Give Us Your Tired, Your Poor, Your Inducement to Additional Capital Investments, Yearning to Cook Chinese Food

Does increased immigration lift or lower native-born Americans' wages? The answer, argues Virginia Postrel, isn't as obvious as it initially seems.

Comments

[Franklin Harris]

Where I live, there are quite enough Chinese and Mexican restaurants, and even almost enough Japanese restaurants. What we need is an influx of Italians.

[fyodor]

Oh come on, you and your libertarian rationalizations. We all know that if everyone was forced to stay put, we’d all be so much richer.

[joe]

Interesting. And this doesn’t even take into account the fact that illegal immigrants, because of their legal status, can be paid lower wages by unscrupulous employers.

The answer to the declining wages of high school dropouts is to have fewer high school dropouts. Our efforts should to towards making sure people have opportunities, not towards making sure people without opportunities are secure in their position. Banging away at immigrant hordes in order to get poor workers to support you is just one more example of the old capitalist tactict of turning the people near the bottom against those at the very bottom, so they’ll waste their energies fighting among themselves.

[R C Dean]

Ah, but those illegals with their untaxed lower wages do two things to raise my standard of living. One, they lower labor costs, which lowers the costs of goods and services I buy, and two, they increase the size of the untaxed economy, which can only benefit everyone from a purely economic point of view.

the old capitalist tactict of turning the people near the bottom against those at the very bottom, so they’ll waste their energies fighting among themselves.

This is hardly a “capitalist” tactic – more like a universal one. You wanna see people at the bottom turned against each other, look at your forced resettlements in Communist regimes, or at the use of slave labor in pre-capitalist economies in general. Puts those robber barons to shame.

[sage]

“this doesn’t even take into account the fact that illegal immigrants, because of their legal status, can be paid lower wages by unscrupulous employers.”

It also doesn’t mention that they can choose not to be employed by said unscrupulous employers.

[Stretch]

they increase the size of the untaxed economy, which can only benefit everyone from a purely economic point of view.

The government is well aware of the taxes they miss out on and generally passes their “burden” on to us.

[Jesse Walker]

they can choose not to be employed by said unscrupulous employers.

Not necessarily. An immigrant’s illegal status makes him more susceptible to coercion.

[Stretch]

It also doesn’t mention that they can choose not to be employed by said unscrupulous employers.

Sort of. You’re pretty much forced to take what you can get, but a good worker will always get paid more eventually. The problem for illegals is no so much that they initially make below minimum wage, because they can work to change that (and paying someone $10 under the table is better for both the worker and the employer). The problem is that there’s a cap to how much they can be paid, regardless of their merits.

[joe]

RC, “Ah, but those illegals with their untaxed lower wages do two things to raise my standard of living.” Yeah, and if I break your window and take your television, it would raise my standard of living, too. Such coerced cost savings may make some parties wealthy, but they don’t help the economy. You, sir, are making the argument of the slaver.

[joe]

Stretch,

“The problem for illegals is no so much that they initially make below minimum wage, because they can work to change that”

Only if they can credibly threaten their bosses with quitting and taking a higher-paying job. Which they cannot, because they are forbidden to by law.

[fyodor]

This is hardly a “capitalist” tactic – more like a universal one.

Thank you, you beat me to it.

Our efforts should to towards making sure people have opportunities, not towards making sure people without opportunities are secure in their position.

There I agree with you, joe. And guess what, freedom = opportunity!

they increase the size of the untaxed economy

If we allowed more people to come here legally, they could still choose to work “under the table” if they so desired. Their illegal status forces them to work in an untaxed economy, it doesn’t enable them to.

The government is well aware of the taxes they miss out on and generally passes their “burden” on to us.

I don’t see the logic in that, unless you mean that illegals use government services for which they don’t pay their “fair share.” Again, the solution, if not a perfect one, is to make them legal.

[Stretch]

Only if they can credibly threaten their bosses with quitting and taking a higher-paying job. Which they cannot, because they are forbidden to by law.

I agree that it’s a very difficult and unfair position. But having access to other opportunities isn’t the only (or even primary) reason that people get raises. As I said, it’s cheaper for the employer to pay anyone under the table, and good work will be paid for by someone. Being forbidden by law has nothing to do with being able to change jobs in this case.

They start in a position where they will not receive fair or equivalent wages, and they’ll never receive those as long as they’re illegal. My only point was that a good workers wages will rise over time, though perhaps not to the same degree and certiainly never above a certain limit.

[Adam]

joe – you’re accusing RC of “coercion” for engaging in voluntary transactions with people who would thwart your attempts to mandate that all employer-employee relationships exist at the wages you and your kind stipulate? You’ve got to be kidding.

[joe]

Adam,

When you finish you negotiation with “…or I’ll have you thrown in jail and deported,” your transaction ceases to be voluntary. And while RC doesn’t do this himself, he essentially has people do it for him.

And no, my support for a minimum wage does not make the above “transaction” any less coerced. Not so good with the logic there.

[Adam]

joe, the immigration laws that provide for jailing and deportation of otherwise non-problematic immigrants are designed to bolster your minimum wage laws. RC wouldn’t be able to make that statement without the support of you and the folks behind the Minuteman Project.

[fyodor]

Both sides are wrong. Jesse is right. Illegals are not literally coerced into their jobs. But their choices are limited by a threat of coercion that others don’t face. And that’s not a minor issue.

[SPD]

Dey tuk ‘r jehbs!

