For those of you who are interested, a snarky review of things learned from our previous discussion (found here) on the Flat Tax. Some observations:
4.) Revenue-neutral tax policy is pervasive idea, no matter how flawed it is in the context of reform. If we’re just shifting pieces around in the pie chart, which is what the advisory panel on tax reform essentially concluded, why bother? But what do I know, the government works perfectly. Reform is unnecessary. Or, as this commenter wrote:
The only reason we have to have this conversation is that we’ve decided that we need (like the rest of the industrialized world) a fairly large central government.
5.) The rich benefit more from government than the poor, so the rich should pay more for those services. It doesn’t make sense to me, either.
6.) People have faith in capitalism, but only when it’s centrally planned by the government. I guess I misunderestimated the definition of capitalism, so this is wrong:
Economic system characterized by the following: private property ownership exists; individuals and companies are allowed to compete for their own economic gain; and free market forces determine the prices of goods and services. Such a system is based on the premise of separating the state and business activities. Capitalists believe that markets are efficient and should thus function without interference, and the role of the state is to regulate and protect.
I blame Oliver Stone.
Quick side note- used a clip of Oliver Stone’s from JFK in a media course, discussed how it distorted the entire JFK debate, and spent a whole hour discussing the fall-out from the movie, the reaction in the news, the experts who came forward to lambast Stone, etc., and after all that, did an informal poll of the students to compare with an informal poll I had done before class. Before class, people were split 50-50 as to whether it was one shooter or a conspiracy. After the class, despite me driving home the no-conspiracy angle, the class was split 60-40 in favor of conspiracy.
That is how persuasive I am.
M. Scott Eiland
It’s a variation on the “don’t think of pink elephants!” problem. My guess is a lot of your students had never heard a lot of those conspiracy theories before your class called them to their attention, while the ones who already knew and believed in them tended to be resistant to having their minds changed–creating a bias that tended to create more conspiracy believers in your class by the time you were done barring Johnny Cochran-like mesmerizing powers on your part.
guyermo
seeing your persuasive abilities…i no longer question why some of the farther right commenters lambast you for defending dKos.
Steve
The rich benefit more from government than the poor, so the rich should pay more for those services. It doesn’t make sense to me, either.
I guess a snarky answer comes in handy when one doesn’t have a logical one. Is the notion that poor people are getting all those big welfare checks, while rich people are out there making money with no help from anyone? Get real. Clearly the rich benefit more from our stable system than the poor do. They (or at least, some of them) also make the system possible, which is why we’re talking about taxing them a couple of percentage points higher, rather than confiscating all their money.
I make a great living in the securities industry, for example. If it were not for government regulation of the securities markets, there would be no public trust in the markets and thus no money-making opportunities. Not to mention that our entire financial system relies upon government backing of our currency. Not to mention that our government negotiates trade arrangements with foreign countries that make our industries possible in innumerable ways.
But put that aside. The real reason for a progressive tax system is that if someone has to pay a few extra dollars, the rich can give them up with less pain than the poor. Again, people talk as though there’s a 90% tax on the highest tax bracket, or as though there’s no incentive for rich people to make more money since taxes soak it all up. Of course there’s plenty of incentive to get rich under our current system, which is why so many people keep trying to do it. We’re talking about a difference of a few percentage points, an amount that is only meaningful to those who are barely scraping by.
There are lots of reasons to want to reform the tax code, eliminate loopholes, incentivize good behavior and get rid of perverse disincentives, but none of that has anything to do with a flat tax. A simplified progressive tax code is just as easy to understand as a simplified flat tax code.
demimondian
All flat tax proposals are bogus. None of them can differentiate between the holding of common stock in a corporation and the holding of warehouse stock in a back room — even though those things are almost always, but not always, different. If you can’t figure out how to tax the unrealized income of a share holder, then your “flat tax” is actually wildly regressive. If you must tax the retail stock of a store, then your “flat tax” is wildly regressive.
No flat tax proposal out there comes close to dealing with that catch 22.
sarah
or perhaps it shows how perverse college students are? don’t take it too hard, john.
jg
I think it shows that once people believe something its hard to convince them otherwise. Facts don’t matter.
Mr Furious
For the snarky tax analysis… BAH!
For your teaching anecdote.. LOL!
Blue Neponset
People are coming to the right conclusion about the ‘fair’/flat tax (which is it stinks) for the wrong reasons.
Isn’t that how politics works these days; the politicians and interest groups convince the unknowing masses something is good or bad in order to further their political agenda? Bush was talking about invading Iraq days after 9/11 and wouldn’t you know it, 18 months later we invaded Iraq to stop Saddam from giving Osama Bin Laden nuclear bombs to vaporize (fill in the nearest metropolitan area).
