly qualified neurosurgeons in the world, has steady hands (unlike Mother Teresa), but also chose to enter the medical profession because he wanted to keep what he earns and take home a sh-- load of money in the process? Personally, I could care less what motivates a man to do his job. I only care about the cost / quality trade-offs of his services relative to the alternatives (i.e., his competitors).
In "The Wealth of Nations," Adam Smith wrote: "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest." Smith was right, yet men of all trades are perfectly willing to serve you, if you return the favor by giving them money in exchange, so that they can make a similar claim on another man for his products or services. That is how markets work! And keep in mind that it is this type of specialization - that comes with trade - which enables us to enjoy a high standard of living.
COTO – It doesn't matter how smart you are (or think you are), if you don't stop to think. And frankly, it doesn't look like you have.
Oop. Looks like my comment did show up. Odd that the submit order isn't the same as the post order. :|
COTO = pretty smart.
Howard = first year economics student (at best) trying to sound smart.
If your rebuttal in this kind of argument resorts to including references to Atlas Shrugged and quotes from Wealth of Nations, its time to admit you've lost. Its like watching you fumble through the flash cards of capitalist dink-dom.
You criticize my understanding of economics, but it appears that you are the one who is lacking in the fundamentals. I don’t know where you studied the subject (if at all), but assuming you did, I imagine you were taught standard fare Keynesian macroeconomics at some point in your academic career.
Have you ever studied Austrian economics? Comparing Austrian economics to Keynesian economics is like comparing chess is to checkers, or MMA and jiu-jitsu to boxing. Don’t be fooled by all the fancy regression equations, econometric models, and high level mathematics used by the neo-Keynesians. The fatal flaw of the Keynesian School is simple: No group of central-planners - no matter how intelligent or wise they may be - will ever have sufficient knowledge in toto to manage and direct an economy. The two essays by F.A. Hayek - which I referenced in my previous post - explain why this is true.
Now, if you would like to learn something, keep reading my dialogue with COTO. Unlike you, he is actually putting forth a respectable counter-argument.
Fightin' words. ;)
Let's see what I can address. Mr. Fiore has kindly provided readers with the incredible shrinking comment boxes.
I could care less what Democrats and Republicans claim to stand for, because both parties are incorrigible.
That would make two of us.
What makes you think that some higher authority like the government should supersede the prices which are determined by free men acting voluntarily through mutually beneficial trade?
You're moving into issues that aren't relevant to progressive taxation.
Taxes are the price that citizens pay for their government--what is ostensibly a national "corporation"--to provide public services. If you want to argue that taxes are too high or too low, fine. Go ahead.
I have addressed the issue where we are given an a priori dollar value x for government revenue. The question becomes: how should the burden of x dollars be distributed over the populous fairly?
Your view is that each man's contribution should be proportional to his income (i.e. a flax tax rate). My argument is that each man's contribution should be proportional to his representation in governing the country's social institutions. Furthermore, I've been arguing that a man's representation is more than proportional to his income. A man who earns $100,000 has far more than five times the influence over lawmakers, professional standards, corporate activities, etc. than a man who earns $20,000. It's a simple fact. Progressive taxation reflects this fact. Hence my stance on the issue.
realize that the Sherman Antitrust Act (1890) gives the federal government nearly carte-blanche authority to destroy pretty much any business it wants to
You're getting into issues of governments overreaching their authority.
I'm not here to debate you on antitrust laws. Frankly, I don't know enough about their history to put up a good fight.
My comments are about progressive taxation.
Sir Isaac Newton, Wolfgang Amadeus Mozart, Charles Darwin, Thomas Edison, Albert Einstein, Henry Ford, or William Bradford Shockley, Jr.
With the exception of Mr. Darwin (who simply ripped off his uncle's work), you've named six of the most prolific thinkers in history.
Yes, if there were six exceptions to the million-dollar-cap rule, these fellows would fit the bill.
Steve Jobs is not Thomas Edison, and yes, somebody else would have invented the iWhatever had he not cornered the market first.
You realize the salaries that men like Mr. Jobs pull in are due to the very government interference you're decrying. There could be a hundred inventors out there who could produce a better iGizmo and yet are prohibited from doing so because Apple owns the intellectual property rights on principal components. Nobody can produce a better version of Google's search engine because... oddly enough... the core algorithms were patented as soon as they were first discovered.