[Steven Crane]

Are people really arguing that black markets are superior to legal (albeit regulated) and transparent markets?

I thought that libertarians liked contracts. You know, the things that can only exist in legal markets. Didn’t Hernando de Soto write a whole book about this?

[fyodor]

Adam, you’re pulling a joe on joe. Maybe he deserves it for…being joe. But it’s still an unfair argument, claiming that he has no right to take a position that agrees with us because he takes positions that disagrees with us on other issues. IF he claimed he was pro-immigration because he was for all-out freedom, then maybe it would be worth poking him in the ribs and asking him why he’s not for freedom in other circumstances. But he’s not saying that, so you may as well accept that he sincerely if accidentally takes the right position on this issue. 🙂

[Ruthless]

“The answer, argues Virginia Postrel, isn’t as obvious as it initially seems.”

It’s obvious to me that the greater the freedom the greater the prosperity. Borders, immigration policies, etc., reduce freedom, so duh.

Those who massage the numbers otherwise are merely seeking to rationalize their hatred of pesky furriners.

[joe]

“joe, the immigration laws that provide for jailing and deportation of otherwise non-problematic immigrants are designed to bolster your minimum wage laws”

No, not really.

“RC wouldn’t be able to make that statement without the support of you and the folks behind the Minuteman Project.” Except for the part where I oppose, not support, the laws that make RC’s statement possible, this makes perfect sense. You should stop digging at this point.

Thank you, fyodor.

[fyodor]

Steven Crane,

Forgive them for they know not what they’re saying, or at least I hope not. It’s interesting and valuable to note the certain advantages that black markets have because of their necessary freedom from government burdens (aside from the fact that the entire activity is illegal), but OF COURSE we should NOT create the circumstances that create black markets. And I’ll go out on a limb and call that the CORRECT libertarian position regardless of whether all or even all of the libertarians here agree with me.

[fyodor]

“whether all or even all”

My typo makes me laugh. In case it wasn’t obvious, I meant “whether all or even any”

joe,

You’re quite welcome. But boy, with friends like me… 🙂

[Native NYer]

When I was out of work a few years ago, I worked ?off the books? construction with both legals and illegals.

The biggest problem for illegal workers is ignorance of the cultural and wage ranges, at least initially. However, I think the argument that the employer can say I?ll report you to INS is wrong, in the first place because the employer doesn?t know where the illegal lives, and secondly the illegals naturally talk among themselves and anyone who pulled an INS stunt would be shunned by illegals and have to hire on the book employees at a much larger cost.

There were certainly employers who picked up the newly arrived guys and would stiff them a day?s pay (I hope there?s a special spot in hell for them!). But everyone I worked with who were longtimers knew exactly who those employers were and avoided them.

Perhaps it?s different in a community with fewer opportunities, but in a big city there is some competition among ?off the books? contractors.

[joe]

Native NYer,

Well, even if “I’ll have you deported” isn’t a realistic threat, “I’ll fire you, and you can’t get another job” is always hanging in the background.

[fyodor]

It’s obvious to me that the greater the freedom the greater the prosperity. Borders, immigration policies, etc., reduce freedom, so duh.

Agreed. Thus the point of my first and sarcastic post. But…

Those who massage the numbers otherwise are merely seeking to rationalize their hatred of pesky furriners.

Maybe. But you have to admit, or at least you should admit, that for those who don’t understand economics enough to look at the larger picture, and for those don’t understand or appreciate the principle you describe, thinking that immigration lowers wages, especially for the working poor, has a certain Occam’s Razor simplicity to it. That’s why it’s not easy to convince them otherwise. And it sure don’t help to write them all off as bigots. Only some of them are! 🙂

[Native NYer]

joe – yes, that’s true. And since there isn’t any work agreements, the best workers get all the work and higher wages, while slower, weaker, or older guys get less pay or nothing.

[Dave W.]

I think if employers of illegal immigrants were jailed, then the state would be acting as a good night watchman. It would also send a good message to the kids about following the law.

[fyodor]

Dave W,

Well yeah, a good watchman for victimless crimes. I don’t know if it’s true that employers are tacitly winked at for hiring illegals as anti-immigration forces love to claim, but I do agree that it’s not good to pass laws that aren’t going to be enforced. And victimless crimes are always tough to enforce as there’s no complainant.

[Stretch]

The government is well aware of the taxes they miss out on and generally passes their “burden” on to us.
————————————————–
I don’t see the logic in that, unless you mean that illegals use government services for which they don’t pay their “fair share.” Again, the solution, if not a perfect one, is to make them legal.

More or less, but it’s not really about simple “use” of services. The shadow economy has a direct and significant effect on deficit spending. Taken to an extreme, if the shadow economy (and hence, unpaid taxes) were 50% of GDP, would the government “need” any less money? Of course not. Yes, that’s mostly a problem with our irresponsible government and retarded tax system, but taking the situation as it is now the benefits from the untaxed economy are offset to some (I suspect significant) degree.

Of course they should be legal. Immigrants come here to work and make a better life for themselves, and they’d prefer to have all of the rights and privileges that working citizens have. If they could be here legally they would, but our immigration policy and bureaucracy makes that impossibly complicated for most.

[Steven Crane]

I am quite surprised that the Lonewacko hasn’t yet weighed in.

[Stretch]

I think if employers of illegal immigrants were jailed, then the state would be acting as a good night watchman.

