It's Fair to Have a Fair System for Fairness

El Neoyorkino's James Surowiecki is displeased with his fellow Americans for not agreeing that people making more than $250,000 a year are greedy jerks who deserve to lose their money.

So he's proposed a new system: Leave those greedy jerks alone, but put a hurting on richer, greedier jerks whom everybody must hate because they're so rich:

Our system sets the top bracket at three hundred and seventy-five thousand dollars, with a tax rate of thirty-five per cent. (People in the second-highest bracket, starting at a hundred and seventy-two thousand dollars for individuals, pay thirty-three per cent.) This means that someone making two hundred thousand dollars a year and someone making two hundred million dollars a year pay at similar tax rates. LeBron James and LeBron James’s dentist: same difference.

This makes no sense—there’s a yawning chasm between the professional and the plutocratic classes, and the tax system should reflect that. A better tax system would have more brackets, so that the super-rich pay higher rates. (The most obvious bracket to add would be a higher rate at a million dollars a year, but there’s no reason to stop there.) This would make the system fairer, since it would reflect the real stratification among high-income earners. A few extra brackets at the top could also bring in tens of billions of dollars in additional revenue.

A tax system that's both fairer and better? What's not to like? Well, here's one thing: The proper role of taxation is not to promote fairness or equality or social engineering. It is to raise revenue to fund the appropriate functions of government. Nowhere in his argument does Surowiecki ask whether tax hikes on the idle rich actually raise more revenues. It's a good question to avoid, because they don't.

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  • ||

    It doesn't seem fair.
    - Fair?
    Who cares about fair?
    The world isn't fair! Truth isn't fair!
    Is it fair that you were
    born like this? No!

  • Ron L||

    "LeBron James and LeBron James’s dentist: same difference."
    Is this writer familiar with the English language?

  • ||

    Is this writer familiar with the English language?

    Are you? Cuz last I checked English was a mash up of at least 5 different languages which has been changing since before it was ever written down.

  • Gabe E||

    Snap.

  • kinnath||

    same difference ==> southern dialect

  • Ska||

    I thought hew was referring to the "apostrophe s" possessive after James' name with respect to his dentist.

    Not that grammar nazis serve an important role, other than to satisfy their own compulsions.

  • ||

    The 's is correct.

    Sorry, it's a compulsion.

  • ||

    what does "same difference" actually mean? no difference?

  • Fist of Etiquette||

    If you can think of a better way to get the wealthy to invest more or increase the private sector workforce than by taxing the fuck out of them, I'd like to hear it, smart guy.

  • ||

    Come now... Higher marginal tax rates on the most productive members of society couldn't have a down side, could it?

  • Fatty Bolger||

    Oh, come on! I still remember how awesome it was with 15 tax brackets, before they were flattened in the Reagan days. Yes, we must go back to that!

  • MNG||

    So you find Lady GaGa, Michael Moore, Etc., to be among the most productive members of society?

  • Old Mexican||

    Re: MNG,

    So you find Lady GaGa, Michael Moore, Etc., to be among the most productive members of society?

    You think they're not, MNG?

  • ||

    So you think some forms of income are less productive than other forms of income, even though it is all based on voluntary exchanges for things people actually want?

    Where did you learn economics -- Southwest Oregon School of Hamburgerology and Motel Management?

  • Warty||

    Managing hotels and making hamburgers are both useful and noble skills. Don't impugn them by insinuating that MNG could do them.

  • ||

    I was going to say that hamburglary is not noble, but I misread hamburgerology.

  • ||

    So you find Lady GaGa, Michael Moore, Etc., to be among the most productive members of society?

    Yes.

  • ||

    I don't, but society votes with it's feet to give these people money. They acquired it legitimately, not by preying upon the sweat of the proletariat, or whatever.

    If you think Michael Moore has too much money, stop paying to watch his movies. Stop paying for Lady Gaga's music. Pirate them, if you must listen and watch.

  • ||

    Do they gain from direct government subsidy or other rent seeking? No? Then, yes, they are obviously among the most productive members of society.

    They'll also do for an example of just how unbelievably damaging it is to tax the productive.

    Let's say Michael Moore makes $10,000,000 per year -- the result of providing value to hundreds of thousands or even millions of consumers of his product. Do we think the net value that he provides -- after all the producers, helpers, and other middlemen his productivity employs have taken their cuts -- is a shade over his salary, like the consumer surplus of someone making $70,000? Of course not. The consumer surplus at such high productivity levels is hard to determine, and likely much greater. Let's say it's $5,000,000.

    Now let's assume after raising Michael Moore's marginal rate, he works 10% less. His work is now worth $13,500,000; he now gets paid $9,000,000. The government is not only out on the taxes a lower rate would bring from the $1,000,000 missing from Michael's paycheck: the economy is out $1,500,000.

    Let's say the change that precipitated all this was an increase from 40% to 50%. In an effort to try to acquire an extra $1,000,000 for government coffers, the government instead grabbed $900,000 on the first $9,000,000, lost $400,000 on the last $1,000,000, and cost the economy $1,500,000.

    High marginal rates are fabulously destructive of wealth, and the higher and more ephemeral the incomes attacked, the greater the losses.

  • MNG||

    Ne'er have I seen so much Michael Moore love on Hit and Run! Usually he is decried as a simple moron...

    Maybe the disconnect has to do with this strange idea that acquiring wealth is necessarily linked with being productive?

  • ||

    "...this strange idea that acquiring wealth is necessarily linked with being productive?

    When exchanges are voluntary, market entry and exit is unrestricted, contracts are enforced, and fraud is punished, then yes... there's no other way to acquire wealth than to offer society greater value in exchange.

    That's equally true whether you're Michael Moore, Lady Gaga, LeBron James, or the greeter at WalMart.

  • MNG||

    Well, that's a pretty big list of assumptions that are not met in any hithertofore existing society. But more important it assumes that subjective value=objective value.

  • Sean W. Malone||

    MNG:

    First off... That list of assumptions is essentially true in entertainment to the extent that they need to be. Let's review...

    A. I don't go to Michael Moore movies, people who like him do = voluntary exchange.
    B. I create movies & other media, as do the majority of my friends and colleagues and we don't ask anyone's permission to do so = unrestricted market entry.
    C. I have contracts with my clients and vendors (as does MM) which can be arbitrated or enforced via courts if either party fails to meet their side of the agreement.

