Elitism and the progressive tax system

posted at 10:06 am on October 25, 2008 by Ed Morrissey

I read different blogs to get different perspectives and to keep up with the arguments on the Left, usually at sites with a mix of contributors like AOL’s Political Machine.  Tommy Christopher both blogs and reports at the site, and while I disagree strenuously with Tommy, he’s a good writer and almost always worth a read.  Yesterday, Tommy wrote an interesting defense of the progressive tax system and threw in some snark at elitism that once again shows a misunderstanding of the concept:

Now, I know that there are tens of millions of people who believe, as I do, that a progressive tax is about fairness, about not just the ability to pay, but the degree to which a wealthier person benefits from our common possessions. That position, like any that disagrees with a Republican position, has been dubbed “elitist.”

If that’s the case, then I say “Pass the arugula!” As I’ve said before, I come from a long line of working-class people, civil servants and tradesman, and I’m in the lower end of that economic bracket myself. Where I come from, a man takes care of his responsibilities and doesn’t complain. He pays his taxes. And when he gets somewhere, he remembers where he came from.

I would love to hear from all of the other “elitists” out there, the teacher, the construction worker, the waitress, the meatpacker, who think that people ought to pay their fair share. People who understand that the burden of these hard times is not falling on those who earn over $250,000.00. It’s “elitists” like us that have carried the weight.

First, let’s tackle his defense of the progressive tax system.  Tommy claims that the federal government somehow benefits the wealthy more than the working class.  I’m certain that will be news to both.  To the extent that one can calculate direct benefits and costs, the cost burden already falls almost entirely on the higher earners.  The top 25% pay 67% of the income taxes received by the government, and the top 10% of earners pay 46%.  The bottom 50% of earners in this country pay less than 13% of income tax collected by the federal government.  Direct benefits from government apply to those who pay less, not more, so the top earners don’t get direct return on their investment.

Ah, but Tommy argues that the federal government protects the rich, and therefore it’s right that they pay more.  But the only manner in which the government protects the rich is in how they protect all of us — by defending private-property rights, defending the borders, and establishing the rule of law.  All of that is neutral to the income level of the individual citizens of the US.

So why have a progressive tax system, meaning one in which rates increase with the level earned?  After all, a flat-rate system would still ensure that the rich pay more in terms of gross dollars while ensuring that everyone pay the same percentage of income earned.  Progressives don’t like that, though, because they want to have government determine winners and losers rather than allowing the talents and the work of individuals in a free market determine that.  And note that I’m not talking about government spending (and the various programs that support lower-income families), but only the manner in which the government collects its income.

The progressive tax system serves two purposes.  First, it punishes those who succeed.  Second, it minimizes the negative impact of redistribution so that more people don’t object to it.  A flat-rate tax could raise just as much money, but the redistribution would become more obvious — and unpopular.

That’s why Joe the Plumber’s objection resonates.  Barack Obama wants government to determine what is excessive wealth and confiscate it because government will “spread the wealth” better than the individuals who earned it.  That, in fact, is elitist, and Tommy doesn’t understand that.  A plumber can be an elitist if he thinks that people can’t make decisions for themselves and need a small, select group of people to make decisions for them.   Elitism doesn’t refer to people who sun themselves on yachts in Aruba, but to a governing philosophy that assumes that people can’t run their own lives and require others to make those decisions.

The basic question from Joe the Plumber comes down to who should spend the money people earn.  If the answer given is “government”, then that’s the elitist answer.  If the answer given is “the earner”, then that is the libertarian, free-market answer that supports self-government and private-property ownership.  In fact, it also supports common sense.  Why filter wealth through a huge bureaucracy when Joe the Plumber can spread the wealth for no additional cost at all, choosing his own winners and losers instead of a few elites in Washington doing it for him?

Update: Added a paragraph for clarity.


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You are arguing a false premise. Anyone who has proposed a flat tax or fair tax has already set a base limit on where it begins. Some say, $40k or $50K/yr. No one who makes less than that would be subject to the tax. Therefore your argument goes away.

JAM on October 25, 2008 at 12:01 PM

There is a certain irony here. There is a maximum amount of tax revenue you can get out of the rich, which you hit with a tax rate somewhere around 20% (think Laugher curve). If you want to generate more tax revenue than that in order to fund more projects, you have to raise taxes on the middle class and pour (and probably eliminate benefits for the unemployed so as not to give them the option of not working). The pour and the middle class will continue to work to pay the taxes, because they have more incentive to get that money, however discounted by taxes, than the rich.
After all, the French peasants lived off of something like 10% of their gross income (though you might quibble that some of that gross was rent payed to the owners of the land).
That is, of course, if all you are interested in doing is paying for government…

Count to 10 on October 25, 2008 at 12:12 PM

Biden: CEO Pensions “Go First” (And Your 401(k) Will Go Next

This post is for those who don’t have access to Rush 24/7.

Now, we don’t know if Obama would go along with this. The odds are pretty good that he would, because they have another plan. But now stop and think, here’s Biden, they’re going to take — I don’t care what you think of Big Oil, I don’t care what you think of Enron — the New York Times, by the way, is the Enron of media. They are now officially, according to Standard & Poor’s, junk, on the very day they endorse Obama, they are junk. This just goes to show you propaganda does not pay. There isn’t profit in propaganda. The New York Times is no longer the New York Times. Not what it was. They’re losing advertising revenue, they’re dropping pages, they’re losing readers, circulation, and they are obstinate as hell about it, and now they are officially junk on the day they endorse Obama. So you can talk about all of this greed and all of this private sector greed and so forth, and they’re going to go out and they’re going to take some CEO’s pension, his pension, their pensions go first? Next, your 401(k) is no longer deductible, and get this. This from James Taranto yesterday at the Wall Street Journal, Best of the Web today, and the headline of his piece here, “Are 401(k)s Safe from Congressional Democrats?”

