Politics
Harold Meyerson recently set out to sneer, in the pages and pixels of the Washington Post, but succeeded more decisively in refuting himself. It's always a bad sign when a writer introduces statistical evidence that weakens the argument he's trying to make.
Meyerson wanted to show that the Republican approach to cutting the deficit—spending cuts only, no tax increases—is absurd. His point on taxes is that in 1955, according to the Campaign for America's Future, the country's 400 wealthiest taxpayers had an average income of $13.3 million (in 2008 dollars) and paid 51.2% of that in federal income taxes. In 2008 the richest 400 had an average income of $270.5 million and paid 18% of that in federal income taxes. In 1955, he notes, "we could afford to pave roads."
But wait. 51.2% of $13.3 million is $6,809,600, the average federal income tax bill for the most fortunate 400 in 1955, using 2008 dollars. Thus, the federal government gathered in the inflation-adjusted equivalent of $2.724 billion from the whole lot of them. 18% of $270.5 million is $48.69 million, meaning that average tax bill for the top 400 was, adjusted for inflation, more than seven times as high in 2008 as in 1955. Those 400 households collectively accounted for $19.476 billion in federal revenues.
It speaks well of American governance during the Eisenhower administration that we managed to pave our roads while receiving $2.724 billion in federal taxes from our richest citizens. It speaks poorly of the quality of our governance today if, despite the additional $16.75 billion the families in the capstone of the income pyramid paid to the IRS in 2008, we can't pave the roads as often or as well, which Meyerson suggests is the case.
Assuming Mr. Meyerson owns and operates a calculator, it makes sense to ascribe his mistake—speaking as if the tax revenues generated by the richest 400 have gotten much smaller when they have clearly gotten much bigger—to a philosophical disposition rather than a mathematical error. Most people, and certainly most NLT readers, assume the purpose of a tax system is to raise revenues to finance the government's activities. A seven-fold increase in tax revenue from one segment of the population would, accordingly, mean that the government could undertake more activities, or that other segments of the population could pay lower taxes, which is a rough description of what actually happened in America between 1955 and 2008.
If, however, the primary purpose of the tax system is to punish or reproach the rich, to express our envy and resentment of people who are rich and getting richer, then it makes sense to treat the much larger revenues from that cohort as a minor detail and concentrate, angrily, on the fact that their incomes have gone up while their tax rates have gone down. Six years ago the columnist Jonathan Chait insisted that such malign intentions toward the wealthy played no part in liberals' preference for progressive taxes: "Liberals want to make the rich pay higher tax rates not because they hate them.… It's because somebody has to pay for the government, and the rich can more easily bear higher rates."
Well, yes, one advantage to being rich is that you can afford things easily that would be difficult or impossible for other people, including the 91% federal income tax bracket that was on the books in 1955. The problem with Chait's argument is there's no way to say where it stops. If the principle is that the rich should pay higher taxes because they can more easily bear the rates, then we should keep raising tax rates until the rich can no longer bear them—until, that is, they're no longer rich. One need not be rich to find this prospect disquieting. A government that can take whatever it wants strikes a lot of people as unfair, and unfree.
Assurances that only the rich will suffer as a consequence haven't convinced most people that this policy is fair, or that it really will be confined to the wealthy. In November 2010 voters in Washington, a state blue enough to have given Barack Obama 57% of its vote in 2008, rejected a state income tax applicable only to individuals making more than $200,000 per year and families making over $400,000. That most prosperous 1.2% of the state's population evidently had a lot of less-affluent friends, since 65 percent of the voters opposed the tax. One factor was that the promise to limit the income tax to the $200,000 and $400,000 thresholds was good for all of two years, after which the legislature could have applied it more broadly.
Meyerson makes a second point. Not only are the rich getting off too lightly, but the main beneficiaries of the federal government's activities tend to be red states. He cites a Tax Foundation study showing that in 2005 the federal government spent between $1.76 and $2.03 in New Mexico, Mississippi, Alaska, Louisiana, and West Virginia for every dollar it received from those states in taxes. By contrast, the blue states subsidize the federal government's operations: New Jersey, Nevada, Connecticut, New Hampshire, and Minnesota received between 61 and 72 cents for every dollar paid in federal taxes. The states that "drain the government also constitute the Republicans' electoral base," writes Meyerson, "while those that produce the wealth constitute the Democrats'."