    Not exactly a complicated list of assumptions actually.

    Secondly, and MORE IMPORTANTLY: You, sir, have no way of establishing anything approaching an "objective value" for anything, much less art/media. Value is subjective and thus the fact that millions of people do enjoy Michael Moore movies and believe they get more value from watching one than the $10-20 they spend on the opportunity means - almost by definition - that Michael Moore is one of the more "productive" members of society.

    And in spite of the fact that I vehemently disagree with other people's assessment of his worth, and do not share those people's values - I recognize that they have just as much right to make their own determinations on what is important to them as I do.

    Sadly, most of MM's audience does not recognize the same rights in return... But that's another story.

  • Sean W. Malone||

    MNG:

    First off... That list of assumptions is essentially true in entertainment to the extent that they need to be. Let's review...

    A. I don't go to Michael Moore movies, people who like him do = voluntary exchange.
    B. I create movies & other media, as do the majority of my friends and colleagues and we don't ask anyone's permission to do so = unrestricted market entry.
    C. I have contracts with my clients and vendors (as does MM) which can be arbitrated or enforced via courts if either party fails to meet their side of the agreement.

    Not exactly a complicated list of assumptions actually.

    Secondly, and MORE IMPORTANTLY: You, sir, have no way of establishing anything approaching an "objective value" for anything, much less art/media. Value is subjective and thus the fact that millions of people do enjoy Michael Moore movies and believe they get more value from watching one than the $10-20 they spend on the opportunity means - almost by definition - that Michael Moore is one of the more "productive" members of society.

    And in spite of the fact that I vehemently disagree with other people's assessment of his worth, and do not share those people's values - I recognize that they have just as much right to make their own determinations on what is important to them as I do.

    Sadly, most of MM's audience does not recognize the same rights in return... But that's another story.

  • Sean W. Malone||

    Seriously though... I didn't post that twice. Wtf.

  • MNG||

    I don't subscribe to the idea that because someone chose x it has the optimal amount of value for x. In a world with things like imperfect information, to take just one, that's simply not true. But further I do think one can talk about "objective" value.

  • ||

    nicely argued

  • Ska||

    Maybe it has to do with people discussing the movies he produces, and not whether or not his income was earned?

  • Old Mexican||

    Re: MNG,

    Ne'er have I seen so much Michael Moore love on Hit and Run! Usually he is decried as a simple moron...

    That doesn't mean he's an unproductive moron.

    Whether one agrees with his politics or not, he DOES make money for himself and all the people employed in making and distributing his movies. If he did NOT, then he would not be productive, at least as a film maker.

    The problem with you, MNG, as with many lefty statists, is that you have this romantic view of productivity: a bucolic scene of people toiling and moiling in the land, under the observing eye of the Great Sage, the commissar. Certainly, Lady GaGa and M. Moore do not fit that mold.

  • ||

    Ne'er have I seen so much Michael Moore love on Hit and Run!

    I find him a detestable person who passes shallow propaganda as documentary and who promulgates some outright obnoxious things in order to pander to people's mistaken notions of class.

    Nonetheless, I am not about to imagine I should be deciding his income based on my opinion of him. People give him money because he provides them something worth more than the money. Who am I to reduce his income because of my values?

    You, on the other hand, apparently do think others' incomes should be reduced based on your values.

  • Chad||

    Mike, I deny your assumption that people will work less in a higher tax regime. There are plenty of reasons people might work MORE if taxes go up. Two are particuarly compelling, and both would cause me to work MORE if my taxes went up a bit. Let's say I earn $100k, pay $25k in taxes overall, and save $20k. These numbers are fairly realistic. What happens when the government jacks my taxes to $30k?

    First, I either have to raise my income, or make some cuts. It is certainly possible that I would do the former, and work more in order to cover the loss in income. What I cannot fathom is working less, and cutting my income even further. Why the hell would I do that? And you would have to be absolutely looney to think that I would cut my income by $20k+, enough to hit the Laffer curve peak. But anyway, I may work more, in which case my income stays about the same, or I may work the same, and make some cuts. Let's look at the latter case, and assume I split the $5000 in cuts as $1500 less savings and $3500 less spending.

    Well now, I am saving $1500 less per year, or $45000 over the rest of my career. With interest, this would probably put me about $100,000 short when I hit age 65, implying that I would have to work about one more year before I retire.

    Oh wait, there it is again. MORE work, not less.

    Seriously, I have a hard time coming up with any compelling real-life scenario were someone responds to a tax increase in anything like our current or any plausible tax regime by working less. More often than not, the opposite is true.

  • Old Mexican||

    Re: Chad,

    Mike, I deny your assumption that people will work less in a higher tax regime. There are plenty of reasons people might work MORE if taxes go up.

    And MORE if taxes go even HIGHER up . . . until the point where we have the MOST PRODUCTIVE NATION this Earth has EVER SEEN - the Soviet Union.

    No?


    Seriously, I have a hard time coming up with any compelling real-life scenario were someone responds to a tax increase in anything like our current or any plausible tax regime by working less.

    You're right - they simply migrate.

    http://online.wsj.com/article/.....28295.html

    More often than not, the opposite is true.

    Sure it is.

    There's something called the disutility of labor, Chad. At one point, a person may regard working MORE to be POINTLESS.

    IDIOT.

  • ||

    What I cannot fathom is working less, and cutting my income even further. Why the hell would I do that?

    Because you earn $10,000,000 (taking home $6,000,000) and can live on $9,000,000 (taking home $4,500,000).

    We're talking about marginal tax rates on the highest income earners. I do concur that when the government raises taxes on a lower or middle class person, he often must scramble more in order to make up for the losses.

    We just disagree on whether that's a good thing.

  • Chad||

    Thanks, Mike, for conceding that to the extent that it exists, the Laffer Curve is mostly about tax-dodging multi-millionaires.

    Let's shut down the tax havens and end that crap.

    Problem solved.

  • ||

    To put it another way, consider someone working hourly on demand rather than salaried who gets all his benefits from his spouse. This person effectively represents a perfectly linear cost for the employer.