Yeah, ’cause that wouldn’t be a significant burden on our prison system. We can put them in cells with people who smoke pot.

[bigbigslacker]

Somehow, every immigration discussion turns into one on illegal immigration. But what the heck…

Are we supposed to be outraged when an employer pays an illegal too little? How about being upset the company hired the criminal at all? Jail for both?

I don’t really want that, and don’t have a huge problem even with illegal entry (having enjoyed the company and cuisine of several illegals), but it is interesting see the usual mostly-leftist suspects come out of the woodwork with the sob stories. I’m more concerned about the potential immigrant that will never get the chance because our entry numbers apparently have to be set artificially low due to the illegal entry. If I sneak into France to wrok illegally, you won’t here me bitchin about….never mind, it would never happen.

[Adam]

joe – which laws that make RC’s statements possible do you oppose? Restrictive immigration laws?

[MikeP]

Does increased immigration lift or lower native-born Americans’ wages? The answer, argues Virginia Postrel, isn’t as obvious as it initially seems.

This posting forms a fun exercise.

Those to whom it is obvious the answer is “no” are surprised when they get to the article and read the headline. Those to whom it is obvious the answer is “yes” are surprised that Jesse Walker said that the answer isn’t obvious.

Surprise all around!

[Adam12]

I know libertarians are supposed to be against taxes and all, but bear with me for a sec…

If we had a purely consumption-based tax system, would the need to distinguish “legal” vs “illegal” immigration cease to exist? I guess my assumption is that current immigration policy exists to protect the pool of native-born workers (though I know there’s a security aspect to it too, but I’m ignoring that for now for the sake of arguement).

Just a thought…

[fyodor]

I am quite surprised that the Lonewacko hasn’t yet weighed in.

Dude’s slipping.

If we had a purely consumption-based tax system, would the need to distinguish “legal” vs “illegal” immigration cease to exist?

Assuming that sales taxes are harder to cheat on as many have claimed, it would alleviate that aspect of the problem of illegals, yes. But making them all legal would accomplish the exact same thing. Since those who want them to be illegal either think they “steal” jobs from “real” Americans or poison our social cohesion or sense of identity or whatnot, I don’t think abolishing the income tax would ease any of their concerns.

[Dave W.]

Well, as J. Walker might say, the question of whether the employers’ crime is victimless isn’t as obvius as it initially seems.

[Ruthless]

Adam12,
You need to elaborate.

[Adam12]

Fyodor:
I guess what I’m thinking is that this would be a “stealth” approach to legalizing the illegals, because no politician (in office) would survive the dawn if he actually suggested opening the borders. At any rate, I do see some merit to the concept of a consumption tax (its potential simplicity for one). I was surprised it wasn’t brought up on this thread before.

[Stretch]

A consumption tax is an inherently more fair form of taxation than an income tax. It would absolutely solve the taxation problems associtated with underground economies. Making them all legal would mostly address the tax problem, but it wouldn’t have the overall benefit that a consumption tax would.

The distiction between legal and illegal would still exist, of course. Many people would still be against immigration and would still have ridiculous notions of immigrants costing people their jobs.

[Adam12]

Ruthless:

I’ll try — I was thinking about arguements against (more) open borders. One biggie is the drain that undocumented aliens pose on social services: schools, hospitals, etc. Well everyone needs to buy milk, socks, lightbulbs, laundry detergent, the occasional carwash, mud-bath, right? So if the funding for gov’t-provided services came from taxes on things that everyone uses, then at least part of that problem would go away (I think).

I’m of the opinion that immigration on the whole is a good and unavoidable thing, and i was trying to think of a way to mitigate some of the unfortunate results of current policy. I thought I’d bounce this one off this lot…

[Adam12]

Of course what I’m not considering is the possibility that a black market for consumer goods and services would crop up (as the price of everything spiked 30+%), but I think those types of brink-and-mortar (or canvas and 2×4) operations would probably be relatively easy to spot.

[joe]

“joe – which laws that make RC’s statements possible do you oppose? Restrictive immigration laws?”

Yes.

[TLB]

How unfortunate that I came late to this latest Open Borders party.

Those of you who want to learn about the downsides of massive illegal immigration should click the link directly below: hundreds of posts all about illegal immigration, and lots of very scary stuff you’ve probably never heard of.

(And, here’s today’s Fun Fact: the Libertarian Party got a whopping 0.4% of the vote in the presidential election in California. That’s despite the fact that everyone knew Kerry would win by a huge margin, thus freeing up a lot of prospective protest votes. I believe the market has made its decision.)

[Steven Crane]

I knew that Senor Lonewacko would make his appearance before the day was out. At least this time he didn’t complain about the nofollow tag.

[Stretch]

Of course what I’m not considering is the possibility that a black market for consumer goods and services would crop up (as the price of everything spiked 30+%)

That would only become a problem if we just added a consumption tax on top of income taxes, instead of completely replacing the income tax. First, people would automatically have more money to spend as they get to keep all of their paychecks, so any increase in price would be partially mitigated. Second, with the elimination of other taxes prices of products would drop to reflect the significantly lower overhead costs, therefore consumer products would not have a significantly higher absolute cost (if at all, depending on %) after the consumption tax was tacked on.

The current FairTax plan has a stated target of 23%, which would make most products cost just about the same as they do now.

[joe]

Wacko,

Thanks for the demonstration of the dangers created by prohibitionist immigration laws.

