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Hayward on The Tax Game

Hayward is on his game today with a Power Line post which asks, "Is There a Conservative Case for Higher Taxes?"

If you aren't compelled to read the whole thing yet, allow me to lift the curtain just a bit and reveal that his answer is, "yes."

My theory is simple: if the broad middle class of Americans are made to pay for all of the government they get, they may well start to demand less of it, quickly.

...if you want to limit government spending, instead of starving the beast, serve the check.

And only Hayward can formulate a strategy whereby "a debate on how to raise taxes might actually be fun to have with liberals."

Categories > Economy

Discussions - 21 Comments

Hayward is right. Again, I live in the Stupid State. The bluest, highest taxed state in the U.S. Yesterday I had to pay $14.00 to drive across the San Mateo bridge with a four axle rig (truck and horse trailer). The San Mateo bridge is 7 miles long. Since I had to make a round trip, one can calculate it at a $1 a mile. The actual road is full of pot holes, cracks and bumps. My question immediately was "What in the hell are they doing with the money". My immediately reply - well they are A. Putting it towards state pensions and salaries or B. Smoking it.

Keep taxing us Governor Moonbeam because at some point and time there will be no money (obviously there is none to fix the San Mateo Bridge) and the bluest State will hit the proverbial brick wall.

You are right Steve - Let them have their cake and eat it too!!!!

Yes, but ... nobody is actually going to raise taxes on the almost half of the population (Wow, that's a lot of voters!) who do not pay. That "free ride" is not ending; it is just not happening and they are the people who will happily endure national debt because they know the check will never be divvied in a way that includes them. Those of the middle class who I know are already seriously opposed to current government spending because already paying the check.

If everyone had been doing their bit to pay the tab, we would not be in this fix.

Ah, and listening to Rush in the background today, he's right about what Republican congressmen are going to face in the fall in the way of middle-class wrath if they do "serve the check" to people who already tired of picking up the tab. They won't be looking to Democrats, but the Tea Party folks will gain traction.

"...the almost half of the population (Wow, that's a lot of voters!) who do not pay."

Well, Kate, those are the sort of incorrect notions one will have if they spend too much time with "Rush in the background." (or Gretchen Carlson of "Fox & Friends" or any of the other "fair and balanced" news outlets)

https://www.salon.com/technology/how_the_world_works/2011/05/31/three_lies_about_taxes

https://www.wweek.com/portland/article-17350-9_things_the_rich_dont_want_you_to_know_about_taxes.html

Actually I got that bit of information from NPR.

https://www.npr.org/templates/story/story.php?storyId=125997180

The number is 47%, which is why I only say almost half.


Here you go Kate:

Information on who pays the taxes from the IRS - The Internal Revenue Server:

https://www.american.com/archive/2007/november-december-magazine-contents/guess-who-really-pays-the-taxes

This will clearly show via the IRS that you are right.

Of course Salon knows more than the IRS does on who pay taxes.

Then you need to read (and write) more carefully, Kate.

You wrote "going to raise taxes on the almost half of the population (Wow, that's a lot of voters!) who do not pay."

You did NOT write "raise INCOME taxes on the almost half of the population who do not pay."

There are, I assume you know, plenty of other taxes that people pay. Even the NPR piece specifies that the stat applies just to that specific tax:

"...nearly half of all Americans don't have to pay any federal income tax."

Also, that nearly 50% figure is an aberration, and not typical of even the last decade - in which it's been lower (more like 35-40%).

Also from the interview:

"Siegel: But we pay other taxes, most notably the federal payroll tax. How many Americans pay more in payroll tax, FICA tax, than in income tax?

Mr. WILLIAMS: If you consider both the share paid by the employee and by the employer, which most economists think is borne by the employee, about 75 to 80 percent of us pay more payroll tax than income tax. Only 13 percent don't pay either one of the taxes a far cry from the 47 percent who get out of the income tax."

Returning to my links, the first one elaborates that:

"In 2009, Congress' Joint Committee on Taxation found that 51 percent of households owed no federal income tax. According to Marr and Highsmith, that figure was inflated by special recession-related factors -- In a more typical year, "35 to 40 percent of households pay no federal income tax."

But that does not mean that these households pay no federal taxes at all. Far from it: Nearly all working Americans pay payroll taxes to fund Medicare and Social Security. In 2007, the poorest Americans -- taxpayers in the bottom fifth of income -- paid 8.8 percent of their income as payroll taxes. The next fifth paid almost ten percent. The top 20 percent of earners paid only 5.7 percent."

