"Tax Breaks for the Rich"

Journal Concern's Journal: "Tax Breaks for the Rich" 4

Journal by Concern on Thursday October 13, 2005 @12:05PM

Ellem entered the fray on the "tax cuts for the rich debate" by posting a quote and a link to some conservative propaganda on the subject. Before reading on, go have a look. The quote, at least, is quite brief and to the point.

Anyway, it got me thinking.

The quoted portion deals with how much federal income tax is paid by rich people, and how little by poor people.

The irony is that this article quietly relies on a frightening trend - that the gap between rich and poor is growing rather dramatically. I know most of you have heard that the rich are getting much richer. So, if your income goes up, you pay more taxes. That's why "the rich" are "paying so much more income taxes lately."

That's all that makes this sinister parlor trick work. They took the scary income disparity stats and tried to make them useful by turning them into "tax disparity" stats.

This relationship holds even when the rich are also getting big tax breaks, which they are.

The article never really disputes that, either. At its best, it's just a written attempt to make you think that's a good thing.

Why is this ironic? Big dollar tax breaks focused on the rich have a big effect on government income - as this article handily illustrates. When the government gets less money, eventually, it has to spend less. This will help widen the gap between rich and poor even further. Amazingly, as much as it's fashionable to hate government, that is it's job. It's our robin hood, taking from the rich and giving the poor science classes.

When the government has less money, the schools get even more crowded. The kids of the middle and lower classes will be even less able to compete, less socially mobile, more desperate for fewer jobs. There's less money for policing; crime will rise. These are just a few things that happen; there are so many more. For instance, disaster relief won't be up to snuff. Today's unlucky will be more likely to become lifetime sufferers (and burdens). American poverty will gradually continue to grow in scope and severity.

This is why, in places like this Washington Post article, you can see a tax policy story look so completely different. Remember, America got rich, and smart, not with microgovernment and laissez faire, but with the liberal, progressive policies it's had for so many years. We got there by narrowing these massive income disparities.

We used to measure sucess by our degree of equality, not by the size of our mansions.

I could go on about this article a little more. If you just look at a few more details, it becomes obvious what a trick it is.

Do you notice how it never actually talks about "tax?"

Yes, that's right. It only talks about "federal income tax," not "tax."

They are hoping you might not notice, or think about the difference.

Federal income tax is only one part of how the government (federal, state, and local) collects money. It's usually the most progressive part. Most taxes are already flat - things like sales tax or gasoline tax, for instace, are the same no matter how wealthy you are.

If you want to talk simply and honestly about tax policy as a whole, you talk about "tax." If you want to deceive and confuse people, you talk only about "federal income tax," and leave out the whole picture, like this conservative writer did.

Now, "flat tax" may seem efficient and more "inherently" fair. There's actually an interesting argument there, because there is certainly a lot of merit to simplifying the way we collect taxes. The IRS is invasive, insanely complex, and hugely wasteful.

But, flat tax has a dark side. It's also a way of saying, "tax that affects poor people most." Think about it. Sales tax, and gasoline tax are a rounding error for a millionare, and a major factor in the life of a McDonalds employee. That's true even though the millionare can drive a lot bigger car, and buy a lot more stuff than the minimum wage earner (if he wants to).

So, is less progressive, or just plain flat, tax really a good idea?

The conservative writer makes no argument for this case. He just assumes you already agree. Most of what he does is actually just insult the New York Times. By the way, does name calling make you right? Or does it make you look like you couldn't think of something smarter to say?

If you want to learn about economics, who do you want to talk to? The school bully? Or the wimpy smart kid he's beating up?

The writer probably thinks he'll get away with his tricks because nobody else is going to give his readers a better explanation.

Well, here goes.

Here's a question for you.

Is capitalism a game that rewards the winner?

Over time, does wealth beget wealth?

Rich people can loan money to poor people and make interest just for sitting back in their chair and waiting for the checks to arrive. (Of course, they can only do this safely when there's a healthy government to enforce the law, so they don't get stiffed.) They can buy property and rent it (as long as the courts and police enforce deeds and leases). They can invest in the market (as long as the SEC looks after their investments). They can go to good schools, and send their kids to good schools (much much better than your public schools!). They can get healthcare when they need it (their doctors are great, since they came from a big pool of well educated citizens). If they have an idea for how to start up a business, they don't have to raise money (and give up most of their profits in advance). They simply start one. If it succeeds, they keep all the profits (minus some taxes, although many larger corporations have ways of avoiding paying taxes ). If they want to buy a home, they just buy it. They don't take a loan, that means they really pay six times the price over decades, like most of us. For that matter, if they don't want to pay as much in tax, they can hire experts and attorneys to help them pay less. That's one of those economies of scale you keep hearing about.