    Say he earns $70 per hour and his marginal tax rate is 50%. He gets paid for the next hour if his work is worth $75 (can't forget FICA and Medicare!) to the employer. But he only works for the next hour if his time for that hour is worth $35.

    Do you really think that $40 difference -- wealth that simply doesn't exist for every hour he doesn't work -- is inconsequential to the economy? Do you think that making that difference bigger is going to make the economy wealthier?

  • Chad||

    First, your hypothesis is already a stretch. Most people have jobs which don't allow such linearity.

    Increasing taxes decreases the amount you get to keep out of the next dollar you earn. However, increased taxes make you poorer, raising your marginal value of money, and making that next dollar more valuable. For the middle class, these more or less offset. For the poor, the latter dominates and increased taxes actually cause many of them to work more. For the rich, they probably work less. But primarily, it is mostly a wash.

    The Laffer Curve, as I mentioned above, is mostly about tax dodging, not refusing to work.

  • MJ||

    Not with the way a progressive income tax works, especially one with many tax brackets that get very high, the last dollar you earn can considerably of less value to you then the 1st dollar you earn.

  • WDIK||

    Ah to be king of a kingdom full of Chads. That's it my little serfs work harder so I can take in more money. Oh you've made up that lost income I took away, well then you won't mind if I take a little more. Surely you can work just a little harder and longer to make it up. On and on and on.... Yeah it's the perfect self perpetuating system, no one will ever revolute against it.

  • Atanarjuat||

    So you find Lady GaGa, Michael Moore, Etc., to be among the most productive members of society?

    I work in the concert industry. I wouldn't have a job if the talent wasn't out there drawing crowds.

  • A Teacher||

    And I won't have a job if Republicans are allowed to block the union payoff bill before Congress now. Call your Congressional representatives and tell them to vote for education.

  • Chad||

    If the "talent" all died in a flaming plane crash tomorrow, new "talent" would magically appear among the tens of thousands of others with similar attributes.

  • MNG||

    And since I'm 99% safe in guessing you fall pretty far outside that 1%, what's up with your unproductive ass?

    Lacking in ambition, skill, or both?

  • ||

    Any income I earn is taxed at the top marginal rate.

    You?

    I think I have a right to bitch about that theft -- and responding by not fucking working in effect for the government, since the various levels take 60%+ of taxable income, and instead doing productive things that can't be taxed.

    Think I'm the only one doing that?

  • ||

    Leaving aside where I fall, you do point out a severe problem with progressive taxation.

    I'd wager that more than half of the people who have an income in the top 1% for the first time actively reduced their income in prior years for the chance to get that higher income in the future. Think people at startups.

    I'd further wager that around half of those in the top 1% in a given year won't be in the top 1% in the next year.

    Progressive taxation is drastically unfair to these people. There are remedies, such as averaging income over five years or so. But then they aren't in the tax code, are they.

  • ||

    Lacking in ambition, skill, or both?

    Both. I have no problem with people being better then me and getting payed more then me for it.

    Why do you?

  • MNG||

    "I have no problem with people being better then me and getting payed more then me for it."

    That's good, because I imagine you have a lot of getting used to that ahead of ya!

  • Sean W. Malone||

    Why are you so bitter about Josh expressing a particular set of priorities?

    Why is it not ok for someone to openly acknowledge that he prefers a more relaxed, even-keeled life to one of hard work & ambition?

    I'm pretty ambitious - in a field that is insanely difficult to be particularly successful in - and I have the utmost sympathy for that idea. Working ridiculously hard and being uncertain of your future... always trying to get better and do more... kinda sucks sometimes.

    I look back sometimes and wonder what it would have been like had I never left my hometown, not gone to grad school, and just gotten some regular job... It would have been a lot less stressful, that's for sure.

    Why isn't that a legitimate choice?

  • MNG||

    My bigger beef is with the idea that there is some perfect correlation between ambition/merit/productivity and market reward. Luck, connections, different starting points, etc., all make that idea silly imo.

  • Vaccine||

    In other words, MNG has a beef with reality. He'd prefer a Handicapper General weigh every Harrison Bergeron down into mediocrity.

  • Old Mexican||

    Re: MNG,

    My bigger beef is with the idea that there is some perfect correlation between ambition/merit/productivity and market reward.

    My beef is tastier. And bigger than yours.

  • Irresponsible Hater||

    In a year or so, inflation creep will have us all in the top bracket, no matter how high it's set.

    We'll be quoting prices by the wheelbarrow. It'll be horrific, but on the downside, we'll all be taxed at the same rate, so there's that.

  • Fatty Bolger||

    Yeah, whenever I think about members of the plutocratic class, using their wealth to manipulate government to their own ends, and influencing politics and policy in all kinds of nefarious ways, one name instantly springs to mind: LeBron James!

    LOL

    What a dolt!

  • TXLimey||

    Hmmm - must have been why no press was allowed at Obama's birthday basketball game. The whole thing was a cover so LeBron James could give the president his orders on how to run the country for the next two years.

  • Coeus||

    Threadjack (my apologies):
    One of the regular commenters (can't remember who) a while back floating a theory that an AI was manipulating the stockmarket (during the flash crash). It seems that there's a ton of bot activity on the market that has no easily discernible purpose.
    http://www.theatlantic.com/sci.....ers/60829/

  • ||

    My guess. It's a bot designed to fuck with other people's bots.

    By throwing random trades into the ether, they hope to trigger other automatic traders that are looking for big price fluctuations to trade on.

  • ||

    People like Surowiecki have zero problem using the force of the state to steal (more), but I wonder what he'd say if someone proposed that theft from him, like, say, a higher tax rate for moronic magazine writers.

  • ||

    Well, that wouldn't apply to him since he's...HEY!

  • ||

    I propose a tax on anyone who proposes a new tax. Of course, that would cause me to be taxed myself for the proposal, which is why I won't propose it. Just like Surowiecki would never propose a higher tax rate for, say, dipshits who write for The New Yorker and use the term "plutocratic classes". Amazing how that always works out that way.

  • ||

    BTW, notice that this disingenuous fuck only talks about tax rates. He never once mentions the disproportionate amount actually paid by the top 1%.

    Of course, if this dishonest cunt did that, his whole argument would unravel like the cheap yarn that it is.