Now, I could answer this in two ways. First, I know you’re scared to look at your 401(k) statements when they come in, what’s happened to this market. Are your 401(k)s safe from congressional Democrats? They’re not safe from Democrats right now, folks, because Democrats have caused what we’re all experiencing. The second answer to the question is the startling information in this story. “If you have a 401(k) or equivalent retirement plan, you’ve probably been watching nervously the past few weeks as your nest egg has shrunken owing to the current turmoil in the markets. Well, it could be worse. But don’t take heart, for what we mean is it could get worse. The market turmoil has some politicians on Capitol Hill eyeing the end of the 401(k) as we know it. Workforce Management reports on a hearing of the House Education and Labor Committee earlier this month.”

“A plan by Teresa Ghilarducci, professor of economic-policy analysis at the New School for Social Research in New York, contains elements that are being considered. … Under Ghilarducci’s plan, all workers would receive a $600 annual inflation-adjusted subsidy from the US government but would be required to invest 5 percent of their pay into a guaranteed retirement account administered by the Social Security Administration.” In other words, there is a plan that the Democrats are considering to convert your 401(k) to the Social Security Administration, your 401(k) then administered by the SSA, your private retirement plan becomes owned by the government. “The money in turn would be invested in special government bonds that would pay 3 percent a year, adjusted for inflation.”

Now, the purpose of this plan is they think you’ll go for this because you’ve seen these wild market gyrations, and you’ve seen your 401(k) plunge, so now they’re thinking that you’ll go along with the Social Security Administration running your private retirement plan at a guaranteed 3% a year. “The current system of providing tax breaks on 401(k) contributions and earnings would be eliminated,” so no longer would you get the deduction off the top of your income for whatever you contribute to your 401(k). The current system of tax breaks on 401(k) contributions and earnings would be eliminated. Teresa Ghilarducci, “I want to stop the federal subsidy of 401(k)s. 401(k)s can continue to exist, but they won’t have the benefit of the subsidy of the tax break.” So that’s two people now that want to come along and take away the tax deductibility and subsidy of your 401(k). George Miller, who runs the committee, and some babe, professor of economic policy analysis at the New School for Social Research in New York.

“Ghilarducci outlined her plan last year in a paper for the left-liberal Economic Policy Institute, in which she acknowledges that her plan would amount to a tax increase on workers making more than $75,000–considerably less than the $250,000 Barack Obama has said would be his tax-hike cutoff. In addition, workers would be able to pass on only half of their account balances to their heirs,” so that your 401(k) would be subject to the 50% death tax rate because the government’s going to own it. The government’s going to own your 401(k), and your 401(k) will guarantee you just 3% in government bonds administered by the government. Your private retirement account that the government set up and got you into, now they want to take over from you, just like Joe Biden wants to go out and make sure that these evil CEOs, their pensions go first. The concept that your money is your money will vanish when the Democrats take over Congress and Obama takes over the White House. All money will officially be government’s.

Now, this is getting pretty brutal, so they had this babe up to testify before this committee, Teresa Ghilarducci, and she offered a sweetener. “Short-term I propose … that the Congress allow workers to swap out their 401(k) assets, perhaps at August levels, for a guaranteed retirement account–just a one-time swap. … How would this work? You go back to your districts and meet up with a 55-year-old who had had $50,000 in his account last month and now has $40,000 in the account. He can swap out that $50,000, valued in August, for that guarantee of what would become, if he retires at 62, a $500 a month addition to Social Security.” So her plan is to have your 401(k) plan taken over by the government, invested by the government, the Social Security plan at 3%, and then your retirement is paid back to you in a Social Security check. Whatever your Social Security benefits are when you retire will be added to by whatever is in your 401(k). The point is that in your mind, if you go along for this, the government is in total charge of your retirement.

And the sweetener, the little hook here is for people to say, “Well, my 401(k) in August it was worth a lot of money, and now it’s lost.” Okay, we’ll give you the August value. Your generous and benevolent government will give you the August value, and then they will take your plan and will put it in the Social Security Administration and will invest your plan in safe bonds at 3% a year, and then when you retire, that money in your 401(k) gets added to whatever your Social — you get one check, your Social Security check. And in that check will be whatever your retirement account is, and you’re essentially giving it up. You’re essentially giving it up. By the way, gone also is any incentive to contribute to it, in terms of the subsidy you get off the top of your income for whatever you donate to your 401(k). Now, I don’t want to totally alarm you here, it’s by no means a certainty that Congress or Obama would embrace this proposal, but I’ll tell you when you listen to them talk, this is the direction they’re headed. You know they’re going to come after pension plans. It’s one of the largest sources of money out there, be it you California teachers, public employees, Teamsters Union, your pension plan, I guarantee you people like Obama and Democrats in the House are eyeing that as though it’s theirs. Joe Biden, “Their pensions go first.”

And then Buenos Aires: “A year ago, when leftist Cristina Kirchner was elected to succeed her husband Nestor as president, many Argentines hoped she’d follow a more conciliatory path … But with gambits like Tuesday’s proposal to nationalize private pension funds, the 55-year-old former senator has shown a combativeness that is every bit the equal of her husband’s. Mrs. Kirchner justified the proposed seizure of $30 billion in pension assets by accusing the funds of having instrumented ‘policies of plunder.’ She said Argentina was setting an example of how to deal with the global financial crisis.” So here’s Argentina with a leftist nationalizing everybody’s pension on the basis of people running the pension funds are crooks. Folks, if you don’t take this election seriously, this is exactly the kind of stuff headed our way.

By the way, this move down in Argentina by the new leftist president, Cristina Kirchner, to nationalize private pension funds is being fought. The citizens, there are all kinds of lawsuits being filed against her down here. People are not standing for this. Look it, Argentina, if I’m not mistaken is the country we always heard about in the late nineties as a model for how to reduce Social Security. That’s right, Chile. Sorry, Chile. One South American country is like all the rest, I guess. I get them confused out there.