It actually happens that the winners have every single advantage in this game. So, they keep right on winning, bigger and bigger with each generation.

If there is nothing to stop them, wealthy families almost always stay wealthy, and poor families have an insurmountable set of barriers keeping them poor.

In our society right now, though, there are lots of things to stop them. Lots of policies and rules. Progressive taxation. That includes things like estate taxes (Republicans call it the "death" tax, although it's really the "Paris Hilton tax"). Labor laws (creating weekends, overtime, etc). Public education. State universities. Strangely, this is exactly the list of things that the Republicans continue to hurt.

All this is so well established that the problem of "wealth begetting wealth" is a recognizably biblical concept, taken from ancient religions including Christianity. Even thousands of years ago, the writers of holy texts were grappling with this issue. And they came up with things like forbidding usury. I'm told even Catholics are technically not supposed to lend money at interest, though obviously in most religions we ignore most of the rules, most of the time.

There are lots of admonitions about the concentration of wealth in our moral codes, and for good reason. Just as communism keeps the individual from prospering, it seems there is another extreme to be concerned about as well.

Have you ever wondered what really happens when a country "goes Republican?" Is there any nation that already follows these policies, and has profited as a result?

That's a good question, isn't it.

We haven't been truly "Republican" in this country in many many years, so nobody alive remembers what it was like. But even if you don't remember your history lessons, let's just make it a conceptual exercise.

If you reduce taxes, you reduce the government.

Many would cheer.

"Good riddance. Government is evil. When we get rid of it altogether, everything will be great. The free market can solve everything."

Well, what's interesting is, when you get rid of government altogether, you no longer have a market.

You have anarchy.

Without government, you have no rules, no law. There are no police, and no army. No currency. No courts. No borders. The strong simply take from the weak. Society is ruled by its most brutal and ruthless elements.

The delicate machinery of agriculture, healthcare, and education crumble like a sandcastle under the first few of the endless waves of violence. Then you get famine. Disease. Suffering on a "biblical" level. Parts of Africa are like this today.

Those guys are begging for government to come back. You can watch it on TV.

"OK, OK, not that little government. When need some. Just not too much."

How much is enough?

"Just an army, to defend the borders, police, to defend property, courts, to settle disputes and allow fair commerce, and of course, you need lots of laws about doing business fairly. Common law, as they call it. Firemen, if you must (most are volunteer, though). No more NEA, no more EPA, no more welfare, no more food stamps, no more state universities. No more subsidies and pork barrels. Public schools are up for debate."

What did you leave out? Trade and labor laws. So the poor go back to working 16 hour days, 7 days a week, and so do their young children.

Occupational health and safety. So when they're injured on the job, they're thrown to the curb to beg.

And because you left out welfare, they die there.

Aristocrats love this kind of setup, because it's "stable." Desperate people struggling just to survive aren't going to become entrepeneurs and compete with the entrenched business owners. The rich not only get richer, but they stay richer.

For that matter, a poor person starting a business usually needs a loan. Who'se going to give him one? There are no rules against discrimination against him, and no bureaucracy to enforce them. If the rich people don't feel like making a competitor for themselves, they'll simply refuse.

"What? Why does the guy at the bank care if someone wants to open another general store? Wouldn't that be good for him?"

What if the guy who owns the store also owns the bank? Or what if they're brothers? Or friends?

Sound silly? It used to happen all the time, when there were no rules.

With no social mobility, there is nothing to threaten established concerns. Ironically, markets are no longer very efficient at all. Monopolies thrive. The economy spirals downwards. Because most people have so little (if any) disposable income or leisure time, there is very little consumer-driven economic activity (hint: our current economy is roughly 2/3rds consumer-driven). Literacy plummets. Lawless ghettos spread across the land. Armed insurrections and guerrilla warfare fester. Sound familiar, amigo?

So, on paper, your banana republic isn't so hot. Of course, from inside the plantation house, life is good. You have servants. Imported goods, the best imported technology, for instance. And you send your kids to America or Europe to study, so they'll get culture and a good education, away from the creeping entropy of the world you created for yourself.

"I wouldn't have it so bad. I'm not a yokel, I have skills, and I have rights."

Where did you get your skills?

From public school? Public university? Or from people who went to either one?

Or did you learn from your family? Were you home schooled? Did you learn a trade from your mom or dad? That was how they used to do it, back in the feudal days.

And where did you get your rights? You just abolished most of them, and destroyed your ability to enforce most of the rest.