But, again, there's more to the story. The Tax Foundation study includes money transferred between citizens and the federal government as well as between the federal government and state and local ones. As the organization explains in the introduction to its study, "The most important factor determining whether a state is a net beneficiary is per capita income. States with wealthier residents pay higher federal taxes per capita thanks to the progressive structure of the income tax." New Jersey and Connecticut are net exporters of dollars, vis-à-vis the federal government, precisely because progressive federal taxes, which Meyerson imagines to have been relegated to the dustbin of history, draw in so much money from those states' disproportionately affluent residents. Mississippi and West Virginia have disproportionately few residents in the top tax brackets, but more than their share of poor residents receiving assistance from Medicaid, food stamps, Supplemental Security Income, school lunches, and a long list of other government programs.
If the disparities between importer and exporter states are intolerable, then perfect fairness will be attained when no such disparities exist, and every one of the fifty states receives precisely as much from Washington as it sends to Washington. At that point, however, the involvement of the federal government becomes completely pointless. The big steps needed to reduce the disparities between states that are net importers of federal dollars and net exporters would be to abolish the progressive federal income tax in favor of a flat tax or Value Added Tax, and do away with federal programs that direct assistance to households with low incomes.
I'm not as mean-spirited as Harold Meyerson, so I'll suggest consideration of a less drastic remedy, proposed 38 years ago by William Buckley in his book Four Reforms. Buckley would confine eligibility for welfare state programs to Americans living in states whose median income was below the national average. Because Buckley thought it was economically and politically debilitating to "turn the skies black with criss-crossing dollars," his reform would ground a lot of those dollars. Federal welfare expenditures would shrink, as the number of people eligible for them was limited, and prosperous states would pay for their own welfare programs without the transit and administrative fees of sending them on to Washington and then back to the states. Mr. Meyerson, do you wish to second the motion?
Where are the Hollywood celebrities holding telethons asking for help in restoring Iowa and North Dakota and helping the folks affected by the floods? Where is good old Michael Moore?
Why is the media NOT asking the tough questions about why the federal government hasn't solved this problem?
......Asking where the FEMA trucks and trailers and food services are?
Why isn't the Federal government moving Iowa people into free hotels in Chicago and Minneapolis ?
When will Spike Lee say that the Federal government blew up the levees that failed in Des Moines?
Where are Sean Penn, Bono, and the Dixie Chicks?
Where are all the looters stealing high-end tennis shoes, cases of beer and television sets?
When will we hear Governor Chet Culver say that he wants to rebuild a 'vanilla' Iowa ... because that's what God wants?
Where is the hysterical 24/7 media coverage complete with reports of shootings at rescuers, of rapes and murder?
Where are all the people screaming that Barack Obama hates white, rural people? My God, where are Angelina Jolie and Brad Pitt, Oprah, and Harry Conick, Jr?
How come you will never hear about the Iowa flooding ever again? Where are the government
bail out vouchers? The government debit cards?
There must be one hell of a big difference between the value of the people of Iowa and value of the people of Louisiana .. Pass this unedited, un-doctored, factual information forward ..... to get Americans thinking.
Beautiful post Mr Holst. Well said. My other question would be is why are the people in those areas not looting and shooting one another? Buehler? Anyone?
As far as an answer to your question: "Where are Sean Penn, Bono, and the Dixie Chicks?"
I really don't know or don't care about Sean Penn or the Dixie Chicks (the lead singer blew it big time), but I believe that Bono - the guy who points fingers at the United States all the time for not giving money and helping the poor and starving in Africa and all the other third world countries - is in the processing of continuing to evade paying taxes. Liberalism is a mental illness.
I
No, Meyerson moves for Summary Judgment, and wins.
The top bracket in 2008 was 35%. The top 400 paid 18%, this is evidence of legal/political rent seeking.
i.e. lower the cap gains tax it is "good for the economy".
The top 400 grew over 20 times adjusted for inflation, as they manipulated and controlled the formation of the law, and the selection of relevant "standards".
i.e. the estate tax.
Forensic Statistical and Legal evidence both clearly indicate that we have a Kleptocracy.
In addition, there is no real Universal Good for the Economy. There is only "Good for the Economy" of a particular business. Thus you end up doing nothing more than the bidding of Wal Mart. Card Check is bad, because it is bad for the profits of Wal Mart.
