Dishonest Rhetoric to Sell Tax Cut

Great Debates
141

jshore:

Concerning the shades of gray, isn’t our government supposed to be blind to these things in terms of our personal freedoms. We don’t distribute in terms of religion, race, or political affinity (or at least we’re not supposed to,) isn’t our government also supposed to be blind in terms of how we choose to accumulate property?

It seems to me that on the poverty side, government needs to ensure education, opportunity, and the minimums of humane survival, and on the wealth side it’s supposed to ensure fair trade, and that monopolies don’t exist, and that abuses of wealth against the commons do not occur. Within those two extremes and within the rule of law, how is the government’s business to say “this guy has too much money, and this other guy has too little?”

I agree that the person who is doing better be taxed correspondingly, but not out of a desire to redistribute, but simply because his success carries greater responsibilities, and because a burden needs to be carried by those who can.

However, when for whatever reason you decide to lighten a burden, you lighten it where it is carried.

142

Well, I gotta agree there. We aint found a gentlemun round here since, well, since tomndebb’s last post.

This fight here 'd be a knucklebuster.

(Can you two cut the hijacks down a few posts?)

143

I’ve considered that. It seems that you have accorded me the distinction of “gentlemen” in your eyes by having chalenged me, so, whether or not I deserve it, my qualification is not in doubt.

I am wondering if you can claim the distinction yourself. Other issues aside, by challenging and dictating terms you have violated your honor as a gentleman (if indeed you can make the claim.) That in itself may be enough to strip you of the distinction.

Then too is the matter that a gentleman cannot withdraw a challenge once made. To attempt to do so may mean that one is not a gentlemen, as a challenge is an obligation, and it is binding.

Quite frankly, I am not sure what status honor dictates that I accord you in this matter, and am unsure how to proceed.

I will need to consult with my people.

144

Well, in a word, NO. Not just this government, but all governments must distinguish shades of gray. Black and white inflexibility is for arcane religious orders. Would you really want a government that judged all policy decisions in terms of absolute dualities of principle instead of intended outcome?

I’m not sure anyone in this thread has made the assertion that it is. However, it’s a legitimate part of the gov’t’s business to provide those social services which its citizens demand, and to fund those services in a way which neither penalizes economic success nor protects it at the cost of those most in need, and which neither penalizes poverty nor perpetuates it. This is a fine balancing act, which cannot be accomplished by a government blind to shades of gray.

145

Xeno:

(You really are having quite a good today)

Within limits, of course. The government may not violate our rights no matter how much the people demand it. Is not redistributing our property a violation.

Of course there are shades of gray, and decisions must be made that have these kind of effects. Making unavoidable choices among shades of gray is one thing. Choosing a proactively redistributive approach is another.

Unless I am mistaken that seems to be what Jshore is suggesting.

146

Pistols at dawn?

Oh, and the Bush tax cut is regressive. You want to help the poor? Cut the liquor, sales, gas, and cigarette taxes.

147

“The government may not violate our rights no matter how much the people demand it. Is not redistributing our property a violation[?]”

No, I think it’s an unavoidable consequence of providing social welfare. Now, we can disagree regarding the amount and focus of social programs, but unless you’ve become a strict libertarian (a legitimate political philosophy, but not one I’ve seen you endorse), I think you agree that there’s a necessity for some governmental social welfare.

[one last comment on the elucidator v Scylla imbroglio]

Look, I’m no sort of paragon of civil discourse, but neither of you boys has perfumed sleeves or carries a snuff case. You do have a real and fundamental dispute, not based on casual insults or some system of genteel “honor”, but on different ideas of honest debate. If you don’t mind, could you stop the cutesy stuff? You’ve pissed on each other’s shoes deliberately; either back off and move on, as you both have before, or take it outside, but please don’t trivialize it.

[end of comment and last mention I’ll make of it here]

148

Both needed to be cut. If you want an economy that grows, it is stupid to tax investment. Taxing capital gains means people are less likely to invest their money back into production, and more likely to spend it on luxuries. Taxing dividends moves capital away from solid, growth-creating blue chip stocks and moves it towards speculative stocks. Absent these taxes, money will flow to where it does the most good, and the proper balance will be struck between risk and reward. This makes the economy healthier and helps prevent the wild swings that come from speculative bubbles.