Similar stories have been documented about prohibitionist alcohol laws, and prohibitionist drug laws.

[The Real Bill]

I’ll be Lonewacko:

If you measure the entire economic output of the average immigrant and compare it to the total amount of government services they consume, is immigration a gain or a loss?

To note:

In California, the average Hispanic immigrant female gives birth to three children. The cost for public education alone is approximately $370,000 in 2005 dollars.

[Steven Crane]

In California, the average Hispanic immigrant female gives birth to three children. The cost for public education alone is approximately $370,000 in 2005 dollars.

Those three children (American citizens, mind you) probably have lives beyond twelve years of public school, you know. They don’t represent a net loss until the age of 18 and then disappear.

Should we also crack on regular citizens with big families? I mean, their kids cost money to educate too.

[The Real Bill]

SC,

The average American citizen has a higher economic output than the average immigrant; thus, they pay more taxes that pay for the services.

[Larry A]

I think if employers of illegal immigrants were jailed, then the state would be acting as a good night watchman. It would also send a good message to the kids about following the law.

Right on. Let’s start in Washington, D.C., and nail a bunch of the high society moms with undocumented nannies. Put the kids in government facilities where they belong. That’ll teach the kiddos.

[fyodor]

Well, as J. Walker might say, the question of whether the employers’ crime is victimless isn’t as obvius as it initially seems.

Naturally I recognize there are opinions contrary to my own, but if the point of your referencing Mr. Walker’s post is that what he said and what I said are substantively related, I should point out that even if it were true that hiring illegals lowered wages, I would still call illegal immigration a victimless crime as there is no victim when someone crosses a border (thus no complainant) plus no one has some sort of right to a particular wage (not that I’m being callous to low wages, just explaining the facts of the matter).

Those of you who want to learn about the downsides of massive illegal immigration

Oh, we already know all about the downsides of massive illegal immigration, Wacked One. That’s why we want to make it legal!! 🙂

[Adam12]

Stretch:
You’re right, I was making that assumption too (that consumption would replace income tax) and failed to mention it. I do wonder whether the initial “sticker shock” that consumers would see while shopping wouldn’t spark temporary black markets, until eveyone got used to the idea and understood that their paychecks just got 50% “larger”. Either way, thanks for the feedback.

[Ruthless]

Adam12,
Thanks for elaborating.
Pesky furriners are such an emotional issue, governments run by the least common denominator will always find ways to shit on furriners’ heads in order to appease the ignorant. And recent LEGAL immigrants are among those most needing appeasing.

It’s a cousin to the War on Terror hysteria.

[The Real Bill]

Larry A,

I don’t know if you are being sarcastic or not, but I agree with your sentiment. We should begin at the top. My first target would be large businesses that hire illegal immigrants. The fine would be $1,000,000 per illegal hired.

[Steven Crane]

You miss my point; surely those public-school educated 1st-generation Americans will have some sort of positive economic output in their lives, possibly even paying for themselves.

Also, surely one can calculate the number of children which a person/family of a given income can support with their own portion of the tax burden. If people exceed that, should they be criticized?

[MikeP]

The average American citizen has a higher economic output than the average immigrant; thus, they pay more taxes that pay for the services.

The average rich person has a higher economic output than the average poor person; thus, they pay more taxes that pay for the services.

Do you want to draw any conclusions from that?

Aside from being unsupportable by any economic argument, it is plain immoral to prevent the free migration of people.

[fyodor]

The average American citizen has a higher economic output than the average immigrant; thus, they pay more taxes that pay for the services.

Well my reply to that would be that just because they don’t make as much or pay as much as the average American doesn’t by itself prove that they’re net negatives to the economy, only that they’re not as much of a positive as the average American.

Stephen Crane,

Anti-immigrationers generally resort to the circular argument when you point out that their reasons for not letting certain people in is just as good a reason for kicking certain people out. As in, “American citizens who are net drains on our economy are here legitimately, while illegal immigrants are not.”

[fyodor]

MikeP,

See my reply to Stephen Crane.

[The Real Bill]

To clarify:

I’m not anti-immigration. My wife is an immigrant (a legal one). I am for immigration as long as it is low enough to allow for assimilation.

I believe that immigration laws are similar to tresspassing laws. I’ll make all you open-borders guys a deal. If you don’t leave open the border to our (shared and supposedly commonly owned) nation, then I won’t go to your house and hold open your front door to all that want to enter.

[Steven Crane]

Sorry, fyodor… when I encounter circular arguments, I generally put my fingers in my ears, rock back and forth, and sing “Material Girl” at the top of my lungs.

[The Real Bill]

SC,

I see your point. I just don’t view it that way. I believe that all people should be responsible for themselves. I should not have to pay for the education of the children of others. I am 35 years old and I want to start a family. I am responsible enough to wait until I am financially able to support any children I father (and I’m almost there). It is unfair to force me to pay for the children of irresponsible “adults”. So, my answer to your question is yes; all people who create children that they are not able to support should be criticized. They are no better than thieves.

[Steven Crane]

I believe that immigration laws are similar to tresspassing laws. I’ll make all you open-borders guys a deal. If you don’t leave open the border to our (shared and supposedly commonly owned) nation, then I won’t go to your house and hold open your front door to all that want to enter.

Trouble is, TRB, that my house is neither shared nor commonly owned, so if I want to chase you off my doorstep with a baseball bat, I can (and probably will, given your sentiments). I might even leave the door open after I’ve gotten rid of you.