Look Wal Mart has a fiduciary duty to maximize profits, but it doesn't necessary follow that elected officials have a duty to maximize the profits of Wal Mart, except that you would be wrong operationally.
The people are fickle, but Wal Mart is calm collected and organized. It is a greater law giver than any one politician. It has hoards of legal and courtroom experience, it has its own international law, the UCC bows before it. The "Liberal Democracy" status of China is no barrier. The arc of history is long but it bends towards Wal Mart, and Wal Mart probably knows more about China that Huntsman.
Congrats, you have just resolved History in Favor of George Soros, multi-national corporations and Capital. Kneel before the Altar of Bloomberg and burn your copies of the Republic, reject all that is located in the PIGS: Portugal, Italy, Greece and Spain. It makes no difference: Karl Popper's society is still a liberal democracy.
You sir are the one with a problem. Your catamite political science is without honor or coherence. At best it serves a loose conflaguration of corporate entities against the true interests of the american people.
Raise your voice in praise of CRX and the privatization of prisons. It is good for the economy, because it will pay a dividend, and prison guards are overpaid. Should folks that just dodge shanks, deal with gangs projectile vomit and 1983 actions be paid up to 100k a year after 30 years+a pension? Hells no! It is ridiculous that labor is 70% of the cost of prison. CRX will achieve cost savings by doing it for 22k per guard. Load up on the options, because this one is the Wal Mart you should have believed in!
Destroy Unions and those who organize for mechanical legal bennefits on behalf of workers. Just look at the trend. Watch the law. Notice the demise of investigative journalism and the rise of innane stupidity, it corresponds with the mental destruction of the middle class, and the complete rent seeking of the entire legal class.
What are the rules of the game? What is the Law? What is politics? --The answer to all three is whatever lawyers, judges, lobbyist and politicians make it. What it is mechanically. It lies not in rhetoric, that is a field of the law governed by Copyright, and certainly a massive business unto itself. But the true political process, occurs at Wal Mart, it occurs at Disney, it occurs at Haliburton, or CRX, and it occurs here because these businesses are organized and technically proficient, surgical even.
So if you want to talk Buckley you are talking copyright law. Good for Buckley that he fixed a modicum of creativity in a tangible medium of expression. But in truth the IP circuit is the 9th and federal circuit.
You cry about the demise of California? Do you comprehend the power of Google. Do you know that this post cannot be made without reCaptcha which is owned by Google. How do you even begin to comprehend the economy and dominion of California?
When a child with bright eyes and a soul comes to liking Gandhi and Carl Scott tells him he should watch a Hollywood movie, does he not realize that he is worshiping the politics and law of the 9th circuit which structured the economics that led to his ability to watch it on Netflix?
You think the market is a random walk? Have you heard of due dilligence and Muddy Waters? Boots on the ground take no prisoners investigation and intel followed by massive derivative investments, and a the subsequent release of blindingly accurate analysis?
Children you do not even understand your own game, nothing is clearer to me than the fact that the economy is legally structured and not pre-political, that your catagorization of the welfare state is hopelessly narrow, and that especially when it comes to the top 400 you do not even begin to understand or account for IP, trade secrets and capacity to bend the arc of history.
In that study is the definition of income the same in the 1950s and today?
Some quick web research suggests that capital gains were taxed differently in the 1950s than they are now. If that changes the definition of income in the study, that could have an impact on the numbers. Or perhaps the study factored all such considerations in.
The notion you attribute to the late Mr. Buckley is odd. Poor people do live in comparatively affluent states. Personal income per capita in New York is about 18% higher than the national mean and exceeds that of all but two or three states. At last report, there were still slums in the Bronx.
If it be your idea (or his) states can be responsible for common provision within their borders, you needn't restrict eligibility to qualify for 'welfare programs' (by which I think you mean 'federal welfare programs'. You could dismantle those programs and send a general subvention to the states the value of which would vary according to per capita income and population. The states could then construct programs according to their discretion.
The problem with the above is that the bulk of common provision and income re-distribution is to be found in Social Security and Medicare. As the principal clients for these programs are the elderly-in-general and determining eligibility for them requires collating information about employment history over many decades, portability of benefits is an issue as is maintaining a central repository of records. These programs cannot be readily devolved.