Tuesday, October 11, 2011

truly malicious, ignorant misinterpretation...deserves only contempt

This is a series of AJC blog postings in which I was accused of the above (subject line). The main character here (MarkV) was engaged with someone else arguing about Marxism, and MarkV was trying to deny his position equated to Marx’s. This is where I chimed in.



MarkV


“To each according to his needs” = Funding social programs and entitlements.


This part of the motto refers to a utopian stage of the society, in which technology is so developed that everybody can get what he/she needs. Again, it is a laughable nonsense to compare it with a safety net in a capitalist society. How many people get “what they need” from the social programs and entitlements? Would you like to have all you needs satisfied by what the people below the poverty line get from those programs?


MPercy


I suspect part of the disconnect will lie in the definition of “what they need”. Humans all around the world demonstrate how little is truly required to survive. This might be one definition of “what they need”, but is probably not close to what progressive liberals mean when they say the words “what they need”, which apparently has come to mean “providing means for everyone to live a U.S. standard lower middle class lifestyle without any further requirements or responsibility on the recipients’ part”, i.e., an air-conditioned home or apartment with an assortment of electronic gadgets, cable TV, broadband internet, free cell phone, free food, reduced electric bill, reduced gas bill, a car and oh yeah, toss in some walking-around money.


MarkV


What you have written is a truly malicious, ignorant misinterpretation of “what progressive liberals mean when they say the words “what they need.” It deserves only contempt.


Tiberius - Your lightning rod of hate!


“It deserves only contempt.”


No, it deserves being backed up with a bit more facts than hyperbole, but there is no denying that the “poor” in America have a better standard of living than the vast majority of “poor” in every other country on Earth.


MPercy


Why? It appears accurate to me. Allow me to explain, with references.


A Department of Energy Survey [www.eia.gov/consumption/residential/data/2009/#undefined], includes a part of which breaks down appliance use in US homes by household Income.


For example it states that 16.9M households are below the poverty line, and of those 15.6M have microwaves, 8.6M have coffee makers, 10.6M have top-door (top freezer) refrigerators, 1.8M have a 2nd refrigerator, 3,9M have a separate freezer, 4.8M have a dishwasher, 10.9M have a clothes washer in their home.


For TVs, of the 16.9M households below the poverty line, only 0.3M had no TV, while 4.8M had one TV, 5.9M had two TVs, 3.5M had three TVs, 1.6M had four TVs, and 0.7M had five or more TVs. Some 8.9M had TVs between 21 and 36 inches in screen size, and 4.4M had “big screen TVs” of 37 inches or more, with 5.7M being LCD or plasma TVs. Some 6.1M had cable TV boxes connected to their primary TV, and 3.9M had a video game console, and 7.1M had a DVD player.


In addition 5.8M of the 16.9M households below the poverty line had computers, while 1.8M more had two computers (and nearly1M had three or more). Some 7.2M had internet access, of those 2.7M had cable broadband, 3.1 had DSL or fiber. And 5.2M had at least one printer.


8.0M (of 16.9M poverty-level) households have cordless phones, 5.2M have answering machines, 0.8M have fax machines, and 0.8M have photocopiers. 5.8M have stereo equipment.


“The Federal Communications Commission’s National Broadband Plan, scheduled to be publically presented to Congress next week, may have something for everyone, but a new intriguing bauble is the suggestion by the FCC that Congress will be asked to “consider use of spectrum for a free or very low cost wireless broadband service.” [www.informationweek.com/news/government/enterprise-architecture/223500023]


Free cells phones are being provided, too. “The latest expansion of an already bloated federal government is a program aimed at putting free cell phones into the hands of low-income Americans.” [www.ibtimes.com/articles/198119/20110816/verizon-cell-phones-tax.htm]


There are certainly programs for reduced utilities, federal programs such as Low Income Home Energy Assistance Program (LIHEAP), plus a bevy of state programs.


Foodstamps provide at least some free food, even fast food. “Food stamps – known more formally as the USDA’s Supplemental Nutrition Assistance Program – have been in use for grocery staples, such as bread and milk, since 1934, but now, for the first time, they can be used for fast food in four states across the country.” [abcnews.go.com/blogs/business/2011/09/fast-food-chains-getting-into-the-food-stamp-act/]


“Just last month the National Economic Development and Law Center (NEDLC) issued the findings of what must be the most comprehensive survey to date of low income car ownership (LICO) programs. The study gathered information from 110 different LICO programs across the country working to “improve access to cars for low-wage workers and their families.” [workforcedev.typepad.com/workforcedev/car_programs/]


I’ll call UI benefits, SSD, etc. “some walking-around money.”