However, “Git off’n my proppity!” is not the proper responce of a free and open society wrt its borders.

[The Real Bill]

I’ll add that no one should create a child unless they are both financially and emotionally prepared to raise that child. Is it any wonder that most people in prison come from “disfunctional” families?

One of the main things that separates humans from the other animals is the ability to control our reproduction. If you are a human that doesn’t control your reproduction, you are little better than a wild animal.

[MikeP]

just because they don’t make as much or pay as much as the average American doesn’t by itself prove that they’re net negatives to the economy, only that they’re not as much of a positive as the average American.

I’m sure we are in complete agreement on the basics here — and I would not hold against any user of taxpayer-provided government services the fact that they didn’t contribute as much as they were given — but I’m less certain about your “not as much of a positive” statement.

In particular, having the government provide services is so spectacularly wasteful that you pretty much need to assume a 100% overhead on such services. The more services demanded, the more wealth is burned. The more an individual uses these services, the more wealth is burned.

It’s not the consumer’s fault, of course. They can’t help it that the cheapest thing for them to do is go to a public school even though private schools cost half as much. But it is vastly unfair to hold the price of a California education against them as some kind of debt they owe someone.

[The Real Bill]

However, “Git off’n my proppity!” is not the proper responce of a free and open society wrt its borders.

I agree. I prefer: “Welcome to my nation! Have a nice visit before you return home. If you would like to stay longer and contribute to the growth and advancement of the US, please fill out the proper immigration forms. We will evaluate your application using a points system. Do you speak English? Can you read and write it as well? Do you have a history of violence? Do you believe in freedom, or will you act like a thief and vote yourself bread and circuses?”

[joe]

‘I do wonder whether the initial “sticker shock” that consumers would see while shopping wouldn’t spark temporary black markets, until eveyone got used to the idea and understood that their paychecks just got 50% “larger”.’

So “everyone” is going to have a paycheck that’s 50% larger? Really? How are you going to do that?

Because under your plan, everyone sure as hell is going to see the cost of their goods go up.

[fyodor]

Sorry, fyodor… when I encounter circular arguments, I … sing “Material Girl” at the top of my lungs.

That’s a lot to be sorry for!!

To clarify: I’m not anti-immigration.

Okay, anti-open borders? I certainly didn’t mean to imply that you were against all immigration. Just using a convenient tag. I didn’t even take you seriously anyway cause I thought you were taking Lonewacko’s side for the sake of argument!

Anyway, I’m not entirely sure if I would go the quasi-anarchist route and just ignore that there was a border there at all. Your goal of keeping immigration slow enough to allow for assimiliation sounds good in some respects. But if it’s slow enough that there’s signficant bottle-neck, then it’s too slow. And I don’t think there should be numerical quotas.

[MikeP]

I’m not entirely sure if I would go the quasi-anarchist route and just ignore that there was a border there at all.

Of course not. There should be a background check. It might even take a day or two until you get your yellow card saying you’ve cleared immigration as a nonthreat to the security of the nation.

[lannychiu]

Paychecks would be larger, because the government would not remove the income tax from salaries. Whatever your effective tax rate is (lower than 50% but certainly in the 15%+ range for most folks), you would see a proportional bump in the consumable part of your income.

[The Real Bill]

fyodor,

I don’t want bottlenecks either, but I’m not sure how we could do without some sort of numerical quotas. I suppose they would need to be flexible.

[joe]

So everyone sees their costs rise by 23%, but poorer people see their incomes rise by much less than that.

What a wonderful plan.

[MikeP]

I don’t want bottlenecks either, but I’m not sure how we could do without some sort of numerical quotas. I suppose they would need to be flexible.

If you really have to have some numerical restriction, then make every immigrant either have a job waiting for her or be a dependent of someone who has a job.

Note that I am not advocating this abrogation of human rights. But it is a hell of a lot better than what we have now.

[lannychiu]

The “regressive” nature of consumption taxes is certainly the major complaint whenever such a scheme is proposed, the major advantage is that it is a much more efficient way to generate tax revenues. Consumption taxes would distort individuals decisions to work less than our current income tax scheme does (since we have a graduated income rates, as one becomes wealthier there is progressively less incentive to work).

A consumption tax based scheme would likely have the effect of increasing total numbers of hours worked increasing the size of the economy.

As for the increase in prices, since wealthier folks would tend to see a larger increase in their effective salaries, the luxury goods that those members of society consume should see a larger rise in prices relative to inferior goods(since it is the wealthier folks have relatively more income). This would imply that the goods consumed by poorer folks would tend to increase in price less lessening the impact.

The 23% is an average with luxury goods rising by somewhat more, and basic goods rising by somewhat less.

Howe

[The Real Bill]

MikeP,

Sounds reasonable, but difficult.

joe,

The marginal tax rate on a family of four making about $30,000 per year is about 43%. That for a a family making $50-70,000 is about 22%. (These numbers are from the Treasury Dept.)

You can’t just look at a person’s paystub to see their actual burden of taxation. Evil pols think its okay to have hidden taxes; the best example is the payroll tax (half of SS and Medicare) which is actually a tax on the worker’s labor. (I should know since I’m self-employed and have to pay the entire amount myself.)