Again, this is a separate question from whether or not the poor should be lifted up by the government. I would prefer to discuss them separately, to avoid clouding the issue.

Remember, I’m Canadian. So I have no personal axe to grind here. I’m more interested in the theory of taxation and how it can hinder growth. And we all, rich and poor, benefit from an economy that grows.

I used to be in favor of a flat tax. Now, I believe that some progressivity is needed, for the simple reason that it’s the only way to raise enough money to pay for the government we have. Also, I think it’s reasonable to apply utility theory here - the marginal utility of an extra dollar is much greater for the poor than the rich. If you could come up with a flat ‘utility curve’, the tax RATE curve would be progressive.

In my quest for the ‘perfect’ tax system, I would start by getting rid of all of the taxes that hinder growth, and I would pay for them by getting rid of government programs that target specific industries. When governments tax business then give the money back to business in the form of grants, all they do is add distortions to the marketplace. The unspoken assumption is that a bunch of politicians who may not have any experience in industry are better allocators of resources than the industries themselves.

So let’s leave the poor out of the equation totally for a minute, and look at some revenue-neutral ways to do this. First, cut subsidies for business across the board. Whatever revenue comes from this goes directly back to business in the form of tax cuts, making sure that they do not favor one industry over another.

What annoys me no end, though, is that Democrats ALWAYS interject class warfare arguments and try to use every single change to the tax system to try and increase progressivity. If you tried to do what I suggest, Democrats would fight cuts to the subsidies (they like pork too), and if you still managed to pass the cuts, they’d fight the tax cut on the dubious theory that it’s a ‘handout’ to the rich to not take their money from them in the first place.

Anyway, I digress. Another area where we can reclaim revenue and get rid of distortions of taxes is to get rid of the myriad loopholes that businesses use to lower their taxes. Democrats scream about businesses paying ‘no tax’, but the dirty secret here is that they are just as responsible for those loopholes as Republicans are, because they are used to buy votes and to push industry in a direction they think it should go. So you get tax breaks for the ‘right’ kinds of investments. Thank you, but I’d rather let the marketplace decide what the ‘right’ kind of investment is. So kill the loopholes, and use the revenue generated from that to also eliminate targeted taxes or give businesses another tax cut across the board.

Frankly, I don’t think the tax structure in the U.S. is too progressive, or at least not by very much. But it’s hard to make it more progressive than it is, because the poor already pay no tax. So more progressivity translates into just raising taxes on the rich in order to give subsidies to the poor. And that’s a bad idea. The philosophical position I have arrived at says that our society is rich enough that no one need starve, nor go without shelter or basic medical care. But I do not believe that the poor need to be subsidized. Provide means-tested social programs. Strengthen medicaid, and expand coverage to the ‘working poor’ if you want. And if you want to help the poor more, I would much rather see aid in the form of job training credits, subsidized tuition, etc. In other words, let’s help poor people become wealthy on their own, rather than subsidizing them to make being poor a little less odious.

Again, there’s the basic principle that if you subsidize something, you get more of it. If you tax it, you get less. By giving poor people subsidies, you wind up with more, slightly less poor people. So let’s not do that. Let’s build a really good, strong safety net, and focus on providing opportunity.

149

Xeno:

I agree.

150

ElvisL1ves said:

I think you have a fundamental misunderstanding about the nature of wealth, if you think that just buying stuff is a ‘wealth generating activity’. It’s not. It’s a wealth CONSUMING activity.

The wealth of society is measured by its aggregate goods and services, and by its ability to crank out more of the same. Money itself isn’t wealth. Economic growth doesn’t come from buying stuff - the ability to buy more stuff is the result of economic growth. Now, you can borrow from the future if you want to enable people to buy a little more stuff now, but that’s ‘generating wealth’ in the same way that I could ‘generate wealth’ for my family by taking out a loan to buy a new car.

Now, if you tax the economy by 9 billion dollars, and then use the money to write a check for $300 to everyone, what have you accomplished?