Given the above, what is there about my characterization that is inaccurate?


MarkV


I guess you never heard about hunger in this country. How poor would you like the people in one of the richest countries to be to satisfy you?


You presented a lot of numbers. Have you given any thought to those numbers? For one thing, they do not tell you anything about the age and condition of the items. But even without that, let’s have a look at their meaning. Out of 16.9 million households under poverty line, 4.8 M have a dishwasher. That means that there are 12.1 million households without a dishwasher. How many of your friends have no dishwasher? 10.6M have a refrigerator- meaning that over 6 million households are without a refrigerator. Can you imagine your life without a refrigerator? Almost 9 million do not have a cordless phone. How many of you relatives or friends do not have a cordless phone? 13 million do not have a computer. You dare to cite a statistic of that as evidence that these people have no needs?


Given the above, what about your characterization is accurate?


MPercy


I’ve given a lot of though to those numbers. In my mind the notion that I am being forced to pay welfare benefits to even on household that chooses to squander their real income on Playstations and big screen TVs is too many. If they can afford to buy a TV, they can afford to buy their own food. If they’ve got a big TV from before they were poor (they lost a job perhaps), then sell the TV first to buy food, then when you’ve truly got nothing left, we can talk about your “needs”.


First of all, there is an extremely high correlation between poverty and obesity in this country, so it seems that most people are getting more food than they need.

So we should be paying benefits so that more people can have a dishwasher, cordless phone, and computer? As I said, it seems that you’re supporting the notion that everyone should be able to live a lower middle-class lifestyle, one that includes all those things, and that our welfare state should provide it without question of other lifestyle choices that may have been made, without requiring work on their part. Your language such as “How many of your friends have no dishwasher?” and “Can you imagine your life without a refrigerator?” implies that everyone is entitled to my lifestyle, which does currently include a refrigerator and dishwasher. You do realize that 75 years ago, even the very richest didn’t have any of the above and people got along fine?


No one needs a dishwasher. It is a luxury, work-saving device. No one needs a TV. It is an entertainment device. No one needs a Playstation, it is a game. No one needs a tattoo. It is a personal choice. No one needs Big Macs, Coke, beer, booze, or cigarettes. If you can afford to buy those, you can afford to meet your basic needs, but are choosing not to and expecting others to subsidize your decisions.


My definition of “need” comes in much lower than yours, and includes minimal support–I don’t want anyone to starve in this country, and want to provide a helping hand. But if you want more than the most basic subsistence level of support, get it yourself. Of course, though, people who simply lack the basic mental or physical ability to support themselves cannot be excluded from a reasonable level of support.


How rich do you want the poor people in this country to be? The onus should be on you,since you want to forcibly take money from me and other to redistribute it to those you feel do not have enough. You have not defined “enough” but your level of expectation on the word “need” seems much higher than mine.


MarkV


Perhaps nothing can illustrate better your blindness than the following:” First of all, there is an extremely high correlation between poverty and obesity in this country, so it seems that most people are getting more food than they need.”


Had you done the slightest amount of research, you would now that the obesity of poor people is not due to more food than they need,” but because of the high cost of healthier foods, severe limitation of food sources poor neighborhoods, less time to cook meals, less money to join sports clubs, less opportunity to exercise outdoors, etc.


We do live like 75 years ago. Most people are not below poverty line because they do not want to work or to work hard. That is a conservative fantasy. They are poor because their jobs they do not pay enough, while incomes of people in upper brackets are often obscene and soaring.


MPercy


Obesity is caused by consuming more calories than you expend. It’s a simple equation. All of the things you mention are irrelevant to the fact that they are consuming more calories than are necessary. You are simply trying to excuse the decision-making process. Rice & beans are cheap, an excellent source of nutrition and are sold in bodegas–and doesn’t the bus line in most urban areas reach a grocery store that lies outside the food desert? Cooking rice & beans is a no-brainer and doesn’t take any more time that going over to the junk food place for a burrito or cheeseburger. Most people eat for other reasons than being hungry; but if what you have is beans and rice that is less likely to happen–when I was a kind and whined that I was hungry, my mother would say, “There’s a can of corn in the kitchen, want me to warm that up for you?”. She had a point, I never did eat that can of corn.