  • #||

    not to mention the bottom portion gets a disproportionate amount of the benifits.

  • SIV||

    The proper role of taxation is not to promote fairness or equality or social engineering. It is to raise revenue to fund the appropriate functions of government.

    If only all Obama voters thought the same way.

  • BakedPenguin||

    A lot of them might; unfortunately, most of them would view Health Care, CO2 regulation, and Mortgage "reform" as "appropriate functions of government".

  • SIV||

    I guess we need more like Tim whose top criteria was the candidates race.

  • ||

    We're not where we were in 1980, just before the Reagan rEVOLution.

    I think we're somewhere around 1977 again.

    "This would make the system fairer, since it would reflect the real stratification among high-income earners. A few extra brackets at the top could also bring in tens of billions of dollars in additional revenue."

    And it's time to fish the Laffer Curve back out of the wastebasket. ...or excavate it out of whatever landfill we foolishly buried it in.

    People are being so stupid. Like it's 1977 all over again.

  • Hugh Akston||

    People are being so stupid. Like it's 1977 all over again.

    Malaise forever!

  • ||

    Like it's 1977 all over again.

    Sweet! Let's get with the deregulatin'.

  • ||

    We've already got home brewing, maybe we can get home distillation this time around.

  • ||

    it's 1977 all over again.

    !!!!!!!!!!

    STAR WARS!!!!!

    !!!!!!!!!

    Plus I think my hot ex girl friend was born only a year ago so now all I have to do is look her up 20 years from now and not fuck it up this time.

  • MNG||

    "The proper role of taxation is not to promote fairness or equality or social engineering. It is to raise revenue to fund the appropriate functions of government."

    What if you think an appropriate function of government is to promote fairness?

    I always love these pieces. They criticize those who want fairness in taxation and then go on to complain that taxing the rich is unfair....

  • ||

    Huh. You must be reading a different piece, because nowhere do I see where Tim says any such thing.

  • MNG||

    The whole meme is that it's wrong (read: "unfair") to tax the right like this.

  • Take Care of THIS!||

    Tax "the right"? I'm curious to know why you think people like Bill Gates, Warren Buffett, George Soros, et al. are part of "the right". Fact is, there are many liberals in that top 1%, and libertarians don't support taxing them either. Sorry to ruin your Team Red vs. Team Blue narrative.

  • ||

    Why would you read "wrong" as "unfair"?

    It is "wrong" in that it is economically inefficient: High marginal taxes on productivity cause less wealth to be created than do other taxes yielding equal revenue.

  • MNG||

    But surely other values can trump "economic efficiency?"

  • ||

    See, I was right, Americans are going to have to accept a lower standard of living. 18% Prime Interest Rate anyone?

  • ||

    If you want to argue that there should be a minimal safety net so that no one in a wealthy society goes shelterless or hungry, that would be a useful dialog.

    The US is so phenomenally far beyond any such thing, and such a paradigm would require such lower taxes and so much less rent seeking, that it would be a wonderful place to go from here.

  • MNG||

    "If you want to argue that there should be a minimal safety net so that no one in a wealthy society goes shelterless or hungry, that would be a useful dialog."

    Why should I stop there? I mean, really, why is it so hard to fathom that some people think an appropriate function of government is to lessen inequality (or at least some of the results of inequality).

  • Vaccine||

    It isn't hard to fathom that people believe such. In fact, we have some great examples of people who thought such. They generally failed miserably and often killed many people in the effort. That's because centralized economic control - which is necessary to set and enforce the definition of "equal" - is always a monumental failure. It's pretty damn close to a physical law.

  • ||

    I owe you nothing.

    Never forget that.

    I owe you nothing.

  • MNG||

    I'm pretty sure you don't fall into the 1% and never will, so don't sweat it dude.

  • Caleb||

    I'm getting tired of liberals telling the proletariat to not "sweat it."

    Hey, maybe we care when the top 1% of earners pay 70% in taxes. Maybe, we concerned that one day the government might think that $50,000 is too much.

  • Caleb||

    and yes, I split and infinitive. Sue me.

  • Caleb||

    Goddamned typos.

  • ||

    Maybe, we concerned that one day the government might think that $50,000 is too much.

    Actually I am more concerned that the 1% will no longer be able to afford to hire me or cure cancer or produce next installment of Grand Theft Auto.

  • MNG||

    Oh lord, their crumbs may not fall down off their table for you!

  • ||

    I could have used more people like you!

  • ||

    250 isn't a big deal.

    A lot more than 1% of the population clears 250 in a year at some time in their lives.

    I doubt I'd ever pay myself more than 250 a year in salary, but that's kinda the point, isn't it.

    That and the fact that I owe nothing and never will no matter your sense of entitlement.

  • CJ||

    I'm pretty sure you don't fall into the 1% and never will, so don't sweat it dude.

    I'll never be female, but I care what happens to females.
    I'll never be white or black, but I care what happens to those races.
    I'll probably never live in Wyoming or Illinois, but I care what happens to the population of those states.

    If everyone consistently applied the logic you're using for tax rates, nobody would care what happened to anybody except themselves.

  • ||

    It does seem to boil down to one or a combination of the following ideas with these people...

    1) The 1% are a minority, and because they're a minority, we can do whatever we want with their property.

    2) They owe me something because they're wealthy.

    3) Out fiscal problems would go away if the government just had more money to gorge themselves on.

    The first two are essentially character flaws--either somebody's mom and dad didn't teach 'em not to take things that belong to others or spoiled them to the point they think they're entitled to whatever they want.

    The third one is a logical problem. It should be fundamentally obvious to everyone that the government will spend every penny it can until it's all gone--that's so fundamental, it's the observation upon which Keynes built his avoidance of the liquidity trap.

    I understand if you think combating unemployment should be more important than anything else--but giving the beast more money to gorge on isn't about to make our fiscal problems any smaller. To the contrary, those investment dollars you're feeding the beast are what farmers used to call "seed corn".

    When you don't see much growth out there anywhere? When unemployment's stuck around 10%? That's an excellent indication that you need as much seed corn as possible, and really what you need to be doing is encouraging people to plant it...

    Not take it away from them and squander it on unproductive government.

    That's just stupid. Libertarian or not, that's just bad public policy.