A consumption tax would allow the poor to defer purchases of unnecessary goods and services (and therefore taxes) and allow them to save for a home or other necessities. The non-poor will spend (and therefore be taxed). They will have no tax shelters by which to reduce their tax burden, which will help level the playing field since the poor generally can’t avail themselves to these tax breaks. In California, basic foodstuffs are exempt from sales tax. I would also include rent. These are two of the largest expenses for the poor. The non-poor tend to purchase their homes and eat out more often, so they will be taxed.

But the greatest benefit of a consumption tax is the fact that it applies to wealth. Income is all the non-wealthy have. The rich have wealth, which is not taxed (or is taxed at a fairly low level–sales tax). When the rich spend their wealth in a consumption tax system, they will be taxed. This will have the effect of shifting the overall tax burden toward wealthy “conspicuous” consumers and away from the working poor that are struggling to get ahead.

[joe]

There would have to be an awful lot of tweaking to make it non-regressive. And even then, the people who can least afford price increases pay few or no taxes, so they’re seeing something like no boost to their income.

Also, I write off any argument based on “my ideas are so splendiferous that the economy will boom, and we’ll all be rich.” I think the improvements in workers’ health brought about by universal health care will make them so much more productive that the economy will boom and we’ll all be rich! So my $trillion scheme actually won’t cost anything! I believe this is known as “dynamic scoring.”

[Other John]

This is kind-of off topic, but:

-What if Lech Walesa would have moved to Germany to do yard work?

-What if the guys who shot Ceaucescu would have moved to Switzerland to do construction work?

[joe]

“A consumption tax would allow the poor to defer purchases of unnecessary goods and services (and therefore taxes) and allow them to save for a home or other necessities.”

I’ve seen poor people “deferring purchases,” Bill. No thanks. Nice use of “allow” there, btw. Hey, look, I can’t pay for food. Lucky me, I’ve been allowed to defer eating.

And the cherry-picked 30k/50k figure is highly misleading.

As is your commentary about “wealth” – the fact that the rich spend a much smaller % of their incomes on goods, and its implication for the progressivity of a sales tax – is oddly missing from your analysis.

[The Real Bill]

joe,

You are wrong. All but the most shiftless of the poor and those that are truly disabled pay taxes. Their tax burden is significantly larger than most people realize. As for universal health care: Thank you very much for wanting to make me more of a slave than I already am.

Have you ever been poor, or are you, like so many other lefties, absolutely ignorant of the poor? I grew up “dirt” poor and I have been working since I was a child. I grew up in a welfare community. The State of California categorizes 99% of the students at my old elementary school as disadvantaged. I worked and studied my way out of poverty. I don’t think you know anything about the poor and what they need.

[lannychiu]

Joe,

Your argument certainly has merit. The primary advantage of the tax is not it’s progress vs regressivity, the general argument is the efficiency in which the tax generate revenue is collected.

As for the likely economic benefits they are 2 fold, first their is likely to be an increase in output (certainly not to the level where we all be rich but a marginal increase in GDP growth can have significantly positive impacts).

Second, since the tax is easier to collect we can reduce substantially the overhead charged to our society for tax collection. These primarily come in the form of salaries for accounts, tax lawyers, the IRS and the 2 weekends each year when we all have to prepare tax returns.

These resources would be freed from our society to more productive uses (for example Universal Healthcare).

There are very few economist, left or right-leaning who would disagree that this isn’t a more efficient way to generate tax revenues, the question generally is, given the likely regressive elements should we implement such a scheme.

[The Real Bill]

Talking past each other.

Those numbers aren’t cherry-picked. They are reasonable numbers representing the working poor and the middle class.

Also, I said that they could defer unnecessary purchases–food does not fit in that category.

[The Real Bill]

By the way, if the consumption tax turns out to be too regressive, we could use a “negative” income tax to prop up the working poor that can’t get by. Such a system would still be better than the current one which, for all the talk about progressivity, actually favors the rich over the poor working stiff.

[fyodor]

I write off any argument based on “my ideas are so splendiferous that the economy will boom, and we’ll all be rich.” I think the improvements in workers’ health brought about by universal health care will make them so much more productive that the economy will boom and we’ll all be rich! So my $trillion scheme actually won’t cost anything! I believe this is known as “dynamic scoring.”

joe, you talk about this as if any claim that one policy would result in greater wealth creation than another policy is inherently fallacious and should be automatically discarded. Well, setting aside the fact that it’s true that no policy scheme known to humankind can possibly make us “all…rich” as you glibly attribute to your hayperson, it’s ridiculous to claim that no policy could be said to result in greater wealth than another. Anyway, it’s a crass thing to assert for one who frequently accuses others of “assuming their conclusion.” In other words, the notion that the sales tax is more efficient and therefore more partial to wealth creation is at the crux of the argument of those who advocate it (I believe? y’all tell me if I’m wrong). So to dismiss that notion without explaining why it’s wrong is…assuming your conclusion!!

[fyodor]

To make my last post more clear, you don’t have to agree that sales taxes in place of income taxes would be wealth creation positive (just as we certainly don’t agree that state health care would be wealth creation positive), but since that’s at the crux of the argument in favor of such a scheme, please explain why that’s wrong rather than dismiss the notion out of hand.

[The Real Bill]

fyodor,

I willingly admit that I support a sales tax on the grounds that income taxes are inherently immoral. The taxation of income is a form of (at least partial) slavery.