  1. You have removed money from where it naturally wants to be, and re-distributed it. You haven’t created any wealth. All you’ve done is shuffle the books.

  2. You can temporarily stimulate consumption, which will temporarily increase production, or at least use up excess inventory. But when you inject money into the economy in order to stimulate production, what happens is that you get a temporary jump in consumption, but if you borrowed the money you’ll have to pay it back down the road, with interest. And because the markets know this, they react immediately by boosting long term interest rates among other things. This limits the amount of real stimulus you get, and also that stimulus comes at the expense of an added contraction in the future when you pay the money back.

Note that this is among the worst of all liberal ideas. It used to be that liberals were for borrowing money in order to pay for education and the like, on the theory that subsidizing education was an investment that would help pay back the loan. Now they just want to borrow money from their kids in order to throw a big party so everyone will feel a little better.

  1. You distort prices. This is a biggie, and it’s almost NEVER talked about in the popular press. If I’m a manufacturer of shoes, and demand goes up, it will stimulate me to make more shoes. But how am I to know if this is ‘real’ demand, or whether it’s a bubble caused by a one-time injection of money into the economy? Answer: I can’t. I don’t know if everyone is spending their $300 on shoes, causing a bubble, or if they spent it on something else and the demand for my shoes is up because people like my new shoe design, or because there is a real shortage of shoes. So I am much more likely to make poor decisions around my shoe production. That cash injection is like a blast of static in the information flow of the economy.

So the net effect of one-time cash injections is to gain a small, temporary increase in production, at the expense of long-term health of the economy. I might favor such an injection in rare circumstances as an emergency measure, but it’s just stupid policy to do it when the economy is already recovering on its own.

The difference between this and Bush’s plan is that Bush’s plan involves a PERMANENT re-structuring of the economy. And it’s a re-structuring that will, in the long term, increase growth which will help everyone. But it’s not a stimulus, because the results of improved efficiency take a long time to show up in a big way. But even if you increase real growth by .5% of GDP, that starts to become real money as you compound it through the years. It’s good, sound, rational long-term economy policy.

151

If you want an economy that grows it’s stupid to tax anything that contributes to growth. Depending on circumstances, it can be far more harmful to growth to tax workers than capital. Both are needed to be operating efficiently in order to have a robust economy.

And yet, we must have some taxes, or we will have no economy at all. The cost of goverment is part of the cost of doing business, you can’t put that whole cost on labor without damaging the efficiency of the system.

Capital without labor is just so much paper. It can’t grow until it’s put in the hands of someone willing to do actual value-added work. It is this need to put capital in the hands of those who will work with it that makes free flowing capital necessary to a robust economy. But it’s even more important to have educated, motivated, and healthy labor than it is to have freely moving capital.

Capital can give a nice multiplier effect to the productivity of labor, but even without capital, labor will still produce something. Without labor, other the other hand. Capital will produce nothing.

It’s absolutely absurd to say that lowering capital gains taxes will always result in a net gain in a real economy.

The trick is to balance taxes so that they do the least harm to the economy while still taking in enough money to pay for government. Reducing taxes only on capital is hardly likely to do that. Chances are it will make things worse rather than better. It either means that we have to raise taxes on something else (most likely on individual productivity) or we have to bill the cost of growth to our children. (which seems to be Bush’s favored plan).

Stupid isn’t taxing investment. Stupid is thinking that you can talk about taxes on dividends or capital gains in isolation from other taxes and still come up with meaningful answers.

152

I don’t really understand this last statement. It seems like a statement that the total tax structure at the moment is too progressive, otherwise why would you make it less so? You might think the current structure is too progressive at the moment and thus want to make it less so, but I don’t see why you would see not doing this as being a black-and-white issue as you seem to. You would try to argue why this is a good thing rather than saying it is impossible to cut any taxes on the poor or not giving the money back to the rich is confiscatory or other such empty rhetoric. We have a current tax structure and we have choice to make as to how we cut the taxes or whether we use the money instead to spend or invest or to pay down debt or whatever. And, one choice has be justified over another.