  • ||

    "That's just stupid. Libertarian or not, that's just bad public policy."

    No growth, so what we need to do is discourage farmers from planting by increasing taxes based on their crop-yield?!

    That seems to be the default position of an awful lot of people, and it is profoundly stupid.

    I know it's hard to believe that class warfare could lead to stupidity, but believe it or not it does!

  • MNG||

    4. Burdens should be shouldered by those better able to handle them.

    5. An appropriate function of governmnet is to lessen inequality.

  • Mr. Bentley||

    5. An appropriate function of governmnet is to lessen inequality.

    Where is that in the US Constitution?

  • MNG||

    Since the Constitution is about the powers not goals of government I would not expect that to be in there. And there are many powers granted there that can be used for that purpose. The broad taxing and spending clause for one.

  • ||

    "4. Burdens should be shouldered by those better able to handle them."

    Then it's entirely inconsistent to tax income rather than wealth or consumption. But you never cared about being consistent.

    A better, more efficient rule would be:

    4. Costs should be paid by the individuals who receive the benefits.

    TANSTAAFL.

  • MNG||

    How is that rule better?

  • J_L_B||

    People make choices that lead to unequal outcomes and incomes. If government is empowered with altering the outcomes and incomes of such choices, allowing them in the first place is wasteful. Your form of government inevitably leads to repression.

  • MNG||

    They often make these choices out of imperfect information or economic need, lessening those could help too, no?

  • J_L_B||

    Even with perfect information and economic needs, not all choices will be equivalent; consumers rank the factors in their decision differently and decide accordingly.

    Furthermore, social engineers fail to grasp that inequality is essential to punish the erroneous choices they hate so much.

  • Vaccine||

    After showing a centralized economic system provides more accurate information than a free market price system, MNG will prove that black is white, up is down, and 'Two and a Half Men' is the best television show of all time.

  • MJ||

    That the government can help lessening those assumes the government perfect or at least less imperfect information. Part of the problem is , the government does not know these people's circumstances, nor at a fundamental level, does the government care or is even capable of caring about them. So, in the end, the government is acting on even less perfect information than the people themselves. All it does is impose its vision on how they should live, and they should value.

  • MJ||

    You've just stumbled into the world view of the left (or at least the Thomas Frank left), who seem to base their politics on a divide and conquer strategy, and seem genuinely confused when voters care about what happens to people who are not part of the class the left puts them in and should therefore despise.

  • Coeus||

    What if you think an appropriate function of government is to promote fairness?

    Define fairness.

  • MNG||

    See Rawls, J. A theory of justice. (1971)

  • Take Care of THIS!||

    I personally prefer Rawls, L. You'll Never Find Another Love Like Mine. (1976)

  • Old Mexican||

    Re: MNG,

    See Rawls, J. A theory of justice [for a definition of fairness] (1971)

    So you would then delegate such definition to J. Rawls? Aren't you a brave soul.

  • MNG||

    What is a fair is a pretty complicated question, I refer to Rawls for as good an answer as any.

  • Old Mexican||

    Re: MNG,

    What is a fair is a pretty complicated question, I refer to Rawls for as good an answer as any.

    You would still have to agree with Rawls about what's fair, so as to delegate to him the definition.

    I never seek to determine what is fair or not. I always judge ACTS for their morality, not fairness. Fairness is too touchy-feely, mamby-pamby - the perfect lefty-statist term, to be more succinct.

  • MNG||

    Yeah, because "morality" is not touchy-feely or mamby-pamby...

  • Old Mexican||

    Re: MNG,

    Yeah, because "morality" is not touchy-feely or mamby-pamby...

    Exactly! See? You're learning.

    If I KILL YOU with no justification, that's immoral. Instead, if I kill you instead of you AND your family, I was being fair to your family.

    Same with Obamacare - see, taking something that does not belong to you, that's theft. But when Obama does it, it's fair.

    Isn't "fairness" so conveniently vague?

    Idiot.

  • BakedPenguin||

    see Rawls, J. A theory of justice. (1971)

    see Nozick, R. Anarchy, State, and Utopia.

  • MNG||

    That's a good one too.

  • MNG||

    But since you want to be silly, define appropriate.

  • Coeus||

    Not being silly. You said it was a appropriate function of government. What would that entail exactly? A sales tax would seem to me to be the most fair, at least as I view the term. And you define appropriate. You said it.

  • MNG||

    I think an appropriate government function is to ameliorate inequality, so I imagine I'd find different taxes appropriate. My point is that not everyone starts off from libertarian axioms.

  • ||

    By what authority?

  • MNG||

    The US constitution certainly doesn't comport with libertarian axioms. The taxing power, the due process clause (which allows for deprivation of liberty and property so long as there is due process), the takings clause, etc., etc., show that property was not supposed to be sacred for example.

  • ||

    Why do you hate me? I'm the reason we don't have North Korea's standard of living.

  • MNG||

    I don't hate you, everything I propose must fit within your structure.

  • Old Mexican||

    What if you think an appropriate function of government is to promote fairness?

    I would say there's something wrong with you. What's "fairness"? According to whom, you? Me? My cat?

    They criticize those who want fairness in taxation and then go on to complain that taxing the rich is unfair....

    There's no fairness in ANY taxation, MNG - taxation is theft.

  • GNM||

    feeding the trolls, does not make them see the light

  • MNG||

    See, you think taxation is wrong ("unfair"). We all have our own ideas of what is right or wrong for government to do.

  • Old Mexican||

    Re: MNG,

    See, you think taxation is wrong ("unfair"). We all have our own ideas of what is right or wrong for government to do.

    Don't equivocate, MNG. Theft is not "unfair", it is immoral. There's a HUGE difference.

    And Taxation IS theft, no matter if the government does it or someone else.

  • MNG||

    It's a funny kind of theft when the group gets to discuss and vote on how much will be taken from them...

    I talk tax fairness, you talk tax morality...Tomatoes, tomatoes.

  • Old Mexican||

    Re: MNG,

    It's a funny kind of theft when the group gets to discuss and vote on how much will be taken from them...

    ESPECIALLY funny when the majority will NOT pay a single cent. That's a funny kind of theft - it is called being a spineless thief.

    I talk tax fairness, you talk tax morality...Tomatoes, tomatoes.

