Wednesday, April 15, 2015

Happy Tax Day. Or not.



     Wednesday is Tax Day, the dread April 15, when income taxes are due to the United States government, at least for now. American colonists cried "No taxation without representation," which, as befits the streamlining of modern life, has become simply "No taxation.'
     Twenty years ago, the idea that American citizens should not pay taxes was limited to the lunatic fringe, who would pick over the Revenue Act of 1913 and write elaborate, self published manifestos explaining why federal income taxes were a Wilsonian conspiracy against the Constitution and natural law. Now mainstream Republican candidates chant it as a mantra.
     Look at the first three Republicans to charge out of the gate in the 2016 presidential race.
     "We need to abolish the IRS" Texas Sen. Ted Cruz told a conservative conference last month—though not, to my surprise, because taxes won't be collected, but rather because a flat rate will be charged so taxpayers will merely write their salary on a postcard, multiply it by a universal figure and be done.
     Internal Revenue Service commissioner John Koskinen, living in the reality-based world, immediately pointed out that even if Americans had a flat tax, and filed their returns on  Ted Cruz's postcard, there would still need to be an IRS collecting the money and confirming the cards.
     "Someone has to follow through on all of that," said the killjoy.
Kentucky Sen. Rand Paul also talks wistfully about eliminating the IRS, and has a number for his flat tax—17 percent—which, like all flat tax plans, is a half-clever way of saying, "Tax breaks for everybody!" (If the figure sounds familiar, Steve Forbes ran on a 17 percent flat tax in 2o00. Historical note: he lost).
     Marco Rubio doesn't want to cut taxes for everyone, just the middle class and the rich, which is code for everyone since poor people don't pay much income tax.
     The Tax Policy Center estimates Rubio's plan would cost the government $2.4 trillion over 10 years.
     Which is the entire point. The bedrock of the Republican party is the notion that government is bad, by definition. Since cutting specific functions—health care for vets, say, or milk for poor children—draws howls of protest and can raise a tingle even in anthracite Republican hearts, the focus is shifted to impersonal dollars.  Cut taxes, ignore what those taxes go to. Starve the body and the head dies.
    If you try to get at why government is bad, they'll say it's corrupt, or incompetent, or domineering, or illegal, or all four. My theory is that they despise the people government serves most—especially the poor, minorities—and since publicly despising them has gone out of fashion, they attack the government as a surrogate. I can't prove this, but then they can't prove that trickle down economics works, and that never stops them form insisting that giving money to the rich somehow profits the poor.
     Speaking of facts-- for those eccentrics who, like me, still find facts meaningful -- is that our taxes are low however you compare them.They're low internationally: our federal taxes top out at 39 percent. In Great Britain it's 45 percent, in Australia, 50 percent. (Comparisons are difficult, with each country having a complicated web and local and national taxes, but that suggests issues are nuanced and complex, and why should I be the only one pushing that crazy idea).
     U.S. taxes are also low historically—our top federal income tax rate is 39 percent. In the 1950s, was a jaw-dropping 91 percent. Rich folk still worked (nobody actually paid that much—again with the nuance— with deductions, the top effective tax rate was 70 percent. The economy boomed).
     Taxation is one of the most common features of human organization, along with baking bread. And there is astounding consistency. Today the top 10 percent of U.S. wage earners pay an average of 19.2 percent in federal taxes. That's almost exactly the rate paid in ancient Egypt. "Joseph made it a law over the land of Egypt unto this day that Pharaoh should have the fifth part" it says in Genesis.
     To be fair, I should mention the tax position of Democratic president candidate Hillary Clinton, who entered the race earlier this week. She feels the wealthy aren't taxed enough, aren't paying their fair share in society. Talk about crazy...

48 comments:

  1. Taxes make no sense. Government is the source of money. They print it. They should just print what they need and leave us alone. Then no need for an IRS. End of problem.