Then there is your implication that we need to have a gym membership to be healthy? Shall we subsidize aerobics classes? And needing to go outside? You can exercise quite nicely in a very small area without any equipment–pushups, situps, for example.


While it is certainly easier for all the reason you list to be obese than to be healthy, barring some actual endocrine system failure, obesity is primarily lifestyle choice. And one that we enable in the poor by allowing foodstamps (EBT, SNAP, whatever they call it this week) to be used at convenience markets and fast food restaurants is simply enabling that lifestyle choice.


While we’re on rice&beans…”The Obama administration’s focus on what Americans eat includes Agriculture Secretary Tom Vilsack, who said on Monday that Americans will “adjust” their tastes to the food the government says is best for people to eat.”


MarkV


All I can say is that you are painfully ignorant of the issues involved in the obesity of the poor people. It is the same attitude of superiority that you are displaying in all your writing. Poor people kids having a play station – what a travesty. People who get some help from the society – and they want to have a TV? How dare they?


I do not like my taxes to be used to support people who do not want to work hard either. But if I should make a list of things I do not like to be supported by my taxes, it would be a long one. I do not want my taxes to be used to build unneeded fighter planes. I do not want them used to pay contractors in Iraq and Afghanistan who cheat the government of billions of dollars. And so on. The money wasted because some of the poor people getting government support do not deserve it is way down on my list. What I found unacceptable in your writing is the broad brush with which you have painted those receiving support.


I should also add that the way you started this discussion about the “need” was a misdirection from what the original issue, which was that Tiberius claimed that those who want to fund our social programs (“99% of the elected Democrat representatives, you, and virtually every other liberal poster on this blog”) were advocating the philosophy of Marx and communism, the motto of which is “From each according to his ability, to each according to his need.” That was the kind of scurrilous attack and labeling people like him make all the time, which shows either ignorance or deliberate misinformation. In fact, Marx specifically denounced the use of a social safety net in capitalist countries.


MPercy


I”m sorry you think I’m painfully ignorant, but you have not provided any counterpoint other than your emotional personal attacks on me whereas I have at least provided some independent background supporting my thesis, which is that progressive liberals seem to believe that everyone is entitled to at least a lower-middle class lifestyle, through government redistribution programs and no effort of their own. This is in contrast to the dire “people will starve to death in the streets” hyperbole. You honestly done nothing to dissuade me from my thesis, and in fact have consistently furthered it.


Re: poverty vs obesity, how about this NIH conclusion? “The association between poverty and obesity may be mediated, in part, by the low cost of energy-dense foods and may be reinforced by the high palatability of sugar and fat. This economic framework provides an explanation for the observed links between socioeconomic variables and obesity when taste, dietary energy density, and diet costs are used as intervening variables. More and more Americans are becoming overweight and obese while consuming more added sugars and fats and spending a lower percentage of their disposable income on food.”


How else can I read that but to think that people are simply choosing to eat low-cost food that are high in fat and sugar (energy-dense) because they like it and it’s cheap? And that given people in poverty a “chose any food you want” card is a bad idea? People in poverty are not starving, they are eating too much of the wrong food, by choice. Or maybe they just don’t know any better, I have to admit that, but really how stupid must you be to not know that Big Macs make you fat?


You seem to think that I am incapable of distinguishing between someone who is milking the system (please do not claim there are none) and those who simply could not survive without it (and I never claimed there are none). I am not painting with a broad brush either. I believe I was quite clear in distinguishing between the truly needy and those who use the programs but do not truly need them, where my distinction involves their ability to choose to spend their money on luxury items or “wants” (and yes, big-screen TV and Playstation are some examples) rather than food, rent, or bills or “needs”.


It was not my intent to misdirect anything. A the time you two were arguing about Marx, I was merely predicting that the root of the point you raised about getting what you need from government services would hinge on what you were using as the definition of “need”. I explained that my definition of need (vs want) would certainly differ from yours and provided my estimation of what I believe the progressive liberal definition of “need” seems to be. Subsequently, I backed up my thesis with external sources.


At no point have you said anything that indicates you disagree with my thesis, and everything you’ve said (well, at least everything that is not some emotional personal attack) seems to solidify the notion that you (as a progressive liberal) believe that everyone is entitled to at least a lower middle-class lifestyle and that the government is right to pursue redistributive programs to that effect, and specifically to provide things like free cells phones, free broadband, free Big Macs, free rent so that the little real income *some* people living in poverty have can be used for big screen TVs and playstations.


