Sunday, July 20, 2008

Just like the good old days

(This is starting to get too reminiscent of the old symposiums. Here I am, thinking I have a whole Sunday afternoon to catch up on things like sleep and sorting through pictures and home videos, when all of the sudden I'm drawn in . . . )

Taxes

So Jesse and I appear to agree that taxes are a mechanism to redistribute the costs of benefits that, due to market failures, are not adequately borne by those who receive them.

I also agree that, in fairness, positive externalities must be considered. For example, the benefits of technological progress justify intellectual property laws and rights. I even agree that productivity is a positive externality.

However, I believe that the market more than fairly compensates for productivity. I imagine that I also believe that the costs (negative externalities) that I outlined in my previous posts are much greater than Jesse believes. By not paying for these costs, our corporations and other owners of means of production are essentially stealing from not only the American people, but all of humanity.

In reponse to Alvin, this is how I justify the majority forcing the minority to pay higher taxes.

Of course, the major problem here is that the we can argue all we want about what the true costs and benefits of these externalities are. It's very difficult to argue one way or another. So what can do to try to quantify these costs and benefits?

One could attempt to do a meta-comparison by comparing results of our current American system to that of other countries (like GDP per capita--I find that that much more agreeable than unemployment). However, I am skeptical as to the validity of a multi-national comparison for a number of reasons. Our nation's wealth owes almost as much to historical happenstance of circumstances (i.e. our geographic location, free land as a safety valve to the poor for almost half our existence, large number of natural resources) and exploitation of other countries (both the past effects of imperilaism and our current exploitation of third world labor) as it does our current system, itself.

I am interested in a historical comparison of American taxation, productivity, and distribution of wealth. However, I've been too lazy to dig up hard numbers. I hate making claims I can't back up, but here's a go. I believe that the top marginal tax rate for most of the first 70-80 years of the last century was above 70%. In fact, during the middle of the century, it was over 90%. Thanks to Reagonomics, it very rapidly declined and is now about 35%. Meanwhile, 1% of the population now holds approximately 90% of our wealth (or something like that--this is where I need to do research). That ratio has been getting worse and worse, not coincidentally, at the same time the highest marginal tax rates have been falling. Likewise, poverty rates have been climbing in a very similar way.

I should take some time to argue why all of this is bad, because I'm sure there are apologists who would say it isn't, but I'm runing out of time before my kid wakes up. So, if anybody **cough**esse, wants to tell me argue why this isn't bad, that's fine with me. (But it's all fun and games, right Jesse--especially since I'll actually agree with you later on here).

Another question of importance is "what should we tax?" Jesse has argued that we should tax consumption. In general, I think this is a very bad idea, because it becomes an essentially regressive tax. Those who have the least amount of money spend the most (percentage-wise) on consumption, while those who have the most amount of money can afford to save money, avoid taxation, and then make even more money.

And while we're talking about savings, while I think we should stay out of debt and encourage a small amount of savings for emergencies, I think we should discourage people from saving large amounts of money. ANY amount of savings has a negative effect on the current economy, because it represents money that is not being put into circulation to make more money. So if we're going to encourage savings, it should be just the minimal amount to take care of reasonably expected emergencies.

Nature of Government

I'm with Elliott. We need to stop looking at government as being somebody else forcing something upon us, and more as a social contract in which we all participate.

But, what do we do about the fact that we can't all agree all the time? I think we all agree that we can't just have a society where everybody can do anything they want just so we can make sure that no one should have to be forced to do anything. We have a right to force people to abide by certain rules that interfere too much with the rights of others--i.e. no murder, no theft, not running red lights, etc.

So we're left to walk the line between "freedom of choice" and protection of other people's rights to life, liberty, and pursuit of happiness. The issues that we've been debating are all hard issues along that line. It's hard to say just where on this spectrum of "freedom of choice" and "protection of rights" things like pollution and ownership of limited resources belong.

Also, I was going to argue with Jesse's assessment that government is, for the most part, no different than any other entity, but I think I'll save that for another day.

Legislating from the Bench

It would probably be pretty easy for me to backtrack from this statement by saying I was being technical when I said that "judges do not legislate." Technically speaking, of course, they do not. They interpret laws. They merely provide their best interpretation of laws that are ambiguous, or strike down laws that Congress had no right to make in light of the constitution. Congress (and by extension, we, as a people) then have the power to make laws that are not ambiguous and/or do not violate the Constitution.

But I'm not going to back down here. When people say that judges legislate from the bench, what they are really saying is that the judges have a different interpretation than they do, but they are saying it in such a way as to dismiss the legitimacy of that interpretation and ascribe typically dishonorable motivations to the judges who hold that different interpretation.