[fyodor]

The Real Bill,

I have a hard time understanding why sales tax is any immoral. I’ve heard the argument that you can decide what you buy, but first of all that presupposes that the sales tax will only be on some items not others, which may or may not be the case. And anyway, why is not every bit as immorally coercive to force someone to pay the government every time a monetary transaction is made, regardless of what other choices one supposedly does or doesn’t have? If you don’t voluntarily consent to giving up that money, it’s a form of theft regardless. How is a sales tax any less immorally coercive than an income tax? I can see that the case of income tax more easily comports to the metaphor of slavery, but so what, that’s just word usage. With both sales and income taxes, the government is forcing people to pay money that would otherwise belong to them without having comitted any crime. What’s the difference?

[fyodor]

You probably know, but:

“I have a hard time understanding why sales tax is any immoral.”

Should be:

“I have a hard time understanding why sales tax is any more immoral than income tax.”

And:

“And anyway, why is not every bit as immorally coercive…”

Should be:

“And anyway, why is it not every bit as immorally coercive…”

[joe]

fyodor,

I agree that there are better and worse policies, which will have better and worse outcomes. But to posit an outcome as the goal of your policy, while also assuming it as a proposition in your argument, just ain’t kosher.

lannychiu, I dig. It would take an awful lot to avoid the regressivity problem, but have read enough about the subject to recognize the efficiency benefits.

Real Bill, it wasn’t the good per se I was objecting to. It was the formulation that making things too expensive for someone to afford as “allow the poor to put off unnecessary purchases,” and the next phrase, that doing so is in their best interest, because then they’ll spend their money right.

And I’ve been poor enough to eat popcorn for two days until my next paycheck. Is it ok if I have an opinion now, Mr. Martyr?

[The Real Bill]

fyodor,

I believe the sales tax to be less immoral than income taxation, not totally moral. At least sales taxes have some element of choice. I support a sales tax system that exempts unprepared food and rent. One could conceivably avoid paying a lot of taxes by living simply. I suppose that by earning little a person could also avoid paying a lot of taxes, but the sales tax allows a person to build wealth and avoid paying a lot of taxes. It’s not a perfect system, just better.

Once a person has saved enough, they’ll likely want to spend. They will then pay taxes when they can best afford to, instead of when they need to keep every dollar to get ahead. The sales tax increases personal choice and the freedom to plan one’s own economic life.

[The Real Bill]

joe,

I never said that you couldn’t have an opinion, I simply believe that your opinion wasn’t well informed. Having to eat popcorn for a couple of days as a young adult between paychecks isn’t easy, but it’s nothing compared to having to loan your mother money (as a young child) so that the family can eat.

[Stretch]

So everyone sees their costs rise by 23%, but poorer people see their incomes rise by much less than that.

Joe,

There are a few things which need to be clarified. First, while there will certainly be an initial spike in prices, they will also certainly drop to reflect the significantly lower overhead costs. You are absolutely correct that, in absolute terms, poor people will see less of an increase (but an increase all the same), but you are wrong to assume that final prices will be equal to the product cost now plus the consumption tax. An estimated 20% of the costs we pay right now are a direct result of our current tax system. It’s really only a question of time, and for all but the most competition-insulated businesses those prices will drop very quickly.

the fact that the rich spend a much smaller % of their incomes on goods, and its implication for the progressivity of a sales tax – is oddly missing from your analysis.

True, but the rich spend a far greater amount in absolute terms on goods so they will be paying more. In fact, percentage-wise they spend far more than 23% over on similar goods, plus used goods are not subject to the FairTax plan, which makes it more progressive than a flat tax.

Rich people rarely by used goods, while the poor often buy them. Those who can afford new goods will be totally responsible for those taxes. For instance, someone who is able to afford a new car will pay the total taxes for that item (again, in absolute terms, it will amount to about the same price as now), while a poorer person who must buy that same exact car used a few years later will pay zero taxes. So in other words the wealthier will absolutely pay taxes that the poor will not. As someone who has worked in the used car industry, I can say that this is a huge upside for the poor.

Also, according to the FairTax people would not have to pay taxes on the basic necessities. In other words, in addition to getting all of their income the cost of basic necessities will actually drop.

[fyodor]

But to posit an outcome as the goal of your policy, while also assuming it as a proposition in your argument, just ain’t kosher.

I haven’t read every word of this debate, but obviously it’s up to either side to say why a sales tax is or isn’t more wealth positive before saying it is or isn’t. But I still say you’re out of line the way you talked of such a claim as an inherent fallacy.

The Real Bill,

What you say strikes me as a stretch, but I suppose I can see a little bit of credence to it….

[The Real Bill]

Stretch,

I’m glad you brought up the flat tax. The flat tax as usually presented is terrible in that it never includes SS, Medicare, and payroll taxes. Essentially these flat tax plans would only be tax breaks for the well off.

Now, a flat tax plan that includes SS, etc., with deductions only available to those earning below a certain income level (to fight regressivity) would be better than the current system, but would still enslave people to the extent equal to the tax rate. Thus, it would be less moral than a sales tax.

[The Real Bill]

fyodor,

I’m curous to know which parts you consider a stretch?

[The Real Bill]

Argh! “… curious…”

[Stretch]

Now, a flat tax plan that includes SS, etc., with deductions only available to those earning below a certain income level (to fight regressivity) would be better than the current system, but would still enslave people to the extent equal to the tax rate. Thus, it would be less moral than a sales tax.

Anything even 99% as complicated as our current system would be significantly better than our current system. If you give me the option of a flat tax or what we have now, I’ll choose the flat tax every time.