    "Fairness" and "Morality" are different things, MNG. A rapist can be fairer to his victim if he wears a condom, but his act is STILL immoral. See the difference, sweetheart?

  • MNG||

    What's "appropriate" to you? Me? Your cat?

    This game can be fun!

  • MJ||

    All MNG proves is "fair" is just a word he's using to manipulate feelings of guilt. It does not have a meaning to him.

  • Gilbert Martin||

    "What if you think an appropriate function of government is to promote fairness?"

    Then you need to get a Constitutional Amendment passed to that effect, because there isn't any such thing in the current version of the Constitution.

  • MNG||

    Since the Constitution is about the powers not goals of government I would not expect that to be in there. And there are many powers granted there that can be used for that purpose. The broad taxing and spending clause for one.

  • Gilbert Martin||

    "Since the Constitution is about the powers not goals of government ..."

    Nonsense.

    The powers delegated to government define the goals of government. They are one and the same.

  • MNG||

    Yes, and many of the powers delegated can be used to lessen inequality and its effects.

  • Gilbert Martin||

    You are flat out wrong about that.

  • ||

    Since the Constitution is about the powers not goals of government

    Oddly enough, the taxation power is limited to advancing certain goals, one of which is promoting the general welfare.

    Redistribution does not promote the general welfare, as it promotes the welfare of some at the expense of others.

    So, whatever else you can say about the Constitution, I don't think you can say that it empowers the federal government to redistribute wealth by taxing some and paying those revenues to others.

  • ||

    Since you seem to have missed this part:
    "We the People of the United States, in Order to form a more perfect Union, establish Justice, insure domestic Tranquility, provide for the common defence, promote the general Welfare, and secure the Blessings of Liberty to ourselves and our Posterity, do ordain and establish this Constitution for the United States of America."

    I count 5 goals of government right there.

    http://en.wikipedia.org/wiki/P.....nstitution

  • ||

    What if you think an appropriate function of government is to promote fairness?

    1) On what do you base this thought?

    2) And why in the hell do you think that the government can carry it out? Politicians don't make life fair; they hook up their cronies. What the fuck is fair about that?

  • DRM||

    I'll agree to a plutocrat tax the moment the tax deduction for state income taxes is repealed. If the people of New York want to tax themselves heavier than the people of Texas, that's fine, but it's obviously not fair that they get a deduction on Federal taxes for their own choice. And not only is it fairer to tax everyone in the country the same, it'll raise tens of billions of dollars in additional revenue.

  • ImaDouchbag||

    The linked article does make some good points; we should greatly simplify the tax code (you pay on all income where you live for the longest portion of the year, no kerry-esque park the yacht in a low tax state bs), then tax the living shit out of the wealthy.

  • barfman||

    *barf*

  • jester||

    Polish jokes start with Surowiecki. I bet the stupid fuck doesn't even know his name is pronounced Su-ro-vyet-ski.

  • Enyap||

    For a magazine with a tophatted and monocled mascot, the New Yorker sure doesn't seem very libertarian.

  • Pedant||

    "... there’s a yawning chasm between the professional and the plutocratic classes, and the tax system should reflect that."

    It does; that's the nature of a percentage.

  • ||

    Laffer's solution to increasing revenue would be what, then? Decrease taxes on the rich? By how much? Given he's the origin of the "Laffer curve", I'd be interested to know what level of taxation he believes would maximize revenue. Or, at the very least, return revenue to historic levels.

    I'd also question the idea that raising taxes on the very rich from their current levels wouldn't at least result in some additional revenue, even considering the wealthy's ability to reorganize their income. Unless they stop earning income altogether, all they can do is rearrange the form in which it comes. Capital gains instead of direct payments, etc. The trick, then, would be to raise the rates on different types of income in lock-step, so there's no "savings" to be had in merely shifting the form in which one's income arrives.

    Another thought: is it possible that receipts may have risen after drops in the highest tax rate due to "profit taking"? If one takes a long view and looks at federal income tax rates like the market, they tend to ebb and flow. Laffer does a good job of illustrating this in his article. So if I'm one of the mega-wealthy, I may have enough liquidity to take no income (or very little) during periods of high taxation, then "cash in" during periods of low taxation.

    In his discussion of the receipts from the top 1% and how they're increased over time (from 1.5% GDP in 1978 to 3.3% GDP in 2007) Laffer also fails to note that this is partly due to the fact that the top 1% of filers have, over that same period, come to represent a consistently increasing share of total income. Consider that in 1980 the top 1% made up 8.46% of total AGI and paid 19.05% of total tax receipts, whereas in 2007 the top 1% made up 22.83% of AGI and paid 40.42% of all revenue. So in 1980 the multiplier was 2.25x whereas in 2007 it was 1.75x. In 1980 the top marginal rate was still 70%. It seems like this rate did in fact extract more tax revenue from the top 1% than we're seeing now in 2007.

  • kilroy||

    I don't owe you anything and neither does Lady GaGa.

  • oncogenesis||

    Given he's the origin of the "Laffer curve", I'd be interested to know what level of taxation he believes would maximize revenue.

    Apparently, your copy of the Internet is missing Wikipedia.

  • ||

    As I understand it Laffer just posited that the curve exists; he didn't stipulate what set of tax rates on income, dividends, capital gains, etc. actually produce the maximum revenue.

    The research cited on the wiki specifies a tax rate anywhere from 32.67% to 70%. So I'm curious what Laffer himself would recommend, given he feels our current rate is too high.

  • ||

    "Laffer's solution to increasing revenue would be what, then? Decrease taxes on the rich? By how much? Given he's the origin of the "Laffer curve", I'd be interested to know what level of taxation he believes would maximize revenue. Or, at the very least, return revenue to historic levels."

    Obviously, if an equation has a variable, then it must be a bad equation--is that what I'm supposed to think? If he can't give you the exact percentage across the board, that means taxes can't possibly be too high?

    In the meantime, we just went through a major credit/investment unraveling led recession (it sure as hell wasn't brought about by inflation), and I'm supposed to think discouraging economic activity and investment through higher taxation won't be a problem?

    You tell me why.

    "The trick, then, would be to raise the rates on different types of income in lock-step, so there's no "savings" to be had in merely shifting the form in which one's income arrives."