You can't rail against anti-libertarian institutions like IP rights while at the same time claiming that Mr. Jobs is "legitimately" worth billions. He's worth billions precisely because Apple has exercised their full authority to make sure no competitor is allowed to (or can afford to) create Apple products.
Just look at California, which is experiencing a "brain-drain" due to its high taxes, red-tape, and generally anti-business climate.
California has problems far bigger than their corporate tax rates. I'll leave it at that.
In "The Wealth of Nations," Adam Smith wrote: "It is not from the benevolence of the butcher, the brewer, or the baker that we expect our dinner, but from their regard to their own interest."
And I agree. But governments cost money, costs require revenues, and revenues are generated through taxation.
You may argue that government spends too much, and that it is not currently worth the taxes it imposes. I would not disagree with you.
A debate on progressive taxation starts with the assumption that revenue must be generated, and it asks how this can be done most equitably.
I take back what I said, because now you are thinking. Albeit, not entirely clearly.
I've been upgraded from "brain dead" to "babe in the woods", have I? It's something, I guess. :)
Should my customers be required to wait for the next innovator to come along...
Alternatively, should I go on selling widgets to my customers even if the government steals all the additional profits...
Consider two alternate scenarios:
Case 1: IP laws are moot and any firm has the right to sell iGizmos. The "wait for the next innovator" lasts precisely 3 nanoseconds. However, given we agree that abolishing IP rights is a bad thing...
Case 2: 100% of profits in excess of Mr. Jobs' $1M salary are funneled to capex and stock dividends. If Jobs' nominal (uncapped) salary was vastly in excess of $1M, he'd hold stock solely for his shareholders' rights (as any capital gains would necessarily be taxed at 100%). His work incentive would be his annual meeting with an army of rapacious shareholders, and the ability to look his fellow executives in the eye during board meetings.
...unless (and until) another innovator comes along with a competing product or service that is just as good (or better) than the iWidget...
You've jumped to the problem of how to implement a salary cap when my original arguments pertained to Mr. Jobs' intrinsic worth.
If IP rights suddenly evaporate tomorrow, Apple's profits crater. The consumer surplus you've mentioned widens as dozens of clones flood the market. In this universe, Steve Jobs is still paid a decent salary. Apple realizes that he gives them a few months lead time on the latest iGizmo. However, since oversized incomes quickly become a liability with narrow margins, 'decent' is a fraction of his current salary.
The salary that Mr. Jobs is paid in this hypothetical universe is what I consider to be his intrinsic worth. It might well be in excess of $1M per year. I don't know.
This is what society gets out of Mr. Jobs. Any excess remuneration, regardless of its importance as an incentive in a world where IP rights do exist, is precisely that: excess remuneration.
You can argue that my "Case 2" above couldn't be implemented in the real world. Or that pressure from shareholders/the board would be insufficient to motivate Mr. Jobs. Again, I don't know. What we do know is that Mr. Jobs wields a powerful governmental apparatus that grants him the ability to broadly, efficiently suppress his competitors. I am not contending that it is morally wrong for him to do so. I am, however, contending that at a fundamental level Mr. Jobs is worth far less to society than his notional value suggests. Think of it as subtracting the deficit in consumer surplus (due to the existence of IP rights) from Mr. Jobs' current income.
Finally, I realize that $1M is arbitrary. There's no way to reliably quantify "peak" intrinsic value, and this is all hypothetical anyway.
First of all, what makes you think a doctor has a moral obligation to be another man's slave?
Firstly, he's being a "slave" to a society rather than to a man, and even this analogy breaks down upon noting that the doctor can elect not to work.
Assuming all people paid equal taxes, the person-to-person "fractional slavery" cancels out. With a flat tax rate, we immediately see a disparity in how much one man is a "slave" to another man. But you've tacitly acknowledged that the existence of this disparity isn't "wrong", since you're making the case for a flat tax rate. The question then becomes how severe a disparity is wrong, which is what we've been debating.
I am by no means a fan of Keynesian economics. (Also note that modern "Keynesianism" bears little resemblance to Keynes' original theories.)
High tax rates driving people into underground economies is certainly a risk, but this is again an issue related to overall tax rates.
