Thursday, October 16, 2008

Taxing the Rich

This is a reply to Steve at Undeception, where we have been having a conversation about the merits of taxing the rich. I am posting it here because I wanted to include this graph that I can't include on his comment section.

Steve, via Kevin Drum, here is a WSJ graph showing the growing gap between GDP growth and median wages over the last 8 years. Contrary to your assertion about capitalism:
What it does promise is a return commensurate with our efforts and ingenuity - and it does this without exception (the proverbial “win-win” transaction) unless the state corners the worker in an alley and takes a cut of his earnings.
It isn't the state that has been artificially holding down middle class wages through any regressive tax policy, it's the magical market forces. Some of it is the growing cost of healthcare. Much is likely the effect of trade and technology. In effect the global economy - or more directly corporations looking either the cheapest or most highly skilled labor - is yanking people around and workers can't keep up. They don't live in the right place or they don't have the right education. It is easy to say that if they just made enough effort and had enough ingenuity this wouldn't be happening but you are essentially talking about the whole middle class in America here, or what used to be the middle class.

Meanwhile, during the last decade the income of the top 1% of Americans has seen their incomes continue to rise virtually unchecked. Are they working harder? Are they more ingenious. Maybe.

But my point is that government has a role here to use tax policy as a means of leveling the playing field. The rich should be paying more - even if we had a flat tax they would be paying more in absolute terms. But I have no problem with setting marginal tax rates higher for the rich and using that money to subsidize healthcare for the poor and/or make strategic investments in infrastructure, technology, and training to create opportunities for jobs here. I am not talking about taking away land and moving people onto collectives or even taxing the rich at rates that shut down the incentive to invest. Everyone making money pays taxes. The rich can and should pay their fair share.

You say:
When businesses grow, jobs are created, and wealth is distributed in a way that is just: by everyone’s explicit choice.
You seem to be forgetting about that that human nature you were talking about in your initial reply to James McGrath. There is never anything "just" about the way wealth is distributed. For one thing, people are born into impoverished areas where choices made by others long before they were born make their "shake" at the American dream something less than fair. On the other hand lots of people are born wealthy and are given every advantage to make a go of it. Then there are those who cheat - think Enron since they happened to get caught. Then there is the government which, often at the behest of wealthy corporations and individuals, subsidizes and protects farms and industries and creates unfair and unjust systems. The list of the ways wealth is not distributed in a just way is long, very long.

Like it or not I think we are in for an extended period of extensive government involvement and investment in the free market. My hope is that the government will use its moment of extra influence to take care of a few problems that are plaguing our economy and making the country more unjust; healthcare in particular. We are already taking care of seniors and veterans and certain Senators who extol the benefits of a free market healthcare system even though they have lived their entire adult lives being taken care of by the government. The time has come to do with healthcare what Roosevelt did with Social Security. I think it is the Christian thing to do!

1 comment:

Stephen Douglas said...

Jay, I've commented on my site in response to your post/comment. I will post it here, but I'm sure you'll understand why hereafter I'll leave the discussion to the comments of my original post so I don't have to keep going back and forth.

I appreciate your arguments, Jay, but that chart and the statistics associated with it say nothing about the ability of the free market to work on everyone's behalf. As I said before (and as you argue a little further down), government's sticky hands giving special breaks to certain industries and businesses have mucked things up royally, but it's laughable to claim this as a result of some fictitious rise in the freedom of the markets over the past 8 years. But come on - the subprime mortgage problems have no one to blame but socially conscious activists thinking that the government can and should help out the less wealthy, regardless of the ability or inability of the less wealthy to be responsible for the handouts they're given.

There is never anything “just” about the way wealth is distributed. For one thing, people are born into impoverished areas where choices made by others long before they were born make their “shake” at the American dream something less than fair.

I didn't say wealth is always distributed well: I said that a free market exchange is mutually beneficial - quite a different thing. Only those living in a drug-addled haze could think that we'll ever live in a world that has all haves and no have-nots. "The poor you will always have with you." So of course there are people who start off as have-nots. I challenge you to tell me a story of one person who worked hard, made good decisions, and did not end up - years later, maybe - in a much better position. In every case in which that happened, it is also noted as in Josh's case above that whether or not fantastic wealth (guaranteed to no one) was eventually acquired, their posterity was put in a better starting position. However, we have multiple generations of people on welfare, bequeathing that status of life to their children - why? Because inasmuch as they vote, they vote in a party that panders to their victim mentality and tells them, "Nope. Can't do it. Government's gotta do it for you." The Church should be in every one of those communities, urging and empowering kids from a young age to plan wisely for their future.

Then there is the government which, often at the behest of wealthy corporations and individuals, subsidizes and protects farms and industries and creates unfair and unjust systems. The list of the ways wealth is not distributed in a just way is long, very long.

Of course - but as you just said, it's not the free market, but the government's involvement that causes the problem. Why in the world do you want the government to be more involved again?

Socialized healthcare is always a disaster. Privatized healthcare could probably do it after a few years, but hand in hand with the Church bellying up to the problem rather than passing the buck to the police power of government, it's a sure bet.