I think you look at the tax structure and the society as a whole and ask questions about what taxes should be lowered in order to best grow the economy and, in particular, if it seems that the economy is working much better for some people than for other people, you try to figure out how to incorporate policies to make it work better for those people. I don’t see cutting taxes on the rich as doing that. I see cutting taxes on middle and lower income people as doing that more. I also see investing in programs to help education and other sorts of investment in people as doing this. I see giving tax breaks to wealthy people as mainly just giving money to the wealthy. Sure, it will have some stimulative effect but probably less than either of those other two options.

153

Jshore:

There’s a couple of reasons, Jshore. As Feynmann once said, there is a preferred perspective for looking at any given problem.

You look at the economy, and let’s say we agree that some kind of a tax cut for stimulus is needed. You say “Look at the people who are hurting, who are not doing well. We need to adjust the system for them. They need a tax cut much more than people who are doing well.”

This is not necessarily the preferred perspective. In fact, I am sure that it is not.

There are two catastrophically large problems with it.

First, is the assumption that the people you wish to target for a cut are doing badly because the system is flawed, and that a correction in the system will remedy or help remedy the flaw. That is a huge assumption. Likely they are not doing well for a variety of reasons.

We can assume that in any given system that there are going to be people who are just not going to do particularly well for reasons that have nothing to do with the system. It doesn’t matter what you do for them, they will mess it up. There will also be people who are down temporarily through hardship, or bad luck. There will be people with chronic problems that prevent them from doing well, sociopathy and the like. You will have people fighting addictions. You will have people that are just in a bad place in a bad time. You will have people who simply don’t care, and you will have people that simply feel comfortable where they are.

You are not going to solve the problems of these people by giving them a tax rebate.

But let’s say you go further and have identified a trend where the rich are getting richer and the poor are getting poorer over some period of time, and that this can’t be explained in terms of people in the margins.

This still doesn’t mean that a tax cut or aid will help. All you’ve done is identified a trend. You have not identified its cause, or that the trend represents a problem that needs to be addressed, or that it can be addressed through taxation. The trend may be temporary or self-correcting, it may represent a reversion to a mean, or it may be part of some sector rotation, or it may simply be a random walk.

In fact, the problem may be that the tax burdens are too light and the aid is too much at the lower end, and that people are finding themselves very comfortable and in a desirable position at the lower nonparticipatory end of the spectrum. If that’s the problem (and I’m not saying it is,) than to lower the taxes or increase aid is exactly the wrong thing to do. It will simply excacerbate the problem.

  1. The second flaw is that any time you are working on a system, or a problem within a system, you need to constantly remind yourself of what it is you are solving for with your adjustments, what the system is supposed to do.

If you are increasing tax burdens and making it more difficult for successful people, and you are easing burdens and making it more comfortable for people at the lower end of the system, than what you are doing, is solving for failure.

By trying to help, you are actually hurting. The goal of the system is to solve for success, to have as many people doing well as is possible, and as few doing poorly as is possible.

Those are the problems.

The most compassionate solutions feel best. They make sense on a visceral level. They produce immediate tangible benefits.

That doesn’t mean that we should do it, though.

We need a perspective that will point us to the solutions that produce the best results in terms of the system and the solution we are solving for. This does not mean that we abandon compassion. It simply means that we are wary of it.
Assuming that we are in this wary perspective, unwilling to make assumptions, and cautious about unintended consequences, than this means we have to be extremely reluctant and watchful of doing anything that encourages failure within the system or punishes success.

This last is an inherent contradiction and one we have to be very careful of because it is off the success that the system feeds itself, that growth and revenues are generated, that the taxes are derived that enable the system to exist in the first place. The burden must lie on the successful, but the heavier burden we place the more we discourage success.

So, when making adjustments to the system, our default position needs to be one of encouraging success and discouraging failure. We need to be suspicious of any action that does the opposite.

Complex systems are tricky. Sometimes there is a lynchpin solution to a problem: That is, the system can be running very badly and a tiny adjustment can fix the whole thing in a cascade reaction.