"Why is everyone suddenly working so hard? I know we used to work 16 hours a day, 7 days a week, and have child labor, but I don't remember why."

Well, there are a lot of people out there in the world. Most of them are starving and desperate and perfectly happy to work 16 hours a day, 7 days a week, and let their kids do the same, just to avoid death from starvation.

You have to compete with all of them. And now there are no more rules to protect you, so you just have to work harder than them, for less, if you want a job. And since there's no social safety net, your alternative is to starve in the street.

"Fuck this. I'll go live somewhere else. I'll grow my own food, live by my own efforts."

There is nowhere else. It's all taken.

"Why am I competing with the whole world, anyway? Why not just with other Americans?"

It's called Free Trade, also known as "Laissez Faire" capitalism.

Maybe you don't want to compete in a labor market with nations that allow slavery. But you have a tiny laissez faire government. You have no complex trade regulations, or the means to really enforce them. You don't want them either, right? You believe in free trade, don't you?

"OK, forget free trade. Let's close the borders."

OK, be my guest. They'll kick you out of the party for that, though.

"Why are there so many desperate people, anyway?"

Well, everyone loves to have babies. Strangely, the more desperate and impoverished we are, the more babies we seem to have. There are billions of people now. Some people say we should slow down, but...

Strangely, some religions are telling people to have even more kids. And not only that, they're telling people not to use birth control (and never, ever have abortions). They're also fighting against effective sex education. This often means that little kids have kids of their own, and they all become impoverished laborers, rather than getting a decent education.

Even more strangely, rich people seem to love these religions. They often support them with their enormous financial resources.

The Republican party seems to support and promote only religions that take these strange views on birth control, sex education, and abortion.

"You're lying. None of this works like you say."

You can read all this for yourself in your American History textbook. Unless the Republicans have re-written it already, that is.

The current Republican leadership is absolutely capable of rewriting American history to make their policies look better. You may already realize it, even if you just think of it as "correcting liberal bias" - Republican code for "anything that contradicts what we say."

"OK... so how did we fix this mess?"

We've done it all before, and it's not so complicated. You make the government more "liberal." By this I mean, have a government that dares to allow the will of the people to redistribute wealth.

Before "liberal" governments, we simply had bloody, disorganized revolutions instead - when the injustices of the system would inevitably build up to the point where people couldn't take it anymore, and would erupt in violence. Throughout history, this has happened over, and over, and over again.

The idea behind liberal governments is to stop this cycle of abuse and violence and use democracy to live in a sustainable and fair way.

It's basically just about people empowering themselves, saying things like, "This government is supposed to serve everybody, but almost everything it's doing is for the idle rich. The rich get more, so they should pay more."

And then you use the money to make social programs and policies that help the poor.

Strangely, this was also an enormous economic success. It turned out that the great teeming mob of "the underclass" wasn't really genetically doomed to be stupid and poor... they were just being oppressed. When they were unleased, they built great cities. They vaulted themselves to the moon. Old money was suddenly competing with new money. The streets, foreigners said, were paved with gold.

We just spent the last few hundred years clawing our way back from the Republican way, step by painful step. Republicans seem to want to go back into the past. Almost all of their policies (from taxes, deregulation and privatization, to the unamerican marriage of church and state) are ancient - relics from the days when we had a tiny class of super-wealthy and a sea of poverty.

Defenders of capitalism claim its greatest ideal is how it treats us equally - that anyone can make it if they're smart and they work hard. "Free Market" Capitalism knows no class barriers. It allows for social mobility.

Of course, we already know there is no such thing as a "free market." Just markets with different kinds of rules.

It turns out that the social mobility that makes capitalism so great is driven by the same socialist rules that Republicans hate.

Socialism is all about fixing the parts of capitalism that reward the winners and punish the losers.

To do it, Socialism gives us things like really good public education, and the leisure and safety to pursue it.

Well, there are lots of ways to have a socialist policies. Europe does it one way, and we do it another. Yes, that's right. The America you know is deeply socialist. Social Security, Medicare, Medicaid... And of course, highly progressive taxes, and a host of other rules and programs. None of these ways are perfect, or even all that great... but we do know one thing. They are better than what we used to have.

We used to have a catalogue of injustices and misery, perpetrated by wealthy aristocrats trying to stay on top without actually having to work. Today we have big government, and progressive taxes and social programs, and a great deal of success... at least, until just recently.

There would be one guilty pleasure in watching Republicans succeed in their mission, and take us back into the past. That would be seeing the look in their eyes, as one by one they finally realize there aren't that many seats at the manor house.

This discussion was created by Concern (819622) for no Foes, but now has been archived. No new comments can be posted.