The second link, which is what makes me suspect you're a Gretchen fan (but odds are the same highly misleading wording and stat is peddled all over FoxNews, as well as by Rush):

"1. Poor Americans do pay taxes.

Gretchen Carlson, the Fox News host, said last year “47 percent of Americans don’t pay any taxes.” John McCain and Sarah Palin both said similar things during the 2008 campaign about the bottom half of Americans.

Ari Fleischer, the former Bush White House spokesman, once said “50 percent of the country gets benefits without paying for them.”

Actually, they pay lots of taxes—just not lots of federal income taxes.

Data from the Tax Foundation show that in 2008, the average income for the bottom half of taxpayers was $15,300.

This year the first $9,350 of income is exempt from taxes for singles and $18,700 for married couples, just slightly more than in 2008. That means millions of the poor do not make enough to owe income taxes.

But they still pay plenty of other taxes, including federal payroll taxes. Between gas taxes, sales taxes, utility taxes and other taxes, no one lives tax-free in America.

When it comes to state and local taxes, the poor bear a heavier burden than the rich in every state except Vermont, the Institute on Taxation and Economic Policy calculated from official data. In Alabama, for example, the burden on the poor is more than twice that of the top 1 percent. The one-fifth of Alabama families making less than $13,000 pay almost 11 percent of their income in state and local taxes, compared with less than 4 percent for those who make $229,000 or more."

cowgirl's article from AEI also appears to be going with the Fox/Rush legerdemain, as well.

Thanks, cowgirl!

Craig, does all that mean you prefer a flat tax for income so rich and poor pay the same percentage of taxes?

Firstly, did you even read "all that"?

If so, I'm wondering why you would think that (actually) reading that should lead to the conclusion that a flat tax would be preferable?

It would be nice though if you could at least concede that you were perpetuating a falsehood - the one where you said that almost half of the population does not pay taxes, when that is only true (as a recent anomaly, not as a typical situation) for federal income tax - and very far from the truth on nearly every other sort of tax, including state and local taxes. Of course, we didn't even get into why some of those people haven't paid - such as, it's hard to pay income tax when you have no income.

Scanlon, I think the point is that about half the population pays BOTH income and payroll taxes, while the other half only pays payroll taxes. Do you really believe that this poorer segment of the population pays its own way in any sense? If they had to bear the full burden of their dependency (instead of parasitically siphoning it off more productive people), would they be such strong advocates of Federal power? I think not.

Good point Redwald. And to add one more thing. Does Scanlon believe that the huge illegal population of 20 million people pay income and payroll taxes equivalent to that of legal residents - whether their tax burden is just payroll taxes or both? I can assure you that that illegal population in the Stupid State pays very litte if any at all, yet reaps benefits like medical care and education at better rates than legal residents living in the Stupid State.

"I can assure you that that illegal population in the Stupid State pays very litte if any at all, yet reaps benefits like medical care and education at better rates than legal residents living in the Stupid State."

A: How do I know that? Well, cowgirl assured me it was so!

B: Do you mean THE cowgirl - she of The Stupid State?

A: Yes!! THAT cowgirl, the one from the Stupid State.

B: Well then, say no more. The matter is settled. We now know The Truth, and there's no reason to discuss this matter any further.

Here are some facts for you Scanlon.

https://immigrationcounters.com/

A .Cost of Illegals in California Annually - $10.5 Billion
https://usgovinfo.about.com/od/immigrationnaturalizatio/a/caillegals.htm

B. Cost of Illegals in California - Executive Summary.
https://www.fairus.org/site/PageServer?pagename=iic_immigrationissuecentersffec

$10.5 Billion annually.... The Stupid State has a 26 Billion dollar deficit. Most of illegals earned money goes back to their native country - $20 Billion total to Mexico. I can't wait for the dump truck load of links from intelligent websites like Salon...

Do you really believe that this poorer segment of the population pays its own way in any sense?

Just to clarify, of that 47% of the population:

1. Roughly 30% might send their children to public schools, make use of Veterans's hospitals, qualify for the services of the public defender or legal aid society, or purchase a city bus pass. They do not qualify for anything else of note, barring some natural disaster.

a. Only a modest minority of families with children pay school taxes and tuition in such quantity that the education of their children in financed in real time. This can be true even of quite affluent families. Primary and secondary schooling is subsidized by people who have yet to have school-age children and by people whose children are beyond school age. The economic effect of property taxes, by the way, falls on anyone who pays rent.

b. The use of Veterans' hospitals is a form of deferred compensation.

c. The appropriations necessary to finance the public defenders' offices, the legal aid societies, and the deficits of the metropolitan transit service are contextually quite small (~0.2% of personal income in my home town).

