Help me formulate egalitarian legislation

Great Debates
41

lemartel:
You say that the increased price of unskilled labor will decrease the demand. This may be true to some small extent, but I believe the effect will be insubstantial for several reasons:
(1) The tax only affects profits, which means that struggling companies will not have to pay any increased labor costs;
(2) Many jobs will not just go away. McDonalds will not suddenly hire PhDs to serve french fries;
(3) The tax may actually result in lowering the cost of unskilled labor. Unions and minimum wage laws would become almost obsolete since profitable companies would have an incentive to share the wealth, and unprofitable companies could pay market rates until they are profitable. It is hard to imagine workers staging a successful strike when a company is about to file for bankruptcy.

** Sneevil**:
In your reply to ** 2sense** you suggested that “efficiency” and “simplicity” should be the main goal of tax legislation. You suggested a national sales tax as a solution. There are just two problems with that: It is a highly regressive tax and it is unconstitutional. Generally, here in the USA, we don’t like to make the poor shoulder a higher tax rate than the rich. A quick search of “progressive regressive tax” came up with this link if you are interested. As to the flat tax suggestion, our man Cecil has already dealt with it here.. Face it, taxes are a method of pushing the government’s agenda. This is not wrong. In fact, this is the role of government. Whatever you believe the role of government to be (e.g., take care of the sick), it can attempt to accomplish its role through taxation (e.g., allow a tax deduction for large medical expenses. NOTE: this is, in fact, a part of the tax code). There is no rational reason to put blinders on and say the sole purpose of tax is to raise money.

In a later post, ** Sneevil** clarified his point by saying:
“If a representative legislative body, be it Federal, state, or local, wishes to pass a law to control behavior, it should do so directly, rather than usurp and expand an existing power for a different purpose. The practice is simply dishonest, IMO.”
Once again, I have to disagree. If the government wanted to encourage home ownership, what direct legislation would be appropriate? It seems a home mortgage deduction is a pretty direct way to accomplish that goal. Also, I disagree with your characterization of the tobacco lawsuits as being an example of the same type of “government overreaching.” Tax laws are written and passed by congress and signed into law by the president. Litigation begins with one attorney general filing suit. You simply can’t compare the two.

labdude
Thanks for your reply, but I’ve always thought that the minimum wage was too broad. It affected everyone, regardless of success. So far, it’s the best way to accomplish the goals of allowing American workers to have a marginally livable salary, but I think it can be improved upon. That’s why I’m suggesting tying a worker’s wage with the success of a company.

** The Ryan**
You are just not getting it. If someone else would like me to elaborate on a question he has, I will, but I get the feeling you are the only one who is totally missing the boat.

42

lemartel:
You say that the increased price of unskilled labor will decrease the demand. This may be true to some small extent, but I believe the effect will be insubstantial for several reasons:
(1) The tax only affects profits, which means that struggling companies will not have to pay any increased labor costs;
(2) Many jobs will not just go away. McDonalds will not suddenly hire PhDs to serve french fries;
(3) The tax may actually result in lowering the cost of unskilled labor. Unions and minimum wage laws would become almost obsolete since profitable companies would have an incentive to share the wealth, and unprofitable companies could pay market rates until they are profitable. It is hard to imagine workers staging a successful strike when a company is about to file for bankruptcy.

** Sneevil**:
In your reply to ** 2sense** you suggested that “efficiency” and “simplicity” should be the main goal of tax legislation. You suggested a national sales tax as a solution. There are just two problems with that: It is a highly regressive tax and it is unconstitutional. Generally, here in the USA, we don’t like to make the poor shoulder a higher tax rate than the rich. A quick search of “progressive regressive tax” came up with this link if you are interested. As to the flat tax suggestion, our man Cecil has already dealt with it here.. Face it, taxes are a method of pushing the government’s agenda. This is not wrong. In fact, this is the role of government. Whatever you believe the role of government to be (e.g., take care of the sick), it can attempt to accomplish its role through taxation (e.g., allow a tax deduction for large medical expenses. NOTE: this is, in fact, a part of the tax code). There is no rational reason to put blinders on and say the sole purpose of tax is to raise money.

