20 September 2011

On Tax & Circumstance

I was listening to a show called Radio Times that is produced by my local public radio station and they were discussing President Obama's job's/deficit reduction/recovery program, specifically whether "millionaires" should pay more in taxes.
The discussion is an extrapolation of the "Buffett Rule," because Warren Buffett recently stated that his effective tax rate is almost half of what his secretary's is. Greg Mankiw does a fine job of parsing the numbers and basically calling shenanigans on Buffett's populist nonsense here. What is important to note is that almost 46% of households filing a tax return under the current system pay no federal income tax at all (this does not include the payroll tax collected for Social Security, Medicare or Medicaid, but then, as Professor Krugman (and Professor Samuelson before him) notes so well, that is on account of the "Ponzi game aspect," despite the fact that he now claims not to have meant what he so clearly wrote. Please see Robert Murphy here and Alex Tabarrok here).

Anyway, back to the radio show. The host is interviewing a gentleman named Seth Hanlon who works for the Center for American Progress ("Progressive Ideas for a Strong, Just, and Free America" serial commas included, no doubt). So you just know we're going to get a really objective look at the proposal.

At one point the host asks, "Would higher taxes lead to job growth?"

Almost a challenging question. And the answer, of course, is no. There is not much debate about this among anyone really. And presumably, Mr. Hanlon knows this. So he doesn't answer the question. He says that the plan is for taxes to increase only on the "wealthy," and that they are going to go back to the level they were before the "Bush tax cuts." He then makes the point that there was robust economic growth in the 90s, when these tax rates were in effect....therefore, ipso facto, correlation is now causation. Higher taxes mean more robust economic growth.

This is, obviously, asinine.

Now you can (try to) make the point that the rich should pay more in taxes in order to reduce the deficit. My answer to that would be that congress has shown an uncanny knack for spending all of the revenue it it receives and then then spending more, so even if revenues were to increase, so would spending (mind you, that if money collected under the FICA "contributions" were kept in trust for the purposes for which they were collected, there would be no problem with Social Security for decades. As it is, the money was spent on "other shit" (technical phrase) and replaced with Treasury notes that we have the happy benefit of owing, plus interest).

You can make the point that the rich don't need as much money as they have. However, this is morally repugnant and indefensible. The easiest thing in the world to do is spend someone else's money and any income, legally obtained, is the property of the person who earned it. Government has no right or claim on anyone else's property, regardless of how much any one person may have. As another aside, Mr. Buffett is free to send as much of his personal fortune as he chooses in to the United States Treasury. He is also free not to set up a charitable trust to shield his considerable estate from federal inheritance tax. He has chosen to do neither.

The 90s also benefitted from something we have come to call the "Tech Bubble," which may have had more to do with the economic growth of the decade rather than the marginal tax rates.

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