The first hour contained a detailed explanation of plans that Democrats have to take your 401(k) away from you and give you the value of it before the market plunge and then put it into the Social Security trust fund, and your 401(k) then will be invested. It’s not your private retirement account anymore. The government owns it, and they’re going to guarantee you 3% growth every year with the purchase of government bonds. And therefore you give up all of the tax deductibility, you know, let’s say you earn whatever it is, a hundred thousand dollars and you put whatever percentage of it into your IRA, then of course your adjustable gross income comes down. So you face a smaller tax payment while saving money. It’s a government sponsored deal and everybody was happy with it. They’re going to take all of that away and put the money in the Social Security trust fund, and then when you retire you’ll get one check that represents your Social Security and whatever your 401(k) has matured to at 3% a year in one check.

Now, one thing I forgot to mention here on this is that IRA contributions drive down adjusted gross income. Using my example, you earn a hundred thousand dollars, and let’s say you direct that $20,000 of it go to your IRA, whatever the maximum you can put away. For some plans it’s 30% max, SEP/Keoghs up to a certain ceiling, but let’s say just for argument’s sake it’s 20 grand, so therefore your adjustable gross income is reduced by $20,000 so you’re going to have a smaller tax payment. Once they take that away from you, guess what? Your tax rate’s going to also go up because your adjusted gross income is not going to have your IRA deduction, and guess what this is going to do? It’s going to push more people into Obama’s new tax increase bracket. It’s going to push more people over the $250,000-a-year magic number. Right now this is not an Obama proposal, I want to make sure that you understand, this is a Democrat Party proposal, and they have been conducting hearings on this already, and the appropriate committee in the House and this plan has been advanced by a professor that they brought in, and they’re intrigued by it. Democrats on the committee are intrigued by it.

Keemo on October 25, 2008 at 12:15 PM

Count to 10 on October 25, 2008 at 12:12 PM

Re-reading that, I wonder if it merited a /sarc tag.
Particularly given my chosen handle…

Count to 10 on October 25, 2008 at 12:15 PM

Ed,

Your figures for total tax paid are incorrect, you quoted the numbers for each groups share of AGI. The percent of total tax paid by each group is even more tilted.

Top 1% pays 39% of total taxes
Top 5% pays 60% of total taxes
Top 10% pays 70% of total taxes
Top 25% pays 86% of total taxes
Top 50% pays 97% of total taxes

So your point is not only still valid, but the progressiveness of the tax system is even more egregious. My point to people who complain about tax cuts going to “the rich” has been that there is no other choice as only the rich are paying taxes.

mrveritas on October 25, 2008 at 12:30 PM

You are arguing a false premise. Anyone who has proposed a flat tax or fair tax has already set a base limit on where it begins. Some say, $40k or $50K/yr. No one who makes less than that would be subject to the tax. Therefore your argument goes away.

JAM on October 25, 2008 at 12:01 PM

So essentially you are willing to let some people benefit from society without paying taxes? You are willing to punish the people making more than 40k or 50k?

Why should someone making 40k be allowed to free load off of the rest of us?

mycowardice on October 25, 2008 at 12:37 PM

Top 1% pays 39% of total taxes
mrveritas on October 25, 2008 at 12:30 PM

Does it bother anyone else that the US could loose some 40% of its income if just 3 million people leave the country?
Does anyone know what % the top 1000 tax payers pay?

Wait, this is income tax only, right? It doesn’t count the taxes payed on dividends before they become dividends (also known as corporate taxes).

Count to 10 on October 25, 2008 at 12:38 PM

mrveritas on October 25, 2008 at 12:30 PM

Could you also publish the wealth distribution matching those numbers?

mycowardice on October 25, 2008 at 12:38 PM

…, gold is not stockpiled by gold companies and the demand is 50% greater than the supply over the last decade, making gold undervalued.

JIMV on October 25, 2008 at 10:54 AM

How does that work? If the price of gold is not regulated globally (I assume this to be the case), how does the price not immediately increase to the appropriate value if demand is increasing faster than supplies? Are you hoarding gold?

DarkCurrent on October 25, 2008 at 12:39 PM

Does it bother anyone else that the US could loose some 40% of its income if just 3 million people leave the country?
Does anyone know what % the top 1000 tax payers pay?

Wait, this is income tax only, right? It doesn’t count the taxes payed on dividends before they become dividends (also known as corporate taxes).

Count to 10 on October 25, 2008 at 12:38 PM

American citizens are taxed wherever they live.

mycowardice on October 25, 2008 at 12:43 PM

Why should someone making 40k be allowed to free load off of the rest of us?

mycowardice on October 25, 2008 at 12:37 PM

Interesting definition of “the rest of us.”
The median income in the US is around $50k. So, “the rest of us” that our being freeloaded off of is around half of the country.
Personally, I think everyone should be paying some taxes on their income, even if it is only 5%.

Count to 10 on October 25, 2008 at 12:44 PM

American citizens are taxed wherever they live.

mycowardice on October 25, 2008 at 12:43 PM

“Citizen” being the operative word, here. What I meant by “leave” included giving that up.

Count to 10 on October 25, 2008 at 12:45 PM

Interesting definition of “the rest of us.”
The median income in the US is around $50k. So, “the rest of us” that our being freeloaded off of is around half of the country.
Personally, I think everyone should be paying some taxes on their income, even if it is only 5%.

Count to 10 on October 25, 2008 at 12:44 PM

So you open to door to progressive taxation. Thank you!

mycowardice on October 25, 2008 at 12:45 PM

American citizens are taxed wherever they live

Yes, but George Soros knows how to get around that.