    You talk about economic activity like it's gravity or something--something that happens regardless of what people do.

    Maybe you've never started or run a business, or maybe you've never really made an investment? I don't know, but there's third option that you don't seem to be considering...

    The one where the wealthy do as little as possible with their money. They don't invest their money, time or effort in efficiency or technology or productive activity--they just sit in relatively stable investments like government bonds... And look at that yield curve!

    http://www.ustreas.gov/offices.....ield.shtml

    30 years at 4%! Fat bid to cover ratio! Why do you think that number is so low? It isn't because the government hasn't been issuing much debt--I'll tell you that.

    What kind of bizarre intellectual hoop do you have to jump through backwards to believe that making investment proceeds less attractive with taxation doesn't discourage people from making investments?

    That is a bizarre belief system.

  • ||

    Bizarre doesn't do it justice. It is based on the assumption that wealth is a zero sum game. That someone being wealthy necessarily prevents someone else from being wealthy. It is not like this guy is saying "we have a lot of stuff to do and it is only fair that the rich pitch in more since they have more". It is much more insidious than that. He wants to tax them because he views them being rich as a bad thing. It is typical of the Leftist strange obsession withe equality, as if someone else' wealth somehow harms everyone else.

  • ||

    Way to assume, champ. Would it surprise you to know I'm a proponent of the FairTax which, if anything, would be a ginormous boon to the extremely wealthy?

  • ||

    Obviously, if an equation has a variable, then it must be a bad equation--is that what I'm supposed to think?

    Not at all. My complaint with Laffer's WSJ article was that his only point seemed to be, "lowering taxes on the rich always increases overall revenue". If the rate's 90% then we should reduce it to 70%. If it's 70% we should reduce it to 50%. If it's 50% we should reduce it to 35%. But he doesn't give us a stopping point. To read the article you'd think we should just keep on reducing the maximum marginal rate all the way to 0%.

    I don't have a problem with the Laffer curve. I have a problem with the principle he seems to lay out in that article, which is that it is always better to lower the rate at which the wealthy are taxed. That's just not true. And I think Laffer would agree, actually. That particular article may simply have been written in such a way as to misrepresent his views.

    If he can't give you the exact percentage across the board, that means taxes can't possibly be too high?

    Did I say that? No.

    In the meantime, we just went through a major credit/investment unraveling led recession (it sure as hell wasn't brought about by inflation), and I'm supposed to think discouraging economic activity and investment through higher taxation won't be a problem?

    Historically the U.S. has enjoyed substantial growth while having a marginal tax rate much higher than what we have now. Maybe that growth could have been even more significant with a lower maximum rate; that's certainly a possibility. But the fact that the growth did occur leads me to question the idea that increasing the max rate will have disasterous consequences. The deficit situation is out of control, even after stimulus efforts and the war(s) are taken out of the equation (though, eliminating those would go a long way). Spending should be cut, sure, but we should also take measures to return our revenue levels to historic norms (assuming their currently low levels are actually related to the tax structure and not merely an effect of the recession).

    Given it was the rich who most recently received tax cuts, it seems reasonable that, if taxes are to increase, they be the ones to primarily shoulder the increase. Speaking of zero sum games, I also dispute that every dollar taken from the wealthy (and hence not re-invested) is "lost". If that dollar is subsequently given to someone at the other end of the income spectrum then it increases that individual's ability to consume, i.e. consumer demand.

    The one where the wealthy do as little as possible with their money.

    Yeah, I don't see this as a real possibility. Did the wealthy not invest their money when rates were higher? Sure they did. Capital gains taxes tax profit. If an investment has the potential to create profit then its a good idea if that profit is taxed at 20% or 30%. Now clearly you can tax gains at such a high rate that the general "overhead" of investing (research, paying money managers, etc.) renders the whole effort no longer worthwhile, but I don't think anyone's suggesting such a rate.

    Just because I'm curious- what would you consider to be the optimal way to re-organize our tax system while keeping revenue in the 18-20% GDP range, and how do you expect this re-organization would affect earners at various income levels?

  • Chad||

    The Laffer curve peak is around 70% for most taxes (it depends on how easy they are to dodge). Anyone who comes up with a lower number than this is either narrowly focusing on some easily-dodged tax, or just full of malarky. Just think about your personal life, and it becomes obvious that raising your taxes from, say $30k out of a $100k income to $35k is incredibly unlikely to cause many people, let the average person, to drop their income by 20%, which would be necessariy for the government to lose money. Mathematically, the Laffer curve makes no sense at all until you are north of 70%, or the tax is fairly easily avoided. The latter may include, at least to some degree, state income taxes.

    Frankly, we would all be better off if the feds controlled state income and sales tax rates, so the states would quit racing to the bottom.

  • ||

    To riff on something proposed further down in this thread, what if the fed determined each state's federal tax obligation via some pseudo-objective means (more on that later) then allowed each state to establish determine independently how it chooses to meet that obligation? Currently there's a duplication of effort: the IRS to collect federal taxes and a multitude of state agencies to collect state taxes. Shifting collection onto the states would give them complete latitude to determine how they want to collect, and would result in a general reduction in overhead since it would eliminate agencies that are duplicated at the state and federal level.

    Payroll taxes would be left alone. The state obligations would be to cover "everything else" (personal income, corporate, etc.)

    The trick, of course, would be how to "fairly" determine each state's "share". Per capita is easy, but that screws "poor" states when compared to what we have now. You could look at "total income", but that punishes income and economic development. One possibility is to use each state's share of "total consumer expenditure". Basically a tax on consumption, but at the state level. If a given state chooses to meet its obligation by an income tax instead of a consumption tax, then that's its prerogative.

  • ||

    Basing it on consumption would also discourage state tax structures designed to drive the poor away to other states. In a per capita system, the best strategy for a state is to get rid of all the poor folks, since they increase the state's federal tax obligation but aren't very taxable (since they have below-average income and levels of consumption). If the state shares are instead based on consumption, then poor residents don't represent as much of a "burden".

  • Chad||

    In general, I am a big fan of tax synchronization, both international and interstate. Virtually all "Laffer" effects consist of people or corporations dodging taxes by hiding on the other side of political borders, not by actually refusing to earn or spend money.