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    1. The govt has been printing money since the 08 crash.....it has raised the standard of living for millions that already had a nice standard going. The really lucky ones have sheltered all that new found wealth and still aren't paying taxes on it.

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    2. NS, do you think quotes from Genesis are a good basis for info?

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    3. Point taken. I just thought the parallel was interesting.

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  2. Simply printing money is no solution. Study macroeconomics 101. Inflation is the result, as the dollar is worth less, and eventually worthless.

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    1. Inflation is precisely the way in which all would equally pay the burden of "taxes." But there would therefore be no "cheating," no non-payment of tax on illegal hidden income, no loopholes, etc. And the entire IRS bureaucracy and paperwork we all have to do would be gone.

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    2. exactly, Tom

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  3. I would suggest you follow David Cay Johnston. He was a reporter for the New York Times. He now writes for different sites on the Web including the National Memo and Newsweek. He also has 3 books out that are very good. I would also suggest listening to Richard Wolf's radio show. You can go to his site rdwolff.com. You can download his weekly show from there or ITUNES. He is an economics professor. He often mentions the high tax rates back in the 50's and 60's

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  4. Interesting article. Think about how many accountants would be out of work if Cruz had his way.

    As for Hillary, hmm, I'm sure she doesn't try to look for loopholes and pays her fair share.

    That's a lovely room on top, where is that please?

    Lady Anon

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  5. I just mentioned David Cay Johnston. This just came up on my twitter feed.

    http://america.aljazeera.com/opinions/2015/4/how-much-do-you-know-about-income-taxes.html?utm_content=opinion&utm_campaign=ajam&utm_source=twitter&utm_medium=SocialFlow

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  6. OK, for the record, I favor higher taxes and not just on the 1% - note well that it was President Obama who agreed to undue 70% the ultra-successful Clinton tax hikes, that gave us a budget surplus and contributed to the best economy in many people's lifetimes).

    That said, Mr. Steinberg either avoids the strongest conservative argument against taxes/government, or at least dismisses them with ultra-quick lip service ("If you try to get at why government is bad, they'll say it's corrupt, or incompetent, or domineering, or illegal, or all four.") As Mr. Steinberg says elsewhere on another point, it's more complicated than that. They might well cite the economist Friedrich A. Hayek and say "we're not all Keynsians now." They might say that of those four things, the closest is "incompetent" but not in the way Mr. Steinberg means it (that the government can't manage a program) but that absent an almost godlike omniscience it's impossible for government to act in ways that don't ultimately prove destructive.

    Here's a thought-provoking example (at least, it gave me pause) from a debate I saw where the progressive cited Eisenhower's interstate highway system as an unquestioned example of positive "big government" intervention. The conservative's response was that the net effect wasn't good: that it provided rocket fuel to white flight from cities to the suburbs and all the associated social ills, made us far more dependent on oil and coal (both commuters and the impact on the rail system for transporting people and goods).

    Or another example: can anyone say with absolute confidence that if we took the amount of money that is spent per-student on education and gave it to parents in the form of a voucher, that the kids would be worse-educated than they are today? Before you answer, take a look at the experience of the small number of students who got to take advantage of the public school choice provisions in No Child Left Behind. (Yes, it's complicated, and you can make an argument either way, but anyone who would dismiss the conservative anti-government argument in this area with a sneer simply hasn't been looking at the performance of CPS graduates).

    I'll end this rant with this: progressives who want higher taxes need to do a far better job pushing for good government, else people who might grudgingly agree to have their taxes raised will think the money is just going to fuel special interests' private benefactors. I think this played a big part in Quinn's defeat.

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    1. Why do you speak of him in the 3rd person? Why not just Neil or Mr S, etc and talk to him directly? This isn't your blog and you aren't the writer critic.

      Not saying have to agree but how you do it...

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    2. A not A, you talk too much and have too much time on your hands obviously, and if you are at work right now, then get back to it or your boss is getting the short end.