I’m not an anarchist (except on TV), so I believe some government, and therefore tax, is necessary. But an income tax is the worst of all possible taxes. A consumption tax (especially one where nobody has to pay for the basic necessities) is voluntary, and therefore not amoral imo. With such a total consumption tax I could theoretically never pay any tax. I wouldn’t die and I wouldn’t be put in jail. Obviously, I wouldn’t choose that lifestyle if I had my druthers, so if I have to pay tax to a government that allows me to buy cheesesteaks and beer I have no philosophical qualms with that.

[fyodor]

The Real Bill,

I’m cur[i]ous to know which parts you consider a stretch?

That choosing to spend less is any more of a choice than choosing to earn less. That the relative benefits can be reasonably deduced by the implications of extraordinary lifestyle commitments. You admit it’s purely a relative matter anyway. Strikes me as a stretch that anyone should give any more than a fleeting thought to such a minor shading of gray.

[The Real Bill]

fyodor,

That choosing to spend less is any more of a choice than choosing to earn less.

One can earn less and pay lower income taxes or one can earn more, spend less, and become weathier while paying lower sales taxes. How is this not significantly different?

For example, I earn a certain amount of money and the govt. takes X% in income taxes. I can spend less and save more or what’s left over to become wealthier, but I still had to pay a fixed amount of tax. Under the sales tax system, I can earn the same amount of money and choose to consume less; I will then be able to save more than I could under the income tax system.

[Adam12]

Joe:
Responding to your post way up there: You’re right, I shouldn’t have said “everybody”. Using my paystub as an example, I forfeit approx. 1/3 of my income to some form of tax right off the bat. So if my total paycheck is $3000, I pay $1000 in combined taxes, taking home $2000. If we were to switch to a consumption tax before my next pay period (hahahah) then I would take home 50% more than I did the last pay period ($1000 being 50% of $2000).

[Adam12]

I like all the discussion on details of the consumption tax! It gives consumers a helluva lot of choice to avoid paying taxes if they are really inclined – buying 2nd hand stuff, which was mentioned, and which I think is generally a good thing from an environmental POV (making cars and TVs is dirty business). So in some respects, you might actually see “Black markets” for consumer goods, but they wouldn’t be any more illegal than, say, Craigslist. No one payes taxes on that stuff either (except cars I guess).

[Viking Moose]

“But to posit an outcome as the goal of your policy, while also assuming it as a proposition in your argument, just ain’t kosher.”

dammit, Joe. but what about the pro torture “arguments”????? heh

cheers.

[TLB]

In California, the average Hispanic immigrant female gives birth to three children. The cost for public education alone is approximately $370,000 in 2005 dollars.

And, here’s what that gets you. 46th in educashion? 80% of highskool seniors can’t pass a djunior high test?

Needless to say, I could go on, providing information on each of the points/”points” above, but instead I invite the reader to take a look at what libertarians support.

99.5% or so of Americans will read that article and realize this is an extremely serious situation. Mexico’s attempts to meddle in our laws and with our prospective citizens must be stopped.

Do the other 0.5% really qualify as patriotic Americans at all? Or, should we consider them the same way that we consider those who would like to establish Communism in the U.S.?

[joe]

Stretch,

Are you assuming that the producers of food won’t also be paying taxes as part of their operations?

I have to wonder whether, with all the add ons and opt outs and different categories and credits for lower incomes, if making this work isn’t going to end up just as complicated as the federal income tax.

I’m not completely against a consumption tax or VAT replacing some or all of the current tax structure, btw. But there seem to be some serious problems to overcome, especially if you’re not willing to sacrifice poor people to “efficiency.”

[Phil]

“A consumption tax would allow the poor to defer purchases of unnecessary goods and services (and therefore taxes) and allow them to save for a home or other necessities.”
I’ve seen poor people “deferring purchases,” Bill. No thanks. Nice use of “allow” there, btw. Hey, look, I can’t pay for food. Lucky me, I’ve been allowed to defer eating.

On what planet is food an “unnecessary good?”

[Stretch]

I have to wonder whether, with all the add ons and opt outs and different categories and credits for lower incomes, if making this work isn’t going to end up just as complicated as the federal income tax.

I’m not completely against a consumption tax or VAT replacing some or all of the current tax structure, btw. But there seem to be some serious problems to overcome, especially if you’re not willing to sacrifice poor people to “efficiency.”

Honestly, Joe, read the FairTax book that’s in stores right now. Seriously, go pick it up from a library (I only decided to actually buy it after much decision and I totally understand if you don’t want to pay for it). If you can get past some of the not-so-subtle jabs at liberals, I think you’ll at least come to see the FairTax as a decent, if imperfect, plan for real tax reform.

You mention “add ons and opt outs” as well as
“different categories and credits for lower incomes”, but they just don’t exist under the FairTax plan. I’ve long thought that a consumption tax was better than an income tax, but never had the basic questions anwsered before I read this book.

Honestly, Boortz is 50/50 with me and Linder is truly an “obscure” congressman”, but the book is good and does a great job of answering the common questions.

[joe]

Stretch, “You mention “add ons and opt outs” as well as “different categories and credits for lower incomes”, but they just don’t exist under the FairTax plan.”

Then the plan is absurdly regressive, and belongs in the circular file.

[passingthru]

“Those three children (American citizens…”

If Mama and Papa are Mexican, little Nino is Mexican. Do you not know the difference between in the United States and on U.S. soil? If these kids were born in your house, does that make ’em your kids?