SteveMG on October 25, 2008 at 12:47 PM

Count to 10 on October 25, 2008 at 12:44 PM

I would agree. Even if it doesn’t approach the real cost of their share of government, without paying any taxes it is easy to feel that that there is no cost to government programs,

BryanS on October 25, 2008 at 12:49 PM

mycowardice on October 25, 2008 at 12:45 PM

We already have that. And even though Dems claim Bush tax policies are to blame for, well everything, the system became more progressive with a higher percentage or revenues paid by the wealthy under his tenure.

BryanS on October 25, 2008 at 12:51 PM

Where I come from, a man takes care of his responsibilities and doesn’t complain. He pays his taxes. And when he gets somewhere, he remembers where he came from.

First of all, that does not describe the typical ACORN enabled Barack Obamaton voter who does nothing BUT complain militantly, and does NOT pay taxes. Secondly, no one is suggesting we should stop paying taxes. It’s how much we should have to pay that is the issue. Third, when we want to “remember where we came from” we do it voluntarily and use our own bank accounts instead of relying on taxpayers.

People like this also fail to account for the fact that most people who make $200,000 (which is the accurate threshold under Obama’s plan for a single earner or small business owner) worked their way up a very steep ladder, probably for many decades, before they finally got to that level of achievement. The idea that they should now be punished is deplorable.

Finally, what is even more maddening is the fact that under Obama’s plan, by his own admission, the total amount of tax revenues will actually decrease, and his tax increases on the “rich” won’t pay for his punishing wealth distribution scheme:

Obama’s plan will cut taxes overall, reducing revenues to below the levels that prevailed under Ronald Reagan (less than 18.2 percent of GDP). The Obama tax plan is a net tax cut – his tax relief for middle class families is larger than the revenue raised by his tax changes for families over $250,000.

Buy Danish on October 25, 2008 at 12:54 PM

In the past we had a Christian consensus in America who bristled at the thought of getting something for nothing. Now in post christendom America the unpaying majority says “gimme more.” Congrats to the dhimmicrats who have put us on this road to totalitarianism. Only a robust conservative movement can derail this train.

Mojave Mark on October 25, 2008 at 11:31 AM

It has nothing to do with Christianity. The “something for nothing” math just doesn’t work regardless of religion. It’s a simple matter of people being not being able and/or willing to understand cause and effect.

DarkCurrent on October 25, 2008 at 12:56 PM

Elite vs. elitism. It’s amazing how many don’t know the difference.

Yakko77 on October 25, 2008 at 1:14 PM

We’re going to get socialism because that’s what people have been programmed to want for years.

It all boils down to petty jealousy, in my opinion. That, and simple laziness. It’s easier to drag someone else down to your level so you can feel good about yourself, then to work hard yourself.

We are obsessed with voyuerism with these assinine reality shows and entertainment news shows, even today’s comedy is based on making fun of people without them realizing it. A couple of generations now have grown up learning to blame everyone else for their own shortcomings, and when even that fails, let’s laugh at some rednecks on television so we can feel superior.

The reason why this happens is that there really isn’t anywhere else to go. Most of the rest of the world is far ahead of us in socialism.

reaganaut on October 25, 2008 at 1:37 PM

We’re going to get socialism because that’s what people have been programmed to want for years.
It all boils down to petty jealousy, in my opinion. That, and simple laziness. It’s easier to drag someone else down to your level so you can feel good about yourself, then to work hard yourself.
reaganaut on October 25, 2008 at 1:37 PM

Right on. If it is not Obama this year, it’s going to be someone else soon enough. We tend to put it all at the feet of the leaders, but the population as even more responsibility. Until this programming is reversed we will keep moving in this direction.
I am currently watching the HBO special “John Adams” and it really makes you reflect not only on the difference in our leaders but also how much tougher the people where back then. We have become accustomed to comfort and security and have been trading our personal freedoms for them. We are slowly loosing the values that made this country great.
Liberalism exploits the lower tendencies of man to advance its agenda, and the majority of people fall for it. It takes a lot of effort to instill real virtue in our children and courage to confront the deterioration of our culture head on, the left has done a good job at labeling and ostracizing anyone who dears to judge the moral decay of our society. America will not continue to be great unless her people strive to be great themselves.

neuquenguy on October 25, 2008 at 2:04 PM

It has nothing to do with Christianity. The “something for nothing” math just doesn’t work regardless of religion

To be fair, Jews were the ones given the Ten Commandments, including “Thou shalt not covet…”

Redistribution of wealth appeals to those who covet others’ property.

The Monster on October 25, 2008 at 2:08 PM

“Citizen” being the operative word, here. What I meant by “leave” included giving that up.

Count to 10 on October 25, 2008 at 12:45 PM

True patriots, I would say.

mycowardice on October 25, 2008 at 2:23 PM

The bottom line is, by switching to a flat tax this whole country would be a lot wealthier, including Tommy, his family members, tradesmen, people who work with their hands for a living, and every American.

indythinker on October 25, 2008 at 2:27 PM

A flat tax results in more wealth creation, because no one is penalized for working harder. No one is penalized for being more successful.

indythinker on October 25, 2008 at 2:27 PM

Obama wants to build the economy from the bottom up. Works for Cuba, right?

marklmail on October 25, 2008 at 2:56 PM

Here you go…progressive taxes explained.

flipflop on October 25, 2008 at 3:07 PM

Every time I see that photo of Obama and JTP I get the creeps. If you ever see Sportin’ Life coming down your street, run like hell. Otherwise, be prepared to have your taxes audited, warrants run, credit checks, privacy invaded and to be publicly lied about and mocked by the msm and koolaid drinkers.

Blake on October 25, 2008 at 3:35 PM

flipflop on October 25, 2008 at 3:07 PM

Well, reading that story you posted, I can see the obvious solution. We just need to make the UN an authorised taxing entity. That way, nobody can get away from paying their taxes.