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    3. A not A, you need to go on a date or get married.

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    4. Anonymous 9:26 - Because Mr. Steinberg objected when I referred to him on a first name basis. (Occasionally I slip up but when I do it's not intentional).

      Anonymous 9:29 - Thanks but 1) I'm blessed to have a job where I'm paid by what I bill and 2) I'm almost always in the office by 7:30.

      Anonymous 9:30 - S.O. passed away several years ago and I only dipped back into the waters late last year. Working on it!

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    5. Do the folks who like to suggest that commenters such as A-n-A have "too much time on your hands" not realize that by reading his comments and then making multiple comments about his comments, they're just proving the same thing about themselves? I guess not. Anybody reading these comments, let alone commenting themselves, could be doing something more productive, instead. That's a given, so it doesn't need to be pointed out on every thread, Anonymous.

      Interesting original comment, and nice replies, A-n-A, but I thought Neil only objected when you spelled his name wrong. Maybe that was somebody else. : )

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    6. A not A-sorry about your spouse, you must be older than I thought

      Jakash, you are making a Jakash of yourself, lol

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    7. A-not-A -- Did I really object when you referred to me on a first-name basis? Doesn't sound like me. Maybe it was more what went after the name. I see your point regarding the highways, but isn't that logic true for any project of any size? Everything has bad and good consequences, and given that every country in the world has a highway system of some sort, I don't think we can use ours as an example of destructive governmental overreach.

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    8. To: My 'ol buddy Neil - yeah, as Jackash remembered once you rightfully called me out on getting my name wrong, another time you didn't like the first name familiarity (i.e., as coming from an anonymous criticizer) - maybe after all my spouting off here it's ok. Re: the highways - oh, I'm a big government dude - I do think we have some problems with the way government programs fail to incentive-ize good behaviors (a la Pat Moynihan's concerns about welfare programs), but I think we all benefit from a strong safety net, not just the recipients, and that many large scale infrastructure works are a net benefit. My point with Hayek and the highways is that this conservative/libertarian theory is different than "the government can't handle it" or has evil/socialistic intentions - it posits that the intervention always leads to bigger problems. If I had to pick a "poster child" program for big government, I'd choose social security (nothing against that person in the debate - if I had been put on the spot to name an inarguably good big government program, I might have said the same).

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    9. To Jackash/Anon - thanks for the nice words. Oh, to Anon, it was my girlfriend - we didn't make it to spouse but were heading there (to fully describe how incredible this person was would truly mean hijacking the blog). As for aging - I think the thing that will depress me most is seeing a bad ad on television and a voice in the back of my head saying "look gramps, you're not the target demo!"

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    10. Mr. Jakash, do you like that old song from Ray Charles? Hit the road , Jack....

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    11. Why, sure, that's a swell song. For somebody who chooses to go without a name on the ole EGD, you certainly seem captivated by mine...

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  7. Why do you always jump on NS? Are you jealous that you don't have a column or that he's smart and you think you are wiser? Insecure, methinks.

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    1. Anonymous 9:21 -- Oh, I'm jealous as heavenly-heck: I'd love for somebody to pay me that kind of salary for my measly musings. I jump on NS *because* he's so smart (yet so snarky). Insecure? Maybe, but zeesh, this is a news columnists blog - why do so many people get upset about being challenged with ideas? I try to provide links for more info too. If he wants an Amen corner, he's free to create one at any time (I'd only ask that if he tells me to go away to be forgiving if I miss it and need repeating - sometimes I *do* have to sign off for the day and get to work.

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    2. okay, then call him Mr. Steinberg but it's aggravating when you don't speak to him directly

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    3. I don't think Mr. S's writings are mere musings.

      But check out Roger Simon's article in ST today on Hillary. Is it me or is he emulating
      our hosts tongue in cheek style?

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  8. A not A, are you really that mean guy from the Trib?