I agree that the man who earns more has greater potential resources at his disposal to do so, but what makes you assume he is going to use them for this purpose?
This is a fair criticism. There is no simple way to quantify a man's "willingness to influence" society. We're limited to looking at each stratum of income-earner in aggregate. I acknowledge that this kind of blunt categorization is a limitation, and that it is--to an extent--unfair.
However, accepting that this is the best we can do, a stratified model like this makes proper sense in aggregate. I hope you'll agree that the probability of an individual with income x being "of great influence" in society (e.g. sitting on boards, regional committees, legislation, standards committees, peer reviews, etc., etc.) is a monotonically increasing function of x. In a country like America, where the median salary is not far removed from the poverty line, disposable income means time. Disposable income means status. As you've pointed out, disposable income means lobbying rights (and with due respect to Mr. Madison's "limited, enumerated powers", look at the present size of the US government or even one chart correlating lobbyist funding with election win likelihood).
If we agree that a man's resources (capacity to influence) grows proportionally to his income, and if you were to grant that a man's "probability of utilization" grows proportionally to the square root of his income (our monotonic relationship), and we taxed each man proportionally to his "probabilistic influence" (capacity to influence times probability of utilization), we end up with a progressive taxation system not unlike the one we currently have.
This does not seem unreasonable to me, even though (as you point out) each dollar is taxed at a marginally higher rate. In fact, I'd argue that the square root dependence of the utilization term lowballs the convexity of the actual relationship. (Lowballing helps us make up for the crudity of our classification system. ;)
Your observations that a flat tax is simpler, (putatively) less prone to loopholes, and can complicate capital allocation (you were really reachin' for this one) are, in my most humble of opinions, not compelling--or rather, not sufficiently compelling--reasons for moving away from a system that is a fairer representation of "influence".
In summary, your "representation" argument is fallacious, because it assumes behavior that may or may not take place (i.e., rent-seeking).
Alas, could but one counter a fallacious argument with one equally as fallacious. ;)
To wit: you are assuming here that "rent-seeking", which I've acknowledged exists, makes progressive taxation a non-starter.
It shows that progressive taxation isn't perfect, certainly. But neither is any other tax code that's applied to some 150 million taxpayers. I contend that the x1.5 dummy model I proposed above is, on its face, defensibly fairer than a flat tax rate, and I have the advantage that the architects of our present tax system agree with me. (Yes, I realize this isn't exactly a first-class endorsement.)
If "influence" was proportional to "likelihood of usage of government services", then flat tax away.
It is not.
"Influence" equates more to "probability of being the architect of IP laws", or "probability of influencing a decision on an antitrust suit". And I hope even my short rant on Mr. Jobs demonstrates how utterly pivotal these intangible benefits of wealth can be.
Your Friend in the Woods,
I take back what I said, because now you are thinking. Albeit, not entirely clearly.
Why "Steve Jobs is Worth Every Penny He Earns"
First, allow me explain the concept of "economic surplus," since I don't think you understand it fully. If I sell a widget to you for $500, and your maximum willingness to pay is $750, you will gladly give me the cash and walk away better off by $250. Why? Because you now have a product you value for $750, but you only had to give up five "Benjamins" to obtain it. The difference of $250 is your "consumer surplus."
Likewise, if it cost me $300 to produce the widget, and you pay me $500 for it, I walk away better off by $200. This is my profit margin, or "producer surplus."
In other words, we both walk away as winners to the transaction. This explains the paradox when you say "thank you" to the merchant operating the cash register at his store, and he responds with an equally heartfelt "thank you" in reply. The exchange has been a "win / win" for both of you.
Now, if I sell this same widget to 5,000 customers, I will earn $1 million in profits ($200 profit / widget * 5,000 widgets = $1 million profit). But consider this, I have also generated a $1.25 million net "consumer surplus" for all the people who bought them. (This assumes, of course, that each customer values the widget as much as you did at $750, but only pays me $500.)
Now, should I stop selling my widgets once I reach $1 million in profits, because as you put it, "No man, regardless of his contributions to society, is actually ‘worth' more than $1 M per year?" What if there are another 5,000 customers who also want to buy my widget? Should they go home empty-handed? Should my customers be required to wait for the next innovator to come along (however long that might take) and develops a new widget just as good (or better) than mine? Should I shut down my operations and lay-off my workers until the new year begins, because Uncle Sam won't allow me to keep what I earn until then? That would be crazy!