Is that or is that not your position?


MarkV


I am not going to discuss such a complex issue as poverty/obesity in these posts. I do not believe you are competent to do that, and neither am I. I have no quarrel with the NIH conclusions you have cited. It is enough to quote your one sentence: How else can I read that but to think that people are simply choosing to eat low-cost food that are high in fat and sugar (energy-dense) because they like it and it’s CHEAP?” (My emphasis) Would you expect them to eat food that is expensive? I could go on and on, picking up your arguments: For instance: “…but really how stupid must you be to not know that Big Macs make you fat?” You really expect the usually less educated poor people to be less “stupid” than those in upper classes who get fat by eating Big Macks?


I think I have expressed clearly enough that there are people milking the system, and that I have no sympathy with that. What you failed to explain is what you want to do about it? Deny the help to all because of some are milking the system? Double the size of the government to watch every one who receives support whether he/she buys a big screen TV or a Playstation?


And yes, you have painted with a broad brush, which was the reason for my original response. Just read your post at 4:37 pm yesterday.


MarkV


MPercy: “…everything you’ve said (well, at least everything that is not some emotional personal attack) seems to solidify the notion that you (as a progressive liberal) believe that everyone is entitled to at least a lower middle-class lifestyle and that the government is right to pursue redistributive programs to that effect, and specifically to provide things like free cells phones, free broadband, free Big Macs, free rent so that the little real income *some* people living in poverty have can be used for big screen TVs and playstations.”


Why don’t you show me exactly where I expressed such a notion. It is not and never was my position.


MPercy


You’re right, I did use a broad brush…to paint progressive liberals. You seem to think I’m attacking people in poverty. I’m not. I’m attacking progressive liberals who do not clearly distinguish between wants and needs. There could possibly be progressive liberals who will use the words “want” vs “need” in a forthright and honest fashion, and my broad brush did not allow for that prospect. Apologies.


I tried to support that statement using evidence from a number of sources. In essence, I was arguing that progressive liberals regularly and with malice aforethought attempt to portray poverty in the most negative possible way, when in reality the standard of living among the poor in the United States has steadily increased to the point where a US person living in poverty has a standard of living similar to middle-class Europeans, and would be the envy of much of the world’s truly poor.


These folks did a nice job capturing this idea…


[Understanding Poverty in the United States: Surprising Facts About America's Poor]


“For most Americans, the word “poverty” suggests near destitution: an inability to provide nutritious food, clothing, and reasonable shelter for one’s family. However, only a small number of the 46 million persons classified as “poor” by the Census Bureau fit that description. While real material hardship certainly does occur, it is limited in scope and severity.


“Although the mainstream media broadcast alarming stories about widespread and severe hunger in the nation, in reality, most of the poor do not experience hunger or food shortages. The U.S. Department of Agriculture collects data on these topics in its household food security survey. For 2009, the survey showed:


* 96 percent of poor parents stated that their children were never hungry at any time during the year because they could not afford food.
* 83 percent of poor families reported having enough food to eat.
* 82 percent of poor adults reported never being hungry at any time in the prior year due to lack of money for food.


“Other government surveys show that the average consumption of protein, vitamins, and minerals is virtually the same for poor and middle-class children and is well above recommended norms in most cases.


“Television newscasts about poverty in America generally portray the poor as homeless people or as a destitute family living in an overcrowded, dilapidated trailer. In fact, however:


* Over the course of a year, 4 percent of poor persons become temporarily homeless.
* Only 9.5 percent of the poor live in mobile homes or trailers, 49.5 percent live in separate single-family houses or townhouses, and 40 percent live in apartments.
* 42 percent of poor households actually own their own homes.
* Only 6 percent of poor households are overcrowded. More than two-thirds have more than two rooms per person.
* The average poor American has more living space than the typical non-poor person in Sweden, France, or the United Kingdom.
* The vast majority of the homes or apartments of the poor are in good repair.


“By their own reports, the average poor person had sufficient funds to meet all essential needs and to obtain medical care for family members throughout the year whenever needed.


“Of course, poor Americans do not live in the lap of luxury. The poor clearly struggle to make ends meet, but they are generally struggling to pay for cable TV, air conditioning, and a car, as well as for food on the table. The average poor person is far from affluent, but his lifestyle is far from the images of stark deprivation purveyed equally by advocacy groups and the media.