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    1. Now that hurts! I've long defended the Sun-Times against the Trib in general, primarily because of its superior columnists. Roger Ebert made the observation that there's a spirit at the S-T that survives the crazy changes in ownership (and crazy owners) - even when the Trib snatches writers, something seems to happen to them there.

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    2. good one, Anon not Anon

      Lady Anon

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  9. I think Keynsian economics, that was vital to the New Deal, was a good plan. The wealthy had gotten away with paying almost no taxes for too long.

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  10. good thing for the income tax amendment around WWI, but DuPont still got away with a lot, got rich over dead soldiers

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  11. On the notion that the wealthy aren't paying their share, attempts to make the tax system more progressive are usually attacked by conservative politicians as a "Marxist" plot to redistribute the wealth. Actually, Marx didn't write about taxation, but Adam Smith, the intellectual father of modern capitalism did...as follows in "An Inquiry into the Nature and Causes of the Wealth of Nations."

    "The subjects of every state ought to contribute towards the support of the government, as nearly as possible, in proportion to their respective abilities; that is, in proportion to the revenue which they respectively enjoy under the protection of the state."

    He went on to say: "The necessaries of life occasion the great expense of the poor...The luxuries and vanities of life occasion the principle expense of the rich...It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion."

    In the U.S., our federal income tax is reasonably progressive, but local, state and other tax burdens fall more heavily on the less affluent.

    Tom Evans

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    1. good points, Mr. Evans

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    2. so true about A. Smith

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    3. Nicely done, T. E.

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    4. I'm not sure (truly not sure) how progressive it is anymore - I vaguely recall during Steve Forbes' presidential run there was a study saying that with all the complex tax breaks, which wealthier taxpayers take advantage of far more than others, the tax system had become effectively flat, or flat enough that a "flat tax" system that exempted the first $____ amount of income would be effectively as progressive as the current system. And with IRS enforcement weak and getting weaker, sometimes I wonder if we wouldn't be better off wiping the slate clean save charitable contributions.

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    5. A-not-A: Since you mention both Forbes and charitable contributions, it's worth noting that his precious "flat tax" would do away with that deduction. Asked how this would affect contributions, Forbes replied, "I don't think Americans need to be bribed to contribute to charity."

      That, in a nutshell, is what annoys me so much about rich people bitching about their taxes. When a deduction benefits them, it's an "incentive"; when it benefits anyone else, it's a "bribe."

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    6. B.Scr. - Very true - I didn't mean to endorse Forbes' flat tax, just that I can envision a "mostly" flat tax that was more progressive/enforceable than what we've got. In fact, it seems "tax simplification" is the one thing that the GOP and Dems seem to agree on these days (so of course it's never going to happen!)

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    7. Very hard to do away with subsidies and incentives once they have been established. Most economists would recommend eliminating the household interest deduction, but opposition would be fierce and widespread, not just from the rich. "Don't tax you. Don't tax me. Tax that man behind the tree."

      TE

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  12. Let's face it-this fine nation is moving toward oligarchy. The right wing things if you are anti greed, you must be anti capitalist automatically.

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  13. Enough with all the "Anonymous" already!
    Get a Gmail account with any sort of name & post with that.
    It's become impossible to figure out who's replying to who anymore here!

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  14. Democrats need to stop being cowed by the term "class warfare." The rich have been waging warfare against the rest of us for decades (and winning).

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  15. I disagree that the poor benefit more than the rich from government spending. The entire infrastructure of the country is provided by government: defense and protection, potable water; the means for delivering all sorts of communication and daily necessities, transportation, and so on. If it were every person for themselves, there would be no civilization as we know it. Jan

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  16. that's why I don't like Libertarians, not realisitic

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  17. Where's Neil today? come out and play

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    1. Sorry -- working. It's hard enough to write the stuff without also being expected to referee the comments. Everyone seems to be playing nicely.

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