In a later post, ** Sneevil** clarified his point by saying:
“If a representative legislative body, be it Federal, state, or local, wishes to pass a law to control behavior, it should do so directly, rather than usurp and expand an existing power for a different purpose. The practice is simply dishonest, IMO.”
Once again, I have to disagree. If the government wanted to encourage home ownership, what direct legislation would be appropriate? It seems a home mortgage deduction is a pretty direct way to accomplish that goal. Also, I disagree with your characterization of the tobacco lawsuits as being an example of the same type of “government overreaching.” Tax laws are written and passed by congress and signed into law by the president. Litigation begins with one attorney general filing suit. You simply can’t compare the two.

labdude
Thanks for your reply, but I’ve always thought that the minimum wage was too broad. It affected everyone, regardless of success. So far, it’s the best way to accomplish the goals of allowing American workers to have a marginally livable salary, but I think it can be improved upon. That’s why I’m suggesting tying a worker’s wage with the success of a company.

** The Ryan**
You are just not getting it. If someone else would like me to elaborate on a question he has, I will, but I get the feeling you are the only one who is totally missing the boat.

43

If you don’t view unequal salaries as being somewhat unethical, why are you trying to fix it with a tax? The fact is that you do see an injustice, and Rhythmdvl was legitimately asking what was so unethical about the situation he described.

Let me just say that if this legislation were ever really proposed, I would take a leave of absence from my job so that I could campaign against it. I feel that strongly about it.

Also, you never answered my earlier question - do you think Tom Cruise’s salary should be limited by what the kid scooping popcorn makes? Or that a pro basketball player (I’m currently not able to name even a single one of them off the top of my head) should have his income limited by what the people who sweep the bleachers make?

44

CurtC
Very fair post. Thank you for giving me another opportunity to respond.

I admit it: I have a hard time expressing my exact objection to a system that allows investors and top executives to make millions while the majority of the company does not make a living wage. It just seems like exploitation. In my defense, however, I have been able to identify numerous other benefits the system would generate.

  • A possible strengthening of the economy since more people will have more money (less concentration of wealth).
  • A better solution than unions and minimum wage laws. (I am not suggesting these mechanisms be immediately abolished, just that they will become unnecessary).
  • A way to correct market imperfections when it comes to (1) top executive wages and (2) minimum wage workers.

Furthermore, since the system is gradual, no line-drawing needs to be made. In some situations, a corporation has an incentive to have a 24% tax, in others it has an incentive to have a 26% tax.

As to your other point about the entertainment industry, it may very well be that the entertainment industry is sui generis. I don’t know enough about it to comment intelligently as to who the lowest paid workers are, what the profits are, and what type of contracts the highest paid workers negotiate. Do movie production studios own movie theaters? Are cameramen paid under a different structure than actors (annually as opposed to per movie)? How much does an actor work compared to the “best boy grip” (I have no idea what a best boy grip is). I just don’t know enough about how a movie is made or how a sports team is run. Certainly, if an athelete trains for 60 hours/week, and the concession stand guy only works 4 hours/week, such a disparity must be taken into account.

45

Seeing as how you have made absolutely no attempt to explain your objection to me, why would I get it? Simply ignoring anyone who brings up a point you don’t want to deal with is hardly a proper form of debate. Do you have anything intelligent to contribute, or should I just ignorte you from now on?

46

The problem with this is that a business with a very low profit margin would stay in business, and continue to pay its workers a below living wage. On of the basic ideas behind the minimum wage is that if can’t afford to pay your employes at least this much the you should go out of business. This decreases competition in the industry until profits are at least enough to pay minumum wage. There are/were many businesses that pay employes very little because the margins are small. eg some agriculture/textiles industries

michael

47

So if a business breaks itself up into divisions doing different parts of the job, would you treat each one separately? A company could spin off a new company to perform the low-wage functions. I know you accounted for this in the OP, but movie studios do basically the same thing. So let’s put some hypothetical numbers along with the example.