    Globally-synchronized taxes on corporations and high earners (both income and capital gains), and nationally-synchronized property, sales, and income taxes for everyone would do a lot of good.

    And yes, we could save a lot of bother by having the feds run it and just distribute the money.

  • Old Mexican||

    Re: Chad,

    Frankly, we would all be better off if the feds controlled state income and sales tax rates, so the states would quit racing to the bottom.

    Chad-ese to English:

    "Frankly, it would be better if the Feds became the sole governing body in the land and put a stop to this pretense that the US is a Republic."

    Obviously, Chad does not really mean it when he says "we would be better off", which is why it gets lost on translation.

  • ||

    "Yeah, I don't see this as a real possibility. Did the wealthy not invest their money when rates were higher? Sure they did. Capital gains taxes tax profit."

    Again, your view doesn't seem to take the real world into account, where people do different things depending on which activity pays them better.

    The fact is that money is just like people that way--they can put their money at risk or they can buy government bonds. In the real world, people and companies are buying bonds hand over fist despite the historically low returns. ...despite the fact that the government is issuing historically high levels of debt!

    People aren't starting businesses like they were--there are multiple reasons for that. One of the things you can do to encourage people to start or expand their business is make their after tax returns higher by cutting taxes. No really--I'm not making this stuff up...

    Just like you can entice a stay at home mom into the workforce by paying her more money, businesses and investments can be enticed into hiring people and buying things by increasing their real returns!

    That isn't a confusing principle to reasonable people.

    And you know what else? Just like you can encourage people with money to invest by increasing their real returns--you can discourage economic activity by decreasing their real returns through taxation too! And excuse me for saying so, but I feel like I'm talking to a 5th grader if I have to explain that to somebody...

    I'd love to get you to understand that not all investments create the same level economic activity. When investments go into government debt, that doesn't produce the same level of economic activity as starting a business and hiring somebody--but why should anyone have to explain that to a grown up?

    Yes, all the money gets invested in something, but that's hardly the point--is it. The real world tells us that right now, they're favoring the government bonds--which are about the least the productive investment you can make. ...and while Laffer seems to account for that, you seem to be ignoring what's happening right now in the very real world.

  • ||

    Let me preface this by saying you're a total ass, but I feel compelled to reply anyway so here goes.

    The fact is that money is just like people that way--they can put their money at risk or they can buy government bonds.

    Wouldn't the gains from bond investment be taxed at the same rate?

    Say I a million bucks and two options on how to invest it. Option one is buying bonds with a modest (but guaranteed) return rate of 4%. My gains on this bond investment will be taxed at a rate of X%.

    Option two to split my money between various stocks (or real-estate, or commodities, etc.) Each of these investments has an expected return rate of 7%. Some will under-perform and others will over-perform. My gains on this suite of investments will be taxed at a rate of X%.

    Explain for me why (X=0) motivates me to prefer option two while (X>0) motivates me to prefer option one.

    One of the things you can do to encourage people to start or expand their business is make their after tax returns higher by cutting taxes.

    I'm all for cutting the corporate tax rate and (potentially) capital gains. Ideally I'd prefer capital gains not be taxed at all. What I can't get around is the fact that such a tax structure would result in the very wealthiest households essentially paying no tax whatsoever, since (as I understand it) the lion's share of their income is in the form of capital gains.

  • ||

    I now realize govt. bonds are tax exempt, which puts your argument in perspective.

    Besides decreasing investment in govt. debt, what would be the effect of eliminating the exemption for gains on govt. bonds? That would put them on equal footing (tax-wise) with other forms of investment.

  • cynical||

    LeBron James is a plutocrat? The guy that won the Megamillions? Not, say, George Soros or Warren Buffett?

    Money doesn't automatically translate to power, in fact is usually goes in reverse. Gah.

  • ||

    Notice he never mentions the real plutocrats. I would say people like Supreme Court Justices and Cabinet secretaries and insider cronies like Jamie Ghorlick or Rahm Emmanual are the real plutocrats. LaBron James never has to my knowledge stolen any money or told anyone else how to live.

  • Atanarjuat||

    The Laffer article has a picture of John Kerry's yacht. It has a massive American flag on the stern. IIRC, he was the candidate who was criticized for not wearing a flag on his lapel. I guess now he's making up for it big time.

  • ||

    Remember, the Supreme Court declared me unconstitional several times, before I was "ratified" as an amendment. Why? If all income inherently belongs to the gov't to tax at whatever rate they want, how could the SCOTUS ever reject me?

  • robc||

    You werent proportional to the population of each state.

    Eliminating the 16th and 17th amendments (the year of living stupidly amendments) and making the Feds send a bill to the states for their proportion of the budget each year would be an awesome (and easy) fix to a whole lot of shit.

  • robc||

    This is also a "fair" way to collect taxes, as then taxation is proportional to representation (except for the senate).

    Wouldnt expect there to be a whole lot of unfunded mandates when the state legislature controls who is in the senate.

  • ||

    Finally, someone who understands me.

  • Gilbert Martin||

    "The proper role of taxation is not to promote fairness or equality or social engineering. It is to raise revenue to fund the appropriate functions of government."

    Indeed so.

    And number one - those appropriate functions are far far less functions that the federal government is currently doing and therefore shrinking the government down to doing only those functions would require far less tax revenue however raised than is currently the case.

    Second, "fairness" has nothing to do with redistributing wealth. Fairness in paying for government provided goods and services is no different than it is for private sector provided ones - on a user fee basis.

    McDonalds can't get away with charging some people $1,000 for a Big Mac so it can give hundreds of them away free to a bunch of other people. There's no legitimate reason why the federal government should be able to get away with doing the functional equivalent of that.

    About half the people in the country don't pay an federal income tax at all. A bunch of them are net tax receivers (i.e on welfare). This isn't because they aren't getting any govt services - it's because the other half of the population is being forced to subsidize the services the are getting. Those folks need to start paying for their own services.

    It's only fair.

  • J_L_B||

    My federal tax rate couldn't be different from anyone else because of my race, gender, religion, geography, eye color, shoe size, favorite sports team, number of letters in my name, weight, education level, and many others.

    However, our experience with government has taught us of their perfect inconsistency. Different rates are possible if based on level of income without a justification as to how it is different or more relevant than the above factors.

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