“The fact that the average poor household has many modern conveniences and experiences no substantial hardships does not mean that no families face hardships. As noted, the overwhelming majority of the poor are well housed and not overcrowded, but one in 25 will become temporarily homeless during the year. While most of the poor have a sufficient and fairly steady supply of food, one in five poor adults will experience temporary food shortages and hunger at some point in a year.


“The poor man who has lost his home or suffers intermittent hunger will find no consolation in the fact that his condition occurs infrequently in American society. His hardships are real and must be an important concern for policymakers. Nonetheless, anti-poverty policy needs to be based on accurate information. Gross exaggeration of the extent and severity of hardships in America will not benefit society, the taxpayers, or the poor.


“Finally, welfare policy needs to address the causes of poverty, not merely the symptoms. Among families with children, the collapse of marriage and erosion of the work ethic are the principal long-term causes of poverty. When the recession ends, welfare policy must require able-bodied recipients to work or prepare for work as a condition of receiving aid. It should also strengthen marriage in low-income communities rather than ignore and penalize it.


The rest of the essay cites provides plenty of government surveys, studies, etc.

[http://www.heritage.org/research/reports/2011/09/understanding-poverty-in-the-united-states-surprising-facts-about-americas-poor]


MPercy


“Why don’t you show me exactly where I expressed such a notion. It is not and never was my position.”


I never said you said it, I said that you seem to believe, appear to support, I have a notion that you believe, etc. Your words implied this notion, and I inferred it from your words. You say this is not your position, but the things you’ve said are not consistent with that statement.


For example, you said “You dare to cite a statistic of that as evidence that these people have no needs?” This was preceded by several items such as dishwashers, cordless phones, and computers that it seems reasonable to infer, based to their position leading up to this question, that you included those items in your list of “needs”. The inference is mine, but should I not have made it given what you wrote?


Subsequently, you called me ignorant and blind. These emotional personal attacks do nothing to help your argument.


MarkV


“Subsequently, you called me ignorant and blind. These emotional personal attacks do nothing to help your argument.”


I do not make personal attacks of the kind I see and get from some people here. But I am also straightforward in expressing my opinion, and it is never an emotional attack. I did not call you “ignorant” and “blind” in the sense of calling you an ignorant person. I called you “painfully ignorant of the issues involved in the obesity of the poor people.” I am sorry if you do not understand the difference. I have not change my opinion. While I do not want, as I have written, discuss those issues here because of their complexity, I have read enough about it to have an opinion that your view is painfully one-sided, and that you lack sufficient sympathy for people, many of whom try hard to make ends meet and give their families some measure of happy life. Yes, even buying their kids Playstations and good TV. It may be a difficult concept for you to understand – it is not for me. Buy the mothers, who come home after a day of heavy work, a dishwasher to allow her a little more rest. You may call it luxury – I do not.

Wednesday, September 14, 2011

The rich *are* "job creators"

Think the rich don’t provide jobs? Or that they only provide a few jobs through their investment activities? People with a lot of money spend a lot of money on stuff and services that the many of the rest of us provide!

One example...

Once upon a time we had a thriving yacht-building business in the US. Congress decided that a luxury tax on yachts sounded like a great idea! Tax the rich fat cats splurging millions on yachts, what’s a few hundred thou in extra taxes?! 10% extra tax on boats costing $100K or more (this was in 1990 or so).

The end result was devastating. Thousands in the boating industry lost their jobs (as did thousands in other industries penalized with similar luxury taxes). The rich? They just bought their yachts overseas and avoided the taxes. There is virtually no yacht building or sales left in the US as a result of this tax, even after it was repealed–those jobs were killed but good!

[Walter Williams]

“Within eight months after the change in the law took effect, Viking Yachts, the largest U.S. yacht manufacturer, laid off 1,140 of its 1,400 employees and closed one of its two manufacturing plants. Before it was all over, Viking Yachts was down to 68 employees. In the first year, one-third of U.S. yacht-building companies stopped production, and according to a report by the congressional Joint Economic Committee, the industry lost 7,600 jobs. When it was over, 25,000 workers had lost their jobs building yachts, and 75,000 more jobs were lost in companies that supplied yacht parts and material. Ocean Yachts trimmed its workforce from 350 to 50. Egg Harbor Yachts went from 200 employees to five and later filed for bankruptcy. The U.S., which had been a net exporter of yachts, became a net importer as U.S. companies closed. Jobs shifted to companies in Europe and the Bahamas. The U.S. Treasury collected zero revenue from the sales driven overseas.