Alternatively, should I go on selling widgets to my customers even if the government steals all the additional profits I generate? (Please note that your arbitrary limit of $1 million in income per year would imply a 100% marginal / "progressive" tax rate on each dollar of profit earned above this threshold.) To continue selling in this scenario would be to engage in charity. Now, don't get me wrong, there is absolutely nothing wrong with charity, but only so long as it is voluntary. Regardless, I think most people would choose to stop producing widgets and they would take a vacation instead.
Thus, returning to the specific example of Steve Jobs, unless (and until) another innovator comes along with a competing product or service that is just as good (or better) than the iWidget, we should hope that Mr. Jobs will have the proper incentive to continue supplying us with these products. "Society" is far better off when he does.
Now, I will concede that you are probably correct to say that someone else will develop a better widget eventually, but how long are you willing to wait? And in turn, should this new innovator be effectively forced to stop selling his product(s) once he reaches your arbitrary $1 million threshold, as well?
There is a reason why the store shelves were empty in the U.S.S.R.
Intellectual Property (IP) Laws
This is beyond the scope of our discussion. I agree that in many cases the duration of a patent (and the government granted monopoly privileges that go with it) are too generous. However, it would be a huge mistake to not protect IP rights at all. Look at China. There is going to be a day of reckoning when the Chinese will have to start developing some IP on their own, rather than stealing it from the Americans, Europeans, and Japanese.
Marginal / "Progressive" Tax Rates
You wrote, "If being taxed at 30% instead of 25% makes the difference in your wanting to be a doctor, you aren't morally qualified to be a doctor." First of all, what makes you think a doctor has a moral obligation to be another man's slave? A 25% rate implies that a doctor must be a slave from January 1st to March 31st of each year. If you raise his tax rates, then he must be a slave even longer. Second, like most Keynesians, you assume that wealth creation is impervious to tax rates, no matter how high those rates might be. In fact, some Keynesians are so delusional that they actually believe that the higher the tax rate is, the less one will earn per hour of work; and thus, the more motivated that person will be to work even harder to make up the difference. After all, a man has to feed his family, right?
Well, yes and no. A rational man is not going to sit back and allow himself to be robbed blind. To borrow Thomas Sowell's definition, "Economics is the study of the allocation of scarce resources which have alternative uses." Time is a scarce resource, because without exception, no man has more than 24 hours in any given day. Since time also has alternative uses, one way it can be reallocated is to spend it doing things other than work. In so far as a man has to meet his basic needs in life, time can also be spent working in the underground economy. There are a myriad of ways a man can avoid paying taxes, some perfectly legal and others not. If you raise tax rates too high, the risk / reward trade-off of moving your economic activity to the black market (and/or under-reporting your income) will begin to shift toward doing exactly that.
"Progressive" Tax vs. Flat-Rate Tax
I agree that "taxes are the price that citizens pay for their government," and without getting into a debate over the proper role of government, let's agree for that sake of argument that some level of government services are indeed necessary (e.g., courts of law, national defense, certain "public goods" - strictly defined as non-exclusionary and non-rivalrous). These need to be paid for, of course, but who should pay exactly, and how much should they be required to pay?
You believe that "each man's contribution should be proportional to his representation in governing the country's social institutions." You then go on to say that "it's a simple fact" that the man who earns more has more influence on these institutions. Really? So, are you saying that the man who generates $1.25 million in "consumer surplus" for his customers, and takes home $1 million in "producer surplus" for himself, yet does not engage in any form of rent-seeking behavior has a greater influence on the government than the man who earns less but hires a lobbyist? I agree that the man who earns more has greater potential resources at his disposal to do so, but what makes you assume he is going to use them for this purpose?
And even if he did, so what? What part of the First Amendment do you not understand? A man has an inalienable right to "petition the Government for a redress of grievances," as the Supreme Court ruled (correctly) in the Citizens United case earlier this year. If you have a problem with rent-seeking and lobbying, the best way to alleviate this problem is to reduce the size, scope, and power of the federal government, so our political class has less influence to peddle to all these moochers and parasites. James Madison warned us about this problem in Federalist Paper No. 10, and that is why the Founding Fathers gave us a federal government of limited, enumerated powers. (It was during the New Deal era when many of these powers were expanded arbitrarily via the "Living Constitution" doctrine. Most notably, the Commerce Clause. If you want to read about an especially egregious case, see Wickard vs. Filburn.)