So, who’s with me on this :?)

BryanS on October 25, 2008 at 3:50 PM

A flat tax results in more wealth creation, because no one is penalized for working harder. No one is penalized for being more successful.

indythinker on October 25, 2008 at 2:27 PM

Taxes are not penalties.

mycowardice on October 25, 2008 at 4:04 PM

I would love to hear from all of the other “elitists” out there, the teacher, the construction worker, the waitress, the meatpacker, who think that people ought to pay their fair share.

Define fair share.
The redistribution precedent is set, I hope, the teacher, the construction worker, the waitress, the meatpacker, are ready to give up their share the even less fortunate.

Speakup on October 25, 2008 at 4:04 PM

Taxes are not penalties.

The tax code is riddled with penalties for certain economic activity (taking your IRA out for example) while rewarding other economic activity.

It’s not just done to raise revenues. It’s also written to influence (reward/penalize) economic activity.

Surely you must know this?

SteveMG on October 25, 2008 at 4:42 PM

Senator Obama wants to raise the capital gains tax not to increase revenues but to make it more “fair.” Again, he’s not interested in raising more revenues or generating more economic activity, he wants to make what he sees as “unfair” taxes more “fair.”

Put otherwise, he wants to use the tax code to penalize those who are acting unfairly by benefitting from the lower rates.

Taxes as penalties.

SteveMG on October 25, 2008 at 4:50 PM

I read different blogs to get different perspectives and to keep up with the arguments on the Left, usually at sites with a mix of contributors like AOL’s Political Machine. Tommy Christopher both blogs and reports at the site, and while I disagree strenuously with Tommy, he’s a good writer and almost always worth a read.

There’s your problem right there, Ed.

Thinking that there is even sometimes, a redeeming value in their writings is like saying that the crops in communist Russia, et al were natural and organic, and, therefore good for you.

It misses the point because it’s the overall living conditions in all of life that is the issue here.

And it’s writers like the above that absolutely do not contribute to the promotion, of a better conserving of the founding principles, in our day, and, as such are not worth the broadband they are printed on.

Mcguyver on October 25, 2008 at 5:31 PM

The tax code is riddled with penalties for certain economic activity (taking your IRA out for example) while rewarding other economic activity.

It’s not just done to raise revenues. It’s also written to influence (reward/penalize) economic activity.

Surely you must know this?

SteveMG on October 25, 2008 at 4:42 PM

Using your logic, law enforcement is penalizing (you can get a ticket)? Your library account is penalizing (you can get a fine)?

My point is that taxes, generally are not penalties. But within the tax system you can find penalties (like say for filling late). As for your IRA example, the reason why there is a penalty for withdrawing early is that it goes against the goal of the IRA. Are you also for dismantling ever single program like 401k or IRAs that give an incentive to save? How about tax deductions for interest on mortgages or donations, are you against those too?

mycowardice on October 25, 2008 at 6:19 PM

American citizens are taxed wherever they live.

mycowardice on October 25, 2008 at 12:43 PM

LOL.

That is the funniest thing I’ve read in weeks.

Thanks for the laugh.

VolMagic on October 25, 2008 at 6:26 PM

My point is that taxes, generally are not penalties

Correct. Taxes fund the acitivites of the government.

However, there is such a thing as exhorbinant taxation. This is a penalty in that it helps no one and hurts everyone. It’s where you draw the line, natch, that makes taxes a penalty or not.

Also, there are taxes like the death tax, which a purely a penalty. There are also luxury/sin taxes, which a penalties. Do you smoke? The ridiculous price of ciggarettes is a direct result of taxes as penalties.

VolMagic on October 25, 2008 at 6:29 PM

My point is that taxes, generally are not penalties.

You’re backtracking now with the “generally” qualifier.

Taxes are often used by politicians to reward and penalize economic activity. In the worst conditions, they reward their friends and punish their enemies.

Or they reward some types of activities while punishing others.

I am for a tax code that is as neutral as possible. That neither favors or disfavors economic activity. Bradley/Kemp tax reform of 1986 was a good start (link).

Again, to state that “taxes are not penalties” ignores how they are currently applied in this country.

SteveMG on October 25, 2008 at 6:57 PM

SteveMG on October 25, 2008 at 6:57 PM

I am not backtracking. If your statement is ‘Taxes are penalties’, I disagree. My statement that ‘Taxes are not penalties’ still stand. For example, some ‘taxes’ give you more money than you paid in. These would not be penalties, right?

Anyways, what does it mean, as neutral as possible?

Are you for or against 401ks and IRAs not being taxed when they grow? Are you for or against deductions for interest on mortgages? Or donations? Or health care expenses? Or tax filing fees? etc.

Taxes are simply a way to levy money to pay for things. If you want to talk about specific provisions that are really penalties (like cashing out your 401k too early or filing your taxes late), I get that. But to generalize that all taxes are penalties makes no sense. Are you ‘penalized’ when you buy a movie ticket? or pay a toll on a road?

You guys have a weird way of describing penalties. VolMagic is at least nicer because he gives us shades of colors, but to mass describe taxes as penalties is illogical.

mycowardice on October 25, 2008 at 7:47 PM

Given the opportunity, would any of these liberals give up their incomes, slash their personal wealth, so that everyone on their street would bring home the exact same amount of cash each payday? I doubt it.