Back then, Congress told us that the luxury tax on boats, aircraft and jewelry would raise $31 million in revenue a year. Instead, the tax destroyed 330 jobs in jewelry manufacturing and 1,470 in the aircraft industry, in addition to the thousands destroyed in the yacht industry. Those job losses cost the government a total of $24.2 million in unemployment benefits and lost income tax revenues. The net effect of the luxury tax was a loss of $7.6 million in fiscal 1991, which means Congress’ projection was off by $38.6 million. The Joint Economic Committee concluded that the value of jobs lost in just the first six months of the luxury tax was $159.6 million.”

Keep this in mind when you realize that Pres. Obama has called for a luxury tax on corporate jets, and remember that a goodly number of corporate jets are built in the United States (Gulfstream, Cessna). How many people will lose their jobs as a result? How much revenue will be generated? We've seen this movie before...the remake won't end differently.

Thursday, September 8, 2011

Real Stimulus: Eliminate corporate income taxes

There is a common meme that corporations pay income taxes. This is simply false. First of all, some 2/3s of US corporations don't owe any taxes in any given year, since they aren't profitable enough to have positive tax rate. But more importantly, when a corporation does pay taxes, those taxes are simply a cost of doing business that is passed to consumers, workers, and shareholders.

Even the federal government agrees with this concept. The Congressional Budget Office produced a report "THE INCIDENCE OF THE CORPORATE INCOME TAX" in which it states
A corporation may write its check to the Internal Revenue Service for payment of the corporate income tax, but that money must come from somewhere: from reduced returns to investors in the company, lower wages to its workers, or higher prices that consumers pay for the products the company produces.
That report goes on to say:
Although economists are far from a consensus about exactly who bears how much of the burden of the corporate income tax, the existing studies highlight the significant types of economic mechanisms as well as the empirical estimates necessary for further quantifying the burdens. CBO's review of the studies yields the following conclusions:
  • The short-term burden of the corporate tax probably falls on stockholders or investors in general, but may fall on some more than on others, because not all investments are taxed at the same rate.
  • The long-term burden of corporate or dividend taxation is unlikely to rest fully on corporate equity, because it will remain there only if marginal investment is not affected by those taxes. Most economists believe that the corporate tax system has some effect on investment decisions.
  • Most evidence from closed-economy, general-equilibrium models suggests that given reasonable parameters, the long-term incidence of the corporate tax falls on capital in general.
  • In the context of international capital mobility, the burden of the corporate tax may be shifted onto immobile factors (such as labor or land), but only to the degree that the capital and outputs of different countries can be substituted.
  • In the very long term, the burden is likely to be shifted in part to labor, if the corporate tax dampens capital accumulation.
  • Most attempts to distribute the burden of corporate taxation have neglected the possible importance of effects on the relative prices of products.
Corporate income taxes account for about $250-$300B in annual revenue for the federal government. Compliance costs for business to determine how much tax they owe is also estimated at about $200-$300B annually. In other words, it costs corporations almost as much slightly more to determine how much they owe as they actually owe. Then there is the inordinate amount of effort that goes into determining how to run the business when various tax considerations come into play instead of simply doing what's best for the business for business reasons rather than tax reasons. For example, should we buy a new truck this year, or build new factory, or hire a 50th employee. Each action can have tax implications that may have a greater influence on decisions made than does the business implications. And virtually all of these taxes and compliance costs get passed on directly to consumers/labor/shareholders.

The federal corporate statutory tax rate is 35%, one of the highest in the world, and the United States is the only country that seeks to double-tax income of multinationals. The rate and the related policies are often cited by businesses when they defend their decisions to off-shore production and jobs or structure their business to legally avoid US taxes (including keeping some $1T overseas rather than face the US taxes if they repatriated the income).

Almost every bit of "corporate welfare" comes in the form of special tax breaks which allow favored industries or even favored companies to avoid some part of the corporate tax code. Also note that a large portion of the potentially corruptive influence on Congress comes in the form of corporate lobbyists trying to "rent-seek" by getting tax provisions passed which benefit their clients.

Given the above, my position involves completely eliminating the federal corporate income tax.