If Mr. Doughnut wants to complain about the American public being too stupid or uninterested to learn about (fill in your pet issue) he needs to take a number and go to the end of the line.
Bob In Pacifica
What was wrong with the other 40%? Hadn’t they studied physics?
Tim F
It irritates me when people sneer at progressivity with simplistic arguments about fairness and such.
Compare what fraction of a person’s income goes into inflexible expenses – essentially food, shelter and fuel – as graded by tax bracket. At the lowest income levels the ‘flexible’ fraction of a person’s income is practically zero. There was a time when an entry-level (union) job at a mill could net you a car and a house in the suburbs, but those days are gone. What hasn’t been eroded by decreased purchasing power and stagnant wages has gone to skyrocketing health care costs. At the lowest brackets you could say that any money they pay in taxes means that much less food to eat, or a doctor’s visit deferred.
It is perfectly true that middle and upper-middle bracket earners are often leveraged up to their eyeballs and beyond, but that’s a choice. Nobody forced them to buy an extra bathroom, or a second SUV, or any car at all. The staples are covered with room to spare, even if debt is eating them alive.
At the highest brackets the fraction of income that covers inflexible costs is practically zero. It seems idiotic to debate that point.
When you consider taxation as the fraction of a person’s flexible income the flat tax starts to look really, really stupid. A flat tax of 26% would be roughly revenue-neutral. That means that the lowest brackets will eat 26% less food and consume 26% less medical care. The middle brackets willl take a substantial hit as well, particularly the Hummer-driving suburbanites who’ve already leveraged themselves into a debt crisis (the GOP loves those people by the way, but that’s another story). Upper brackets, the ones which will benefit most from a flat tax, won’t care because most of their revenue comes from wealth rather than income, and because the fraction of their income which constitutes flexible expenses is practically 100%. They will not eat less food because their income is taxed at 35%, or 50%, or 65%.
A ‘flat tax’ that I could get behind would be to estimate the rough fraction of each bracket’s income that constitutes flexible expenses, and tax that at a flat rate.
Jack Roy
Before class, people were split 50-50 as to whether it was one shooter or a conspiracy. After the class, despite me driving home the no-conspiracy angle, the class was split 60-40 in favor of conspiracy.
Don’t feel bad. Read your John Zaller again, and it’ll make perfect sense.
srv
Even a revenue-neutral flat tax offers one huge advantage. Simplification. Accountants, federal employees, special interest lobbyists and their accompanying soiling of the political process would all go “poof” overnight.
That’s why it will never, ever, happen.
Existing tax schemes do benifit the rich more. Some folk are more equal than others.
What was Oswalds motive again? Anyone?
Steve S
If you do not understand this, you would do well to read Adam Smith’s “Wealth of Nations”. i.e. the bible of capitalism.
Don
I usually respond to such people with “we couldn’t peddle some weapons to Iran and keep it secret, you think there’d be no leaks about killing a president?”
RSA
I’ve never really gotten flat tax arguments.
From the referenced post: The flat tax as percentage, with exemption, beats flat fee since it only expects a portion of my labor. Not really. Flat fee, with a sufficiently high exemption, does exactly the same thing. It also relies on a simpler notion of “fairness”, which is hard to define in any case.
Unless you hold a “starve the beast” philosophy, arguing for a flat tax seems equivalent, to me, to saying that you think poor and middle class people don’t pay enough in taxes. You can argue that, but it probably won’t be too convincing. Wanting the government to spend less is a completely separate concern from how its revenues come in.
As soon as exemptions enter the picture, the flat tax becomes a step function. So in our current system we have, what, three brackets? That’s four levels (including zero) instead of two. Big deal.
RSA
All it means is that you’re less persuasive than a five-minute clip (or however long it lasted) of an Oliver Stone movie. Try Michael Moore next!
Blue Neponset
That isn’t true at all. The complicated part of the tax code isn’t the tax rates. I can list all of the tax rates on one 8 1/2 x 11 piece of paper. Determining how to calculate taxable income is the complicated part. Tax libraries are full of information regarding that.
srv
Well, most flat-tax schemes involve tossing out most deductions, so everything is income.
Blue Neponset
So self-employed people can’t deduct their office rent in a flat tax scheme? S-corp owners can’t deduct the depreciation on their machinery in a flat tax scheme? Grantor trust beneficiaries can’t deduct trustees fees in a flat tax scheme? Landlords can’t deduct the real estate taxes on their rental property in a flat tax scheme.