2. About 20% are elderly or disabled. Social Security has stiff eligibility requirements and is somewhat earnings-related. Beneficiaries are distinguished not so much by their social stratum as by their point in a life cycle.

3. Another 10% or so are suffering interstitial unemployment. Unemployment compensation has eligibility requirements as well. The people drawing benefits now will be paying in again in a year.

---

That does leave a considerable able-bodied population eligible for this and that. The thing is, disagreeable as are the social side-effects of many programs and as inefficient is their administration, open-ended doles and subsidies to mundane expenditure do not account for a large share of public expenditure. Housing subsidies, Food Stamps, gas and electric subsidies, and relief payments (TANF, &c) chew up less than 4% of federal, state and local budgets.

---

There is of course the matter of public expenditure on medical care and on long-term and custodial care. These programs can be agreeably restructured. The thing is, few people are of a social stratum that they are not potential beneficiaries of these programs, because the conditions which give rise to them can financial devastate all but the most patrician families.

Okay Scanlon I will play your silly game.

Illegal aliens in California cost the taxpayers $10.5 billion per year. Go ahead make my day and google it.

There are approximately 3 to 4 million illegal aliens in California. Let's play math class.

$10.5 Billion divided by 4 Million (I will take the higher number to help your illegal aliens look better on paper)
equals approximately 2.6 million per illegal alien per year in costs to the taxpayers of California. There is no way there is any illlegal alien in California that is working a job that will cover his/her expenses.

Now that you have the truth, believe that you are truly blessed with knowledge.

Taking your word for all that, AD, the point remains that the 50% of us who actually pay Federal income tax are paying for things like the military, the national parks, Homeland Security, etc. "Carrying one's weight" is more than simply paying for whatever personally benefits you. I think the time has come for the flat tax where all of us contribute to our common welfare. The rationale for the "progressive" income tax (that the country has "made it possible" for affluent people to get that way, and so they owe) is bogus in the extreme. The flat tax, which is still somewhat progressive (in that a percentage of a million bucks is more than the same percentage of 100K), is by far a superior system of taxation because it would prevent the incipient parasitic society that is forming.

Again,

1. State and local governments are heavily dependant on property and sales taxes. The economic effect of these taxes falls on just about everyone even though the responsibility for the remittances does not. The economic impact of sales taxes is inversely related to income.

2. Payroll taxes are assessed on anyone who works. The economic impact is inversely related to income because only returns to labor are taxed and because federal levies exempt salaraied income in excess of a referent value. The last time I checked, federal payroll tax levies amounted to 5.8% of domestic product whereas federal income tax levies were just north of 6% of domestic product.

3. 'Ere the assessment of taxes and transfers, less than 15% of personal income in this country accrues to the less affluent half of the population. A great many people are quite impecunious. Making a wretched fuss that tax levies depress their disposable income by 18% rather than 32% seems in poor taste.

4. Public policy, most especially between 1958 and 1996, erred in how it structured public benefit programs. However, no where near 47% of the population is properly described as 'parasitic'. (And a discussion of the less affluent neglects consideration of the sort of rent-seeking that really is an abuse of the public weal). For many who are net beneficiaries of common provision, the overwhelming bulk of the benefit is in the form of the public schools, a program of antique provenance.

Those are nice facts, but they are essentially irrelevant. First, to suggest that it is tasteless to tax the bottom half of the population does not legitimate the overtaxing of the more productive half (Robin Hood). Most of our Federal institutions serve all the people, and all the people should pay. As I'm sure you know, the growing inequality in America is mostly due to dual-earner couples, outsourcing/offshoring, out-of-control immigration, and sectoral shifts in our economy that strongly favor highly-educated workers. If we want to be Democrats about this, we can blame the well-off. Let's not, and instead say that 1) immigration needs to be reduced (both highly selective as well as the mass-import of poor Mexicans), 2) we need a national industrial policy to promote blue-collar work in this country, 3) more private investment in start-up industries (where employment gains will be highest). How exactly does stealing from the rich and giving to the politicians help any of this?

As for parasites, I was not suggesting that 47% of the people are out-and-out parasites. I was suggesting that a situation where a person votes on spending without having to spend himself is a dangerous situation. It's how we got into this terrible debt crisis. Overall, regardless of the income distribution, it's far better if everyone pays something towards the Federal burden.

You keep refusing to acknowledge in the course of this discussion that they are paying, just at a lower rate than the remainder of the population.