What is indeed unfair is to take from those who have earned it to give to those who do not earn it. [Take a look at Obama and Biden's charitable contributions over the years. Slim. Appallingly slim. As do most liberals, they believe that giving is a function of government, not of the individual.]

coldwarrior on October 25, 2008 at 10:51 AM

This is the same argument I use with all of my liberal friends all the time. If redistribution is so fair, whay are the people that want it so much not already giving their money to those that need it already to set the example. None of these people give large amounts to charity, maybe time but rarely money. Some of the largest philanthropist have also always been the greatest capitalists. Think J.P. Morgan, Carnegie, J.D. Rockafeller, even Bill Gates.

cobrakai99 on October 26, 2008 at 12:01 AM

Could you also publish the wealth distribution matching those numbers?

mycowardice on October 25, 2008 at 12:38 PM

There is turnover of “the wealthy”.

http://mjperry.blogspot.com/2007/11/churnin-and-turnin-high-turnover-in.html

The point of your question is to treat “the wealthy” as some club with a secret decoder ring that doesn’t let other people in…. this couldn’t be more wrong. The general “Amercian dream” is to work hard to achieve some degree of wealth. How well you perform in that effort is a huge determinate of the result. That is why we have the turnover mentioned in the Forbes article. Income redistribution will help put a stop to this turnover by making “wealthy” more difficult to achieve for everyone except the truly ultru-rich liberals living off a trust fund.

CC – BHO: “my Muslim faith”

CapedConservative on October 26, 2008 at 10:42 AM

CapedConservative,

That’s interesting statistics, although I would love to a broader view than just the top 400.

mycowardice on October 26, 2008 at 12:52 PM

As I recall from my academic years, the philosophical underpinnings for a progressive tax system came from the Utilitarians (e.g. John Stuart Mill, Jeremy Bentham). The idea was that each person should contribute an equal quantity of lost utility to the running of the government. The fact that there is a diminishing marginal utility for wealth suggested to the utilitarians that the wealthy would have to pay more in nominal terms in order to contribute the same amount in lost utility.

The utilitiarians also believed that there was some absolute (as opposed to relative) measure of utility that would allow society to be ordered according to precise mathematical techniques for maximizing aggregate utility. What they missed is the fact that, while an individual may evidence diminishing marginal utility, there is actually no method for absolutely measuring utility in a way that is comparable from person to person. This is the implication of Kenneth Arrow’s aptly named “Impossibility Theorem”. Hence it is not possible to determine how progressive taxes “should” be. So progressive taxation cannot be justified on a “greatest utility for the greatest number” basis. What is left is tax system without any coherent moral justification, that has become nothing more than a tool for ensuring control over the government’s ability to coerce.

jl on October 26, 2008 at 12:55 PM

am i the only one who gets it? how can obama give 95% of the workers a tax cut? what in fact obama is doing is buying 40% of all voters in the u.s. am i the only one who undestands taxes?

taxes and subsidies define our economics. the fact is that no one except the consumer pays taxes.

if i wanted to start a copany where would i go?? whould i invests millions of dollars in the u.s. economy. no i would not!!

People in ohio and michigan and pennsavania still do not get it! why is that jobs are fleeing the u.s.

taxes more taxes and yet more taxes!!

this is a fact no one pays taxes except the poor who need to buy everyday neccessities.

TomLawler on October 26, 2008 at 3:07 PM

You guys have a weird way of describing penalties. VolMagic is at least nicer because he gives us shades of colors, but to mass describe taxes as penalties is illogical.

Sorry, you have a weird, i.e., unrealistic, view of the way taxes are imposed under our system. Not the textbook definition of taxes; the real world application of taxes.

Taxes are not simply the government’s take of a percentage of one’s taxable income.

Taxes are used to influence – penalize or reward – economic activity.

It is this use of the tax code that invites corruption and distorts the market.

By limiting as much as possible the ability of the government to manipulate the tax code, we’ll also mitigate the abuses of that power.

You have a naive view of taxes as simply being the price we pay for civilization (Holme’s characterization). But they are much more than that. To ignore how they are actually used in the real world is to ignore the potential abuse inherent with that use.

SteveMG on October 26, 2008 at 3:14 PM

but to mass describe taxes as penalties is illogical.

And I never “mass described” taxes as penalties.

I said the use of the taxex to manipulate economic activity, e.g., the real world application, was penalizing people.

law enforcement is penalizing (you can get a ticket)?

Sure, if you act improperly, you’ll get penalized.

Just as with the tax code. If you engage in improper economic activity, you’ll be penalized by having to pay more taxes.

SteveMG on October 26, 2008 at 3:22 PM

Economies work better from the bottom up. Look at Cuba. Obama is a liar.

marklmail on October 26, 2008 at 3:54 PM

if i wanted to start a company where would i go??

Follow the regulations, and the Rust Belt states are fine. The talent is there- provided you don’t purposefully disqualify every citizen for your H1/L1 venture.

People in ohio and michigan and pennsylvania still do not get it! why is that jobs are fleeing the u.s.

The way that the jobs left Ohio, Michigan, Pennsylvania and such have only given a desire for revenge. After about 30 years of receiving little more than harm from trade, and having no means to stop industries from leaving, they finally get a chance to stop it cold. There was no buy-in for them. The rise of offshoring in 2003 only made the issue a national, far-reaching one versus just a “Rust Belt” one.

There wouldn’t be vengeance if those who paid so little in taxes were treated with a lot more respect than is afforded to them in this economy. This doesn’t mean those on welfare so much as it is those who have worked and see it go to some far-off place in the world. Follow that up with any replacement being far-off at best (or nonexistent at worst), and they’ll want any means including tax policy changes to halt the exodus.

It is not so much the amount of taxes paid, it is the amount of influence afforded to the top n%. It’s not just Soros, it is anyone who has done such deeds – moving capital faster than the citizen can move makes for very bad policy.

sethstorm on October 26, 2008 at 6:35 PM

must listen to audio of Obama in 2001 talking about 40 acres and a mule. or in modern terms spreading the wealth around.
http://minx.cc/?post=276607

unseen on October 27, 2008 at 12:21 AM

Off topic, but good stuff: John Stossel’s Guide to Politics 20/20 show from Oct. 17th in 5 parts.