Deductions aka expenses aren’t limited to schedule A of the 1040.
jg
Flat tax is like the death tax. Rich people are presenting an argument designed to get the rest of us on board with reducing THEIR taxes. A bone is tossed to us but the rich win out big time.
MMM
well, research does show that students perceive you as more credible before they get to know you….
srv
They are for 90% of taxpayers.
Blue Neponset
I think you are grasping at straws.
You originally said:
I don’t think people who have only W-2 wages and itemized deductions on there 1040 are lobbying Congress. How is getting rid of the itemized deductions on Sch A and reducing the number of tax rates to one going to get rid of accountants, federal employees and special interest lobbyists?
Bob In Pacifica
I’m in my mid-fifties. Most people my age or older, people who were at least in their teens when JFK was shot, do not believe the “Oswald did it all by his lonesome” meme. I think the whole thing started out shaky and it slipped under fifty percent within a year after the murder. I find it laughable when people who are wed to the official propaganda find that a substantial percentage of people don’t. Let’s face it. People believe in criminal conspiracies because they exist. There are laws about them. A few people at the very top of government are at risk of going to jail for just such a thing right now.
I wouldn’t mind a simpler tax, but the flat tax as a rich man proposes isn’t the same as a poor man proposes. There’s all sorts of flat. Sort of like Reagan’s tax simplification. Maybe it’s another conspiracy theory but I think that Republicans, who suck on the corporate teat, tend to look out for the rich at the expense of the poor.
srv
Schedule A, Federal:
My memories are of far more federal employees being tasked towards individual taxes than business (but the money was all in the latter, which tells you something). Processing, compliance, collection – you couldn’t turn out the lights, but you’d be better off than today.
Schedule A, Accountants (and I’ll throw in tax preparers):
There wouldn’t be any, they wouldn’t be needed. Business types discussed below.
Individuals:
The most vaunted/discussed plan in modern times was from Steve Forbes (yes, it is only one of many plans, but we weren’t talking specifics). Personal deductions. No tax on savings or investments. I believe (I could be wrong) that Forbes argued real estate taxes wouldn’t be deducted becuase the flat tax rate would be so ‘reasonable’.
Business:
Forbes – investments were all immediately expensed. No depreciation (there go alot of corporate spreadsheet pounders). Flat corporate rate, only on US-based income. Losses carried forward.
Trusts:
I don’t remember.
Lobbyists:
Well, they mostly work for rich individuals, interest groups and corporations, yep. But the point of giving them a flat tax should imply them giving up armada-loads of deductions. Which is why I said it won’t work/happen…
The Disenfranchised Voter
You see John, the thing is one can think Oswald was the lone shooter and it is was bullet, but there was still government involvement. That is the position I take.
I completely agree with you about Stone fucking up the debate though. His movie was based on known falsehoods such as the “magic bullet” theory. I’m sure you know what the reason why the bullet appeared to zig-zag is because the middle seats of the 1961 Lincoln limo were six inches further insides than the back seats.
With that said, I do think Oswald was the guy who killed Kennedy, I just think the government–specifically the CIA with the help of LBJ–was involved.
The Disenfranchised Voter
it was one* bullet
Kimmitt
We can have simplification without a flat tax; there’s no real difference between pulling out a calculator and pulling out a rate sheet. The devil’s in the details, not the marginal rate.
Kimmitt
Also, that’s a weird interpretation of what I wrote — what I was saying is that the reason why questions of how we raise money are so important is that we need to raise a lot of money to fund the kind of government we have decided as a polity to have.
I mean, I say a lot of stupid things, so I feel kind of put upon to be quoted as saying something stupid I didn’t say.
Blue Neponset
Srv,
As long as individuals, business, trusts, etc. are required to file tax returns there will be accountants, lobbyists, and government employees. A flat tax might make the tax filings of those who only earn wages easier but it won’t matter at all to those who have to report the income and expenses of a business or trust. It also won’t affect the tax filings of deferred compensation plans or exempt organizations. In other words, a flat tax might make a simple return simpler but it won’t change the reporting burden of those who do not have simple returns.
Tony
Kimmit,
I did not intend to misquote you. I obviously read it in the context I used, which seemed reasonable given that it reads as a blanket, matter-of-fact statement rather than as a supportive statement for the government size we have now. I apologize that I used it in a context you did not intend. Obviously I don’t agree with the way you meant it to be read. I’ll update my entry to reflect that, so that you don’t feel put upon.
Kimmitt
Don’t get me wrong — I do think that the Federal government’s about the right size. It’s just that this has little to do with the fact that because it is its current size, questions of revenue generation are very important. The former is, of course, debatable. The latter really isn’t.