This accomplishes a number of things in one fell swoop. It ends the vast majority of corporate welfare (which usually takes the form of preferential tax treatment). It unburdens the economy of the US relative to the rest of the world, since 0% is a lot less than 10, 20 or 30, or 35%--certainly some multinationals will rush to move their HQs to the USA? It frees up some $300B/yr (more or less) in compliance costs that US companies spend each year just to figure out how to minimize their taxes. Removing the tax burden and compliance costs would make it more feasible for some, but not all, activities (and the jobs) that had been previously offshored to return here, i.e., those jobs which were *almost* but not quite worth keeping here.

The "cost" for this move would have an initial price tag of $250B/yr (more or less). This is the amount that the IRS collects from corporate taxes each year. However, since a large share of the $250B in corporate taxes not being paid and the $300B (more or less) not being spent in compliance costs will be returned to shareholders, they will pay income taxes on those dividends, and workers who might be given raises will pay taxes on those raises. In other words, recognizing that corporations pass on the cost of taxes, eliminating the corporate tax would largely just move the corporate profits into individuals pockets, where it would be taxed under the income tax code. Then there's the positive economic impact of corporations moving their HQs and some production back to this country, those relocated and rehired workers would be paying income taxes, too.

To further offset the "cost", we can eliminate the IRS workers (*), programs, etc. charged with collecting the corporate taxes in the in first place, but a better use would probably be to refocus them on collecting the nearly $300B/yr estimated to exist in the "tax gap" between personal income taxes owed and those actually paid. In other words, if we could simply collect the full amount of personal income taxes owed, it would completely offset the baseline of missing corporate income taxes (not including the offsetting elements I mentioned above).

(*) We'd have to include the cost of the UI we'd have to pay to the fired IRS workers, corporate tax accountants, etc. But I'm sure at least some of them could get jobs with the multinationals to help them figure out their foreign taxes?

Monday, August 22, 2011

Lather, rinse, repeat

I found this in my Drafts folder. I'm not sure if I copied from somewhere or wrote it myself...

The pattern is
  1. Government policy and poor regulation cause (or invents) a crisis.
  2. The government publicly and violently searches for culprits, aided by the MSM, and names the wrong parties--usually in the private sector.
  3. The government then rolls out a massive new law and its regulatory children to "fix" the problem as they defined it.
  4. The new law doesn't solve the real problem, costs a lot, and has massive unintended (but fully predicted) consequences, including setting the stage for the next crisis, which will be bigger and more damaging.
  5. Memory of the past crisis fades and everybody reluctantly adjusts to the massive new regulatory overhead.
  6. A new crisis occurs. The government publicly and violently searches for the culprits, aided by the MSM--looking exclusively in the business community...
and so it goes.


Would you believe? 70% vs 35% tax rate...

For fun, let’s compare the effective rates and a few other values under Carter (1979) and G.W. Bush (2006). Recall that under Carter (1979) the marginal rate went all the way up to 70% paid on income over $215,400 (married filing jointly); under Bush (2006), the highest marginal rate was *only* 35% paid on income over $336,550 (married filing jointly). The CBO puts out a nice paper every year. It starts with data from 1979 and runs up to 2006 (the last year for which I have data, 2005 for the top 0.01%), making this comparison easy.

Would you believe that in 1979, when the highest marginal tax rate was 70%, the effective income tax rate paid by the top 1% was just 21.8% (compare to the marginal rate of 70%). In 2006, after massive tax rate cuts that were accompanied by elimination of a host of deductions, the effective income tax rate for the top 1% had dropped only a few points down to 19% (compared to marginal rate of 35%).

Would you believe that in 1979, when the highest marginal tax rate was 70%, the top 1% paid 15.4% of all federal taxes collected but that in 2006, when the highest marginal rate was a mere 35%, the top 1% paid 27.6% of all federal taxes collected?

Would you believe that the bottom 80% are *all* (statistically, not necessarily as individuals!) paying a smaller share of the both the total federal tax burden and income tax burden in 2006 than they were in 1979? Only the top 20% are paying more?

Would you believe that the bottom 40% went from paying about 4% of income taxes collected in 1979 to paying -3.6% in 2006 (negative share of taxes due to excess refundable tax credits, primarily EITC and child-related credits)?

Believe it!