We are in a debt crisis because expenditures exceed revenues. Those expenditures may be wise or silly. They do not provoke a debt crisis if you are willing to raise the revenue to finance them. There is a great deal of dreck in the federal budget, but the ratio of federal expenditure to domestic product is not unprecedented (actually fairly similar to what it was in 1984). Unnecessary expenditure is not unsustainable expenditure.

Federal taxes are so structured that they are pro-cyclical; the proportionate fall in tax revenue well exceeds the decline in domestic product. The ratio of federal tax collections to domestic product is now as low as it has been for 50-odd years. This was, of course, exacerbated by the decision of the Democratic congressional caucus to increase the ratio of federal expenditure to domestic product by 15%. That was because...

The set of social dynamics through which the political class is generated has produced a corps of asinine, unserious, and irresponsible individuals at the top. The electorate tolerates these shmoes, but they are produced by a process of self-selection and socialization as are any occupational group. Only a modest minority of adults are paying much attention to public affairs, fewer still among the less affluent and educated. Beneficiaries, mobilized by the AARP or not, are not usually going to be a threat to more than a few dozen members of Congress. Public sector unions are a more formidable foe than beneficiary organizations, but they have just had their ass handed to them by several state governors who were compelled by circumstance to address they threat these folks posed.

Exactly what injuries were done to members of Congress who cast votes in 1996 that dramatically truncated federal relief payments (AFDC, now TANF)? Not a whole lot from the electorate; just a mess of insults from the likes of John Lewis. Large blocs of the dependent population are not promising material for political mobilization and the marginal penalty to be had in voting against the immediate material interest of the dependent population is close to zero. Name me a Republican member of Congress from a slum district.

Slapping a proportionate income tax on the lower 47% of the population might reduce the federal deficit by about 11%. That ain't going to get you out of your debt crisis. It will, however, cause an abrupt decline in the disposable income of low-wage workers and impecunious old folks who generally have few ready options to adjust to such changes (the condition of the labor market rendering the option of a 2d job out of reach for most).

Along time ago, Robert Dole made the observation that 'there is no PoorPAC'. If you want to take a gander at a mobilized collection of rent-seekers, look at the teachers' unions, not at the poor.

Any time the government consumes 25% of the GDP I think we can conclude that this is unsustainable in the long-term. Higher levels have occurred in Europe, and we see where this is leading.

I feel for those who are impecunious (i.e., broke), but there are a variety of reasons they ended up that way. I think private charities are the way to go for that, not holding a gun to the heads of productive people and forcing them to be "their brother's keeper." In the past, the FAMILY was the insurance policy, and it should be so again. One of the reasons Europeans are going extinct is because they let the goverment do too much for them.

All should pay -- we could perhaps make the transition gradual because it is a game-changer. I really don't want to be inhuman, but I definitely want people to start taking responsibility for their own lives (whenever possible), and I also definitely want charity to come from the heart and not from the barrel of a gun.

And yes, I realize this makes me sound like a libertarian. They are correct about some things.

Any time the government consumes 25% of the GDP I think we can conclude that this is unsustainable in the long-term. Higher levels have occurred in Europe, and we see where this is leading.

Public expenditure has exceeded a quarter of domestic product for about 70 years now. I think the case that such is 'sustainable' has been made. Whether it is advisable is another matter.

In a number of European countries, public expenditure has exceeded 40% of domestic product for many decades. Some have severely compromised public balance sheets at this time, some do not. Reasons vary: Ireland made an impetuous decision to assume liabilities of its private banks, Spain is suffering the effects of prolonged economic recession, and Greece more or less fits your thesis with some accessories appended. What you do see in Europe (and in spades in the industrial Orient) is the implosion of fertility. I would not doubt that pathologies in state-society relations play some role in this, but those pathologies are quite prevalent across the whole run of Occidental and affluent countries. Yet, fertility rates are wretched in the Asian Tigers (which have a history of smallish public sectors) and have recovered in the United States and France. Other factors are at work there.

Of course myriad factors shape fertility decisions, but I guarantee you that government-sponsored old-age pensions are a prime culprit. Surveys of 3rd-World fertilty have always shown that children are viewed as old-age insurance (among other things). As for Asia, small public sector or not, they have old-age pension systems.

Is a single generation enough time to determine sustainability? Do you know the time-frame of social evolution? I think not. And when you factor in State and local taxes, it's about 40% of peoples' incomes that go to government (utterly shameful). If we could cut that in half we'd have a truly dynamic society, not one that mopes along at half-speed. Everything that truly needs to be done can be done with half what we spend. And, if the government would get out of the medical business, we'd find medicine far more affordable.

I agree that none of this could be done overnight. I'm suggesting radical transformations, and people will need a half-generation to adjust their behavior.

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