Let’s say Tom Cruise makes one movie a year. He works 60-hour weeks for three months (750 hours total), and makes $20 million. Now the guy who scrubs the toilets at the studio works 40 hours a week, for 2000 hours a year, and makes $12000. There’s a pay difference of 1667x, not even accounting for the fewer hours worked by Mr. Cruise.

Of course, this couldn’t happen in your dream world - your tax laws would either limit Mr. Cruise’s fee to much less than $1 million, or raise the toilet scrubber’s pay to much greater than $200k per year, or some combination of the two.

A similar hypothetical could be formulated for the sports industry. Is this the goal you hope to achieve? If the entertainment industry is sui generis like you suggest, are you then saying that a movie actor is worth big bucks, but a great corporate leader isn’t?

The basic flaw with your proposal is that it assumes that everyone’s work is worth the same, and penalizes companies based on how far they deviate from your ideal. But people are *not[/] worth the same. Not even close.

I guess next you’d propose that advertising time during the Super Bowl should be no more expensive than on local public-affairs programming. I’m sure someone could list the benefits society would accrue from doing this.

48

Sneevil:

Thanks for the clarification. Surprisingly, I agree with many of your objections. The tobacco paradox should be resolved.

Curt C:

You stated:

Not to quote you out of context, I know that you were talking about the value of a person’s labor, but this sentence illustrates my point. All people are worth the same. Utilizing the profit motive to operate the economy is the most efficient system known to us. This is why capitalism is valuable. Because it helps people. It has no moral value independent of this utility. If it is used to harm people ( as it can be and has been ) then it loses its value. I believe that Morgan is trying to find a better way to balance the efficiency of capitalism with the wellbeing of people. The value of the labor of the highest paid members of a company may be many more times that of an unskilled mailroom employee, but paying the unskilled employee a wage that a person can not live on does not benefit society. It is not the responsibility of a company to worry about the effects of its policies on society. It is the responsibility of the government to do so.

  • Also Curt C.
49

So we’ve found the point where we fundamentally disagree. A free economic system is just as “right” as a free political system. Capitalism, aka economic freedom, is just as important to me as the right of free speech, and for the same reasons.

I guess this is why I would react so strongly to the proposed legislation.

50

CurtC,

You correctly called me on the entertainment hypothetical. I tried to dismiss it without any foundation for doing so, and you persisted. The issue deserves more attention than I gave it.

Revisiting the issue, I see no reason why the same philosophy should not apply to the entertainment industry.

What the hell does Tom Cruise do anyway? Is his skill set really worth $20 Million for 750 hours of work? (It may be a little higher, because he goes on the talk show circuit and does other promotional activities). The movie business is so amazingly profitable that they can throw $20 Million at a walking haircut and still put millions in the bank. Tom Cruise is in a position where he has the power to demand a chunk of the profits. The janitors are not. Anyway, I seem to remember the movie business being notorious for making profits disappear and screwing people who have negotiated a percentage of the net, so they will probably not be affected by this law anyway.

You claim that I assume “everyone’s work is worth the same.” I do not. I am not proposing that wealth be redistributed to such an extent that it destroys all incentive to work. I have had to defend myself on this point numerous times, and my answer remains the same. My system provides an incentive for sharing profits. Period.

You also wrote: “Capitalism, aka economic freedom, is just as important to me as the right of free speech, and for the same reasons.”
You don’t really believe that. Think about it. Would you let a mother sell her baby to the highest bidder? Would you let her sell her own liver? Would you allow Ponzi Schemes? Would you let Standard Oil artificially decrease gas prices to drive out the competition, and then increase prices to reflect their monopoly? Would you let tobacco companies advertise directly to children, even though it is illegal for children to smoke? There are many examples of necessary regulations on economic freedom. Notice that each example could, in the absence of direct economic regulation be done legally.