More often though systems tend to remain in a state of profound equilibrium. That means that they are resistant to change. If you attempt to change them, more often than not you end up engaging in a behavior known as “feeding the hole.” That should be a pretty self-explanatory term, and hopefully I don’t need to tell you why “feeding the hole,” is a really bad idea from a systems standpoint.

So, the preferred perspective for making macro changes to the system is the one that benefits the system by increasing efficiency. We need to be extremely reluctant to engage in behavior from a compassionate perspective, or to make changes to the system that alter its goals or what we are solving for.

We have to be this way, because the goal of our system is the most compassionate goal possible, that is simply maximum success with minimum burden for all the components.

Not only is the compassionate viewpoint not the preferred viewpoint for making changes. In the current environment we can be almost completely sure that it is going to be exactly wrong.

It is going to be wrong because we’ve altered the system over the last 40 years by making compassionate decisions. We are now solving for failure, and no longer solving for success.

I say this last not as hyperbole, or idle opinion, but as provable fact. The growing ranks of poverty and inequality prove what the system is solving for.

Now I am not a hateful man, and I don’t want to screw the poor or cause people pain, and I think liberals as a whole are dismissive of this kind of thinking as self-serving.

It is very easy to say that Scylla is a conservative and he wishes to give tax breaks to the rich and screw the poor because he is selfish and self-interested, and he is devoid of compassion. On the other hand you care about suffering and you want to help people who have it tough, and you are being compassionate while I am not.

So, on the surface it is very easy for someone with a compassionate perspective to be dismissive of what I am saying, to look down upon me, and discount it simply because I am saying it.

It’s a stereotype. Conservatives are selfish, and liberals care. It may even be true in many instances.

But consider the ramifications if I am correct. There is no doubt that managing the system from a primarily compassionate standpoint will ultimately produce growing failure within the system.

Consider the possibility that we may be doing so now. Ask what we are solving for from a systems standpoint, what we are producing. Look at changes in the system from that viewpoint.

Do that, and become suspicious and distrustful of the easy and compassionate choice. It loads the system to produce the most uncompassionate result. Failure.

154

Well, these are all very interesting conjectures. Absent any proof, they remain interesting conjectures. It also may be that the overproduction of musical carousels is at the root of the problem. I have, of course, no proof that this is the case. But it is an interesting conjecture.

It may also be that compassion and empathy are to be considered suspect. It may also be that those represent the most noble and most worthy of human motivations. The people who taught me Sunday School held the latter position, and I agree with them. Of course, I can’t prove that.

We are given to understand that we must not punish the successful. It may be so. It may be that in our haste to provide a decent life for the least of us, and for thier children, that we will deprive someone of a flashy geegaw or some other display of thier opulence. Perhaps it is a personal failing, that my compassion is centered on the “have not” rather than on the “have shitloads, but want more”. But, once again, no proof is offered, beyond a confident assertion that it is so.

Of course, any concept of “punishment” needs to be relative. If I take a thousand dollars from a man who has a thousand and one, I have ruined him. The same amount from a man with 10 million is just so much pocket change. The suffering of the rich is an abstraction, the suffering of the poor, a cold fact. A very cold fact.

Being a simple man, and unsophisticated in the intricacies of economic philosophy, it seems to me that the essential problem of the poor is a lack of money. Hence, it follows that providing them with money, or at least amerliorating the awful consequences of that neediness, is a direct and effective approach.

It has been suggested that this is not the case. But, of course, no proof is offered.

155

Beyond the moral equations of social welfare, there is also the question of broad economic stimulus, which you’ll all remember was the justification for the dividend tax cut (y’all remember Alice? This is a song about Alice…).

I think Scylla has assigned an assumption to jshore (#1 in Scylla’s post above) that he has not made. Rather than focusing on tax cuts for the less wealthy due to any “flaw in the system” or because he thinks helping those who are not “doing well” will fix system flaws, jshore has proposed that temporary (1 or more years) income tax cuts targetted to credit those at medium to low income levels will put more money more quickly into our economy than will the repeal of taxes on dividends. Couple those cuts with government spending on programs which benefit people in those same brackets, or benefit employers of those people, or help the states benefit those groups, and you’ve got a real economic stimulus package. That is the system standpoint on which jshore’s assertion seems based.