You wrote that "government is ostensibly a national 'corporation' to provide public services." Using that analogy, shouldn't the "shareholders" (i.e., taxpayers) in this "corporation" be allowed to vote in accordance with how many "shares" they own? And if so, wouldn't that mean that those who pay more taxes (i.e., in absolute dollar terms) would get to cast more votes? For example, one vote for each $10K paid in taxes each year. Now, that would be a true plutocracy. (Something I am opposed to, by the way.)
You are correct to note that I am in favor of a flat-rate (%) tax, though. Why? Because every American should have to pay for his government and have a vested interest in how it spends our money. A flat-rate (%) would also eliminate much of the rent-seeking that goes toward trying to convince Congress to write numerous deductions, exceptions, rebates, and other loop-holes into the code. Ideally, we should repeal the 16th Amendment and replace it with a flat-rate (%) tax on either income or consumption. An additional advantage is that this would greatly alleviate the administrative burden of enforcing and complying with the code. And, as any respectable economist knows, a flat-rate (%) system would eliminate many of the distortions in the "price signal," which is so essential to a well functioning market. Keep in mind that most people look at after- tax costs rather than pre- tax costs; whether it be for labor, interest paid on mortgage debt, or the price of an electric car. If the tax rate paid on these things is flat, the after- tax prices of each item relative to all the others will be the same; and it is relative prices that matter when it comes to "allocating scarce resources which have alternative uses."
Now, let me address the real crux of the issue. A flat-rate (%) tax is "progressive" in absolute dollar terms. For example, if a flat-rate (%) was imposed on income and set at 20%, the man who earns $1 million would pay $200K in taxes, but the man who earns only $50K would be required to pay only $10K in taxes. This is fair, because if a man earns more income (or consumes more), he is most likely going to use more government resources in the process (e.g., police, fire, and legal protections, as well as the use of public infrastructure). Ideally, the cost of government services should be charged directly to the beneficiary of such services (e.g., the rich man who ships a lot of his products on public roads should be required to pay a toll tax, which would be used to maintain these roads). But since it is nearly impossible - in practice - to allocate the costs for all government services in this manner, a flat-rate (%) tax is probably the closest approximation to fairness.
A "progressive" tax, by contrast, is unfair, because I see no reason why each marginal dollar earned (or spent on consumption) would lead to a higher marginal cost for the government services necessary to support it.
In summary, your "representation" argument is fallacious, because it assumes behavior that may or may not take place (i.e., rent-seeking). And a "progressive" tax is unfair, because it can only lead to some people being forced - arbitrarily - to pay more for government services than others, and thus, be required to subsidize others. "Subsidization" is nothing more than a euphemism for wealth redistribution, and thus, legalized theft.
I apologize for such a long post, but you have raised a lot of important issues. Besides, you are probably the only one who is going to bother reading this.
I've posted my reply immediately above your comment rather than here for some additional space.
Trickle ... nice. One of the more visceral rejections of trickle down theories I have seen.
I actually found it to be a highly accurate view of trickle down economics. The rich get a tax cut, save it for themselves and then lay off blue collar americans. Not to mention sending our jobs to China and India.
John Bo(eh)ner ... can you say "emotionally unstable" - what a piece of, ahem, "flawed work". I absolutely can't tolerate maudlin drunks. At the very least, you can knock a belligerent jerk on their a$$ and, more often than not, they stay down (just don't turn your back!) However, you tell vapid, 'vapors'-rub whiners to hit the bricks and they just mosey on down the bar to cry in another mark's beer -- Wahwahwah, O poor, poor, pour me! OT (then again...) did you know that 19 th century pro-slavery terrorists were called "pukes" - how befitting (and, suitable for 'tooning;-)
Phala, Whys=Wise but No≠Know
I felt it trickle down alright! My job was outsourced and I ended up working at BevMo. Lousy fat cats and their supporters! TO *$#!@ With compromise! Soak the Bastards!
It's that old jukebox standard, "Johnny Cry." Just a regular guy, singin' about his emotions.
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