Gist: The larger the government, the more things are screwed up; government needs to get out of our way!

He has a demo of giving skaters instruction at an ice rink… beginners, pros and all in between all skated just fine, but when Stossel or an olymic skating expert attempted to guide everyone it became all screwed up.

Also shows how private charities are very successful in rebuilding New Orleans homes, but government-run efforts are a failure and a farse.

electric-rascal on October 27, 2008 at 12:58 AM

This guy is a tool.
There are different kinds of elitism. My brother is a retired school teacher, lower middle class INTELLECTUAL elitist who thinks that he won’t get taxed more to pay for entitled people who may not even be citizens and/or appreciate the money even Tommy gives them now.
Tommy can you hear me?
Brains do not not a sensible man make.

Christine on October 27, 2008 at 1:03 PM

Given the furor about “Joe the plumber” I’ve written an open letter to Mr. Obama myself. I think it is worth the read. Maybe if Americans could take a closer look at what a small businessman is, they wouldn’t want politicians penalizing their success. Feel free to forward it if you want…

Cory

Mr. Obama,

Given the uproar about the simple question asked you by Joe the plumber, and the persecution that has been heaped on him because he dared to question you, I find myself motivated to say a few things to you myself. While Joe aspires to start a business someday, I already have started not one, but 4 businesses. But first, let me introduce myself. You can call me “Cory the well driller”. I am a 54 year old high school graduate. I didn’t go to college like you, I was too ready to go “conquer the world” when I finished high school. 25 years ago at age 29, I started my own water well drilling business at a time when the economy here in East Texas was in a tailspin from the crash of the early 80′s oil boom. I didn’t get any help from the government, nor did I look for any. I borrowed what I could from my sister, my uncle, and even the pawn shop and managed to scrape together a homemade drill rig and a few tools to do my first job. My businesses did not start as a result of privilege. They are the result of my personal drive, personal ambition, self discipline, self reliance, and a determination to treat my customers fairly. From the very start my business provided one other (than myself) East Texan a full time job. I couldn’t afford a backhoe the first few years (something every well drilling business had), so I and my helper had to dig the mud pits that are necessary for each and every job with hand shovels. I had to use my 10 year old, 1/2 ton pickup truck for my water tank truck (normally a job for at least a 2 ton truck).

A year and a half after I started the business, I scraped together a 20% down payment to get a modest bank loan and bought a (28 year) old, worn out, slightly bigger drilling rig to allow me to drill the deeper water wells in my area. I spent the next few years drilling wells with the rig while simultaneously rebuilding it between jobs. Through these years I never knew from one month to the next if I would have any work or be able to pay the bills. I got behind on my income taxes one year, and spent the next two years paying that back (with penalty and interest) while keeping up with ongoing taxes. I got behind on my water well supply bill 2 different years (way behind the second time… $80,000.00), and spent over a year paying it back (each time) while continuing to pay for ongoing supplies C.O.D.. Of course, the personal stress endured through these experiences and years is hard to measure. I do have a stent in my heart now to memorialize it all.

I spent the next 10 years developing the reputation for being the most competent and most honest water well driller in East Texas. 2 years along the way, I hired another full time employee for the drilling business so that we could provide full time water well pump service as well as the well drilling. Also, 3 years along the path, I bought a water well screen service machine from a friend, starting business # 2. 5 years later I made a business loan for $100,000.00 to build a new, higher production, computer controlled screen service machine. I had designed the machine myself, and it didn’t work out for 3 years so I had to make the loan payments without the benefit of any added income from the new machine. No government program was there to help me with the payments, or to help me sleep at night as I lay awake wondering how I would solve my machine problems or pay my bills. Finally, after 3 years, I got the screen machine working properly, and that provided another full time job for an East Texan in the screen service business.

2 years after that, I made another business loan, this time for $250,000.00, to buy another used drilling rig and all the support equipment needed to run another, larger, drill rig. This provided another 2 full time jobs for East Texans. Again, I spent a couple of years not knowing if I had made a smart move, or a move that would bankrupt me. For the third time in 13 years, I had placed everything I owned on the line, risking everything, in order to build a business.

A couple of years into this, I came up with a bright idea for a new kind of mud pump, a fundamentally necessary pump used on water well drill rigs. I spent my entire life savings to date (just $30,000.00), building a prototype of the pump and took it to the national water well convention to show it off. Customers immediately started coming out of the woodworks to buy the pumps, but there was a problem. I had depleted my assets making the prototype, and nobody would make me a business loan to start production of the new pumps. With several deposits for pump orders in hand, and nowhere to go, I finally started applying for as many credit card as I could find and took cash withdrawals on these cards to the tune of over $150,000.00 (including modest loans from my dear sister and brother), to get this 3rd business going.

Yes, once again, I had everything hanging over the line in an effort to start another business. I had never manufactured anything, and I had to design and bring into production a complex hydraulic machine from an untested prototype to a reliable production model (in six months). How many nights I lay awake wondering if I had just made the paramount mistake of my life I cannot tell you, but there were plenty. I managed to get the pumps into production, which immediately created another 2 full time jobs in East Texas. Some of the models in the first year suffered from quality issues due to the poor workmanship of one of my key suppliers, so I and an employee (another East Texan employed) had to drive across the country to repair customers’ pumps, practically from coast to coast. I stood behind the product, and made payments to all the credit cards that had financed me (and my brother and sister). I spent the next 5 years improving and refining the product, building a reputation for the pump and the company, working to get the pump into drill rig manufacturers’ product lines, and paying back credit cards. During all this time I continued to manage a growing water well business that was now operating 3 drill rig crews, and 2 well service crews. Also, the screen service business continued to grow. No government programs were there to help me, Mr. Obama, but that’s ok, I didn’t expect any, nor did I want any. I was too busy fighting to make success happen to sit around waiting for the government to help me.