Share of Total Federal Tax Liabilities
* the lowest quintile (20%) paid 2.1% of all taxes collected in 1979 and 0.8% in 2006
* the second quintile paid 7.2% of all taxes collected in 1979 and 4.1% in 2006
* the middle quintile paid 13.2% of all taxes collected in 1979 and 9.1% in 2006
* the fourth quintile paid 21.0% of all taxes collected in 1979 and 16.5% in 2006
* the highest quintile paid 56.4% of all taxes collected in 1979 and 69.3% in 2006
* top 1 percent paid 15.4% of all taxes collected in 1979 and 27.6% in 2006
* top 0.01% percentile paid 2.7% of all taxes collected in 1979 and 6.5% in 2005

Share of Federal Income Tax Liabilities
* the lowest quintile paid 0.0% of income taxes collected in 1979 and -2.8% in 2006
* the second quintile paid 4.1% of income taxes collected in 1979 and -0.8% in 2006
* the middle quintile paid 10.7% of income taxes collected in 1979 and 4.4% in 2006
* the fourth quintile paid 20.2% of income taxes collected in 1979 and 12.9% in 2006
* the highest quintile paid 64.9% of income taxes collected in 1979 and 86.3% in 2006
* top 1 percent paid 18.3% of income taxes collected in 1979 and 39.1% in 2006
* top 0.01% percentile paid 2.6% of income taxes collected in 1979 and 8.0% in 2005

Share of Pre-Tax Income
* the lowest quintile earned 5.8% in 1979 and 3.9% in 2006
* the second quintile earned 11.1% in 1979 and 8.4% in 2006
* the middle quintile earned 15.8% in 1979 and 13.2% in 2006
* the fourth quintile earned 22.0% in 1979 and 19.5% in 2006
* the highest quintile earned 45.5% in 1979 and 55.7% in 2006
* top 1 percentile earned 9.3% in 1979 and 18.8% in 2006
* top 0.01 percentile earned 1.4% in 1979 and 4.2% in 2005

Total Effective Federal Tax Rate (income+payroll+excise+corporate)
* the lowest quintile rate was 8.0% in 1979 and 4.3% in 2006
* the second quintile rate was 14.3% in 1979 and 10.2% in 2006
* the middle quintile rate was 18.6% in 1979 and 14.2% in 2006
* the fourth quintile rate was 21.2% in 1979 and 17.6% in 2006
* the highest quintile rate was 27.5% in 1979 and 25.8% in 2006
* top 1% percentile rate was 37.0% in 1979 and 31.2% in 2006
* top 0.01% percentile rate was 42.9% in 1979 and 31.5% in 2005

Effective Income Tax Rate
* the lowest quintile rate was 0.0% in 1979 and -6.6% (negative 6.6 percent) in 2006
* the second quintile rate was 4.1% in 1979 and -1.0% (negative 1.0 percent) in 2006
* the middle quintile rate was 7.5% in 1979 and 3.0% in 2006
* the fourth quintile rate was 10.1% in 1979 and 6.0% in 2006
* the highest quintile rate was 15.7% in 1979 and 14.1% in 2006
* top 1% rate was 21.8% in 1979 and 19.0% in 2006
* top 0.01% percentile rate was 21.0% in 1979 and 17.0% in 2005

Wednesday, July 20, 2011

Futility of "Taxing the rich" as the solution to the problems

In the last year for which data is available, 2008, the highest marginal tax rate was 35%. This rate is paid on AGI above $357,700. Certainly someone with AGI over that value is in the well-to-do category, but may not be “millionaires and billionaires” (but this is immaterial to my point). According to the IRS, the number of returns that were in this highest marginal rate was 971,510. So there’s nearly a million households in this country that are, at least by the IRS bracket definition, “rich”. Not too shabby, it seems the USA is indeed the land of opportunity.

According to the IRS, the cumulative amount of AGI subjected to this highest rate was $622,765,389,000, so let’s round up to $622.8B. The taxes generate on this money is therefore $218B (the IRS reported $217,967,886,000). The overall effective rate for these returns (taxes paid / income) was 28.9%.

Let’s assume for a moment (no matter how unrealistic the assumption is) that no one affected would change a lick of their income-generating behavior as a result if we raised the top marginal rate to 100%. How much revenue would that generate? Why, all of $622.8B, if no one modified their behavior in any way that affected their income and tax impact. That is, it would generate an additional $404.8B in revenue relative to the current 35% bracket.

If you added that $404B to the revenue pot, our deficit this year would still be over $1T…

Is power needed to "implement principles"?

A "progressive" WSJ commenter stated What is the point of principles if you have no power to implement them? My response: Pri...