As far as progressive taxation “discouraging success”, all I can say is this is an assertion for which some evidence is necessary. I totally agree that there is a general level of taxation above which, at minimum honesty of income reporting and/or participation in the country’s economy are discouraged. But I think that’s quite a bit higher than our present highest bracket. (Of course, I welcome objective evidence.)

156

As to the original issue of honesty and dishonesty, I import the opinion of Molly Ivins. A couple of passages:

"Speaking of damned lies and statistics, one of the little games being played in Washington is that the Republicans want to switch to Enron accounting on the economy.

They’re leaning on both the Congressional Budget Office (CBO) and the Joint Committee on Taxation to change the way they make their economic estimates.

According to the R’s, “static scoring” – as opposed to your “dynamic scoring” – overestimates the cost of tax cuts by ignoring their role in boosting economic growth. Why, claim the R’s, tax cuts pay for themselves!"

http://www.dfw.com/mld/startelegram/news/columnists/molly_ivins/4931133.htm.

Everyone should read Molly Ivins. Its good for you, it builds character. Oh, and send her money. Beer and Bar-B-Q aint cheap, you know.

157

Xeno:

I would agree that are current taxation system has not yet successfully discouraged financial success. That’s hardly the point. Each step that makes it less attractive, makes it less attractive.

More importantly, we are actively encouraging failure. A good example of this may in fact be Minnesota. There was a report on Dateline not too terribly long ago, who’s gist was basically that Minnesota, Wisconson and, I think, Michigan basically had a pretty sweet deal for welfare. That is, they had a pretty progressive package. According to the program, the fact was that a lot of people in troubled circumstances were moving to these states to take advantage of the programs.

I think the lady described in the article you cited to me a page back falls into this category.

It seems to me a pretty basic assumption. Create a favorable environment for a thing, and that thing will thrive.

Now Minnesota has a big homeless and poverty problem.

Is this in any way a surprise, or does it follow logically?

elucidator:

This kind of thinking is why you are so consistently wrong about these things. It’s like saying the essential problem of smallpox is a bad skin condition.

Throwing money at poverty is feeding the hole. It’s putting a band-aid on a massive head wound. it’s actually worse than that because it perpetuates the problems.

How many trillions of dollars have we thrown at poverty over the last 40 years?

And the problem just gets worse.

Throwing money at poverty is trying to put out a fire with gasoline. It’s like a fiscal Boyle’s Law. Poverty will expand to consume any amount of money you throw at it.

No. Gasoline to the fire. It makes you feel good though, so don’t bother thinking.

As for your link: It doesn’t work.

Calling dynamic accounting, Enron accounting is disingenuous and misleading at best.

Personally, I have reservations about the government using that standard.

There is little question that well-executed and prudent dynamic accounting is much more accurate, meaningful and useful than static accounting. It presents a truer model from which judgements can be made.

It is incredibly useful and has direct benefits, for example the securitization of the mortgage markets which yields both a sorely needed conservative income source to investors and lower more competitive mortgage rates to homeowners.
The more powerful the tool the more dangerous it is if misused. Dynamic accounting can be a very powerful tool.

158

Scylla, did you read that entire article I cited and still come away thinking that Minnesota welfare is a “sweet deal”? I ask, because I’m a bit puzzled about that characterization. I while ago, you were pretty concerned about people working all day and then having to sleep out in the cold. Now, it’s some sort of inducement to stay poor?

159

xeno:

Let me ask you seriously, with no hint of irony, rhetoric, or sarcasm.

Are you truly missing my point?

160

Once again, as before, conservative theory offered as fact. Beyond your firm assertion that this is so, nothing is offered in evidence.

And, again as usual, with insult offered in place of evidence.

Cite?

Your defense of “dynamic” accounting is, no doubt, valid. I haven’t much expertise in these matters, being naive enough to believe that “audit committees” actually have something to do with audits. Ms. Ivins point, which seems to have escaped unscathed, is that it is at best optimistic of the Pubbies to presume the efficacy of thier program in advance. Rather like upgrading a patients condition from grave to excellent in advance of the application of an unproven therapy.