Now, we have been manufacturing the mud pumps for 7 years, my combined businesses employ 32 full time employees, and distribute $5,000,000.00 annually through the local economy. Now, just 4 months ago I borrowed $1,254,000.00, purchasing computer controlled machining equipment to start my 4th business, a production machine shop. The machine shop will serve the mud pump company so that we can better manufacture our pumps that are being shipped worldwide. Of course, the machine shop will also do work for outside companies as well. This has already produced 2 more full time jobs, and 2 more should develop out of it in the next few months. This should work out, but if it doesn’t it will be because you, and the other professional politicians like yourself, will have destroyed our countrys’ (and the world) economy with your meddling with mortgage loan programs through your liberal manipulation and intimidation of loaning institutions to make sure that unqualified borrowers could get mortgages. You see, at the very time when I couldn’t get a business loan to get my mud pumps into production, you were working with Acorn and the Community Reinvestment Act programs to make sure that unqualified borrowers could buy homes with no down payment, and even no credit or worse yet, bad credit. Even the infamous, liberal, Ninja loans (No Income, No Job or Assets). While these unqualified borrowers were enjoying unrealistically low interest rates, I was paying 22% to 24% interest on the credit cards that I had used to provide me the funds for the mud pump business that has created jobs for more East Texans. It’s funny, because after 25 years of turning almost every dime of extra money back into my businesses to grow them, it has been only in the last two years that I have finally made enough money to be able to put a little away for retirement, and now the value of that has dropped 40% because of the policies you and your ilk have perpetrated on our country.

You see, Mr. Obama, I’m the guy you intend to raise taxes on. I’m the guy who has spent 25 years toiling and sweating, fretting and fighting, stressing and risking, to build a business and get ahead. I’m the guy who has been on the very edge of bankruptcy more than a dozen times over the last 25 years, and all the while creating more and more jobs for East Texans who didn’t want to take a risk, and would not demand from themselves what I have demanded from myself. I’m the guy you characterize as “the Americans who can afford it the most” that you believe should be taxed more to provide income redistribution “to spread the wealth” to those who have never toiled, sweated, fretted, fought, stressed, or risked anything. You want to characterize me as someone who has enjoyed a life of privilege and who needs to pay a higher percentage of my income than those who have bought into your entitlement culture. I resent you, Mr. Obama, as I resent all who want to use class warfare as a tool to advance their political career. What’s worse, each year more Americans buy into your liberal entitlement culture, and turn to the government for their hope of a better life instead of themselves. Liberals are succeeding through more than 40 years of collaborative effort between the predominant liberal media, and liberal indoctrination programs in the public school systems across our land.

What is so terribly sad about this is this. America was made great by people who embraced the one-time American culture of self reliance, self motivation, self determination, self discipline, personal betterment, hard work, risk taking. A culture built around the concept that success was in reach of every able bodied American who would strive for it. Each year that less Americans embrace that culture, we all descend together. We descend down the socialist path that has brought country after country ultimately to bitter and unremarkable states. If you and your liberal comrades in the media and school systems would spend half as much effort cultivating a culture of can-do across America as you do cultivating your entitlement culture, we could see Americans at large embracing the conviction that they can elevate themselves through personal betterment, personal achievement, and self reliance. You see, when people embrace such ideals, they act on them. When people act on such ideals, they succeed. All of America could find herself elevating instead of deteriorating. But that would eliminate the need for liberal politicians, wouldn’t it, Mr. Obama? The country would not need you if the country was convinced that problem solving was best left with individuals instead of the government. You and all your liberal comrades have got a vested interested in creating a dependent class in our country. It is the very business of liberals to create an ever expanding dependence on government. What’s remarkable is that you, who have never produced a job in your life, are going to tax me to take more of my money and give it to people who wouldn’t need my money if they would get off their entitlement mentality asses and apply themselves at work, demand more from themselves, and quit looking to liberal politicians to raise their station in life.

You see, I know because I’ve had them work for me before. Hundreds of them over these 25 years. People who simply will not show up to work on time. People who just will not work 5 days in a week, much less, 6 days. People always looking for a way to put less effort out. People who actually tell me that they would do more if I just would first pay them more. People who take off work to sit in government offices to apply to get free government handouts (gee, I wonder how things would have turned out for them if they had spent that time earning money and pleasing their employer?). You see, all of this comes from your entitlement mentality culture.

Oh, I know you will say I am uncompassionate. Sorry, Mr. Obama, wrong again. You see, I’ve seen what the average percentage of your income has been given to charities over the years of 2000 to 2004 (ignoring the years you started running for office – can you pronounce “politically motivated”), you averaged less than 1% annually. And your running mate, Joe Biden, averaged less than ¼% of his annual income in charitable contributions over the last 10 years. Like so many liberals, the two of you want to give to the needy, just as long as it is someone else’s money you are giving to them. I won’t say what I have given to charities over the last 25 years, but the percentage is several times more than you and Joe Biden… combined (don’t you just hate goggle?). Tell me again how you feel my pain.

In short, Mr. Obama, your political philosophies represent everything that is wrong with our country. You represent the culture of government dependence instead of self reliance; Entitlement mentality instead of personal achievement; Penalization of the successful to reward the unmotivated; Political correctness instead of open mindedness and open debate. If you are successful, you may preside over the final transformation of America from being the greatest and most self-reliant culture on earth, to just another country of whiners and wimps, who sit around looking to the government to solve their problems. Like all of western Europe. All countries on the decline. All countries that, because of liberal socialistic mentalities, have a little less to offer mankind every year.

God help us…

Cory Miller

just a ordinary, extraordinary American, the way a lot of Americans used to be.

P.S. Yes, Mr. Obama, I am a real American… http://www.cmillerdrilling.com

skeeter on October 28, 2008 at 1:24 AM

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