Most of these judges have no aspiration to "legislate." Yes, some of these judges are not generally elected, but these are not people who are appointed on a whim, nor are these people who have no reason but partisanship for making their decisions. These are people with very methodical and thorough understandings of the law, which understandings cause them to hold oft-times difficult to categorize beliefs. For these beliefs and legal understandings, they at one point were appointed office by people we trusted enough to elect to office. The beliefs of these judges are, generally speaking, quite centrist. Their attitudes reflect the attitudes of different populations of the American people very well (which is unfortunate in many circumstances).

I guess what I'm getting at is that by dismissing judicial decisions as partisan-minded activism, we disrespect the judicial process, the judges themselves, and the opinions of the many Americans who hold the same beliefs as the judges. I'm not saying we have to agree with every decions handed down by a judge, or every opinion held by every American citizien, but we should at least take the time to respect the legitimacy of their opinion. Until we take the time to understand one another, all we are doing is yelling back and forth, getting no where.

Social Conservatism

So finally, on to the main topic of the day--social conservatism. I liked Alvin's story about someone trying to convince him to be a Democrat. I think I was in much the same frame of mind as Alvin coming out of BYU. I wish the BYU environment would more openly challenge students to develop political consciences for themselves. I think American Heritage was supposed to do this, but it didn't. Even in law school, by which time I'd become more liberal minded, it was difficult to have a fair and open discussion of politics.

The first time I ever forced myself to actually build my political consience from the ground up, I became a libertarian (this was for about a year right after 2001--obviously, I have since changed my mind on many issues). The most difficult aspect to accept of libertarianism was, for me, the idea of being socially liberal. I never made it all the way there, but to this day I still believe there are a lot of "private" issues that the government has no business being involved in.

For a while, one of these was gay marriage. Morally, I'm opposed to it. Emotionally, my revulsion to homosexuality is complicated by the fact that one of my sisters is gay. Intellectually, I think my opinion is similar to Jesse's--except I would argue that it was perfectly legitimate for the court to decide what they did. I question whether government has any role endorsing any kind of religious institution, and thus I question whether government should endorse marriage. The fact that this is the only political issue I've ever seen the church become involved in, however, has me looking for ways to intellectually reconcile things. So, anyone out there have good secular arguments for it? Particularly since, as a California citize, I need to decide how to vote?

2 comments:

Peter said...

For those too lazy to do research:

Summary of wealth distribution. The top 1% owns about 40% of the nation's wealth (not 90%). The number is slightly below 40% if you include home values, and slightly above if you exclude home values. There's a link at the bottom to a more complete study.

20th Century top marginal tax rates. The top marginal tax rate was >80% from 1940-1963, about a quarter of the last century. It was between 50-80 for 32 years. The median is 70, the mean is 60.6. However, as shown by the spikes in the tax rate, they were largely due to sudden onset national level crises, e.g. WWI and WWII, Great Depression, Cold War military build-up. The only times we weren't seeing dramatic external or internal threats to US security (which necessitate higher taxes) were the pre-WWI years and the lull between WWI and the Great Depression. In both those eras we see top marginal rates below those seen currently.

[edit]I can't get the web-pages above to present in a new window (the comment form won't allow "target" attributes in href tags). Here are the full urls

http://www.truthandpolitics.org/top-rates.php
http://www.faculty.fairfield.edu/faculty/hodgson/Courses/so11/stratification/income&wealth.htm
[/edit]

karlrees said...

Thanks, Peter, for digging up hard numbers. If blogs had emoticons, I would be red-faced right now. This is why one should never try to throw out hard numbers without adequate time for research.

So, regarding wealth distribution, what I should have said is "The wealthiest 1 percent of families owns roughly 34.3% of the nation's net worth, the top 10% of families owns over 71%, and the bottom 40% of the population owns way less than 1%." (I think this last number is the most distrubing).

Regarding taxes, the rate was above 60% during and after WWI and then from 1932 to 1981. The rate was above 70% from from 1936 to 1981. The rate was above 90% in 1944 and 1945, and then again from 1951-1963.

I agree that WWI and WWII are extraordinary, and therefore taxes during those periods would have to be considered to be exceptions to any trends. However, I see nothing peculiar about the years from 1951-1963 that would indicate that rates above 90% were any more justified then than they would be now. The same goes for 70% rates through 1981.

(By the way, I wouldn't even dream of calling for a 90% rate again, but I do believe that we should have many more "tax brackets" than we do now, with a highest marginal tax rate at much higher than it is--probably capping at somewhere between 50-70% for those that earn, say, $5,000,000 or more--whoops here I am with hard numbers again).

Just one more number I should resist throuwing out there because there's probably not a causal connection, but still it's fun--note that in the run-up to the great depression, the highest marginal rate hovered at 25%. During the recovery, the rate went from 63% to 79%.

At any rate, I stand behind my general assertion that there is something wrong with wealth distribution in America, and that disparities in wealth distribution are getting worse at the same time that taxes for those with the most wealth have dropped enormously.