51

Hi Curt C.:

Well, there are many definitions and applications of freedom. I don’t want to get into an involved hijack on this subject. Freedom is a word that is loaded with emotional connotations. I will state that an individual has as much or as little freedom as the other people in the society believe that they should have. I was unaware of this definition of Capitalism, and I am not certain that this is a valuable way of defining it for debate purposes.

My point was that Capitalism was “usefull”, not “good”. So we do disagree. Another time I wouldn’t mind debating this.

52

2sense,
I’m all choked up. You were able to characterize my arguments without distorting them. <Sniff>

labdude,
I’m still thinking about your post. Of course, if Nike can’t get cheap workers in the US, they will just go to Thailand or Malaysia. I’m also not sure how, exactly, my proposal would affect that trend. One of my problems with the minimum wage (and the current income tax system, for that matter) is that cost of living is not taken into account. In Baton Rouge, LA, you can have a 4BR house in a safe neighborhood that is close to everything for about $140k (I just sold mine). In the San Francisco Bay Area, which it would be fair to say covers about a sixty-mile radius, the same house in the same neighborhood would cost about $850k (I’ve been following the market). I am quickly learning that although my salary nearly tripled when I came out here, my disposable income has not come close to keeping pace. My system would take cost of living into account.

53

But I do believe it, and believe it strongly. However, just as there are limits on free speech, there are limits on economic activity at the fringes. Some of the things which you list I see a need to proscribe, some I don’t.

But my ability to enter into a mutually agreeable arrangement with another free person is as important to me as the right to speak to another person about whatever I want. (This of course doesn’t include threats, libel, etc.)

54

CurtC,

Your original claim was that you disagreed with my proposed system because you disagreed with the concept of egalitarianism. I explained that the two main functions of my proposal was to (1) correct market inefficiencies and (2) give companies an economic incentive to care for the wellbeing of its workers. The fact that these functions were accomplished with an egalitarian tool should be irrelevant.

What is it that you still disagree with?

Your latest posts indicated that you believe in economic freedom so strongly, you equate it with free speech. This is not so much an objection to my proposed system, but an objection to taxes in general. Is your objection to my system different to any objections you would have towards progressive nature of our current tax system? What about the home mortgage interest dedecution? What about the medical care deduction? How is my proposal more objectionable than what is in place now?

Morgan

55

Just off the top of my head: What would you think of a flat tax with exemptions based on income? It would still require reporting, but it could be constructed so as not to be regressive?

Or, better yet, a national sales tax that would not apply to basic necessities (food, clothing, shelter, transportation to, say, $25,000 per vehicle, etc.,)-would also meet the non regressive requirement, be much easier and more economical to administrate, and allow disbanment of the IRS?

56

I have heard that sales taxes are regressive.

57

Sneevil,

A flat tax with exemptions based on income? I don’t see the distinction between that and a graduated income tax.
We can define the current system as being a 39.6% flat tax, with an exemption for those making under $280K of 3.6%, an exemption for those making under $130K of 8.6%, an exemption of 11.6% for under $62K, etc. (The exact percentages are actually a little different because each tax rate only applies to money over the threshold amount, but you get the idea).

The problem with a national sales tax is: (1) its regressive, and (2) its unconstitutional. As for your suggestion for only taxing certain items, it just seems rather arbitrary. I suppose an extremely complex and well-thought out system could achieve all sorts of social goals, (e.g., determining the external costs on every product and taxing each product according to cost it imposses on society) but I can’t imagine such a system surviving very long with lobbyists and constituents falling over themsevles to get exceptions.

58

Well, I thought that egalitarianism was the purpose of the proposal. Sorry if I misunderstood. Now what I don’t get is how paying someone their true value is inefficient. Seems like the perfect example of economic efficiency to me.

Taxes in general are necessary to run the proper functions of the government. I do object to taxes that are meant to penalize behaviors that someone doesn’t like, or tax breaks for “worthy” stuff. Especially if the thing being penalized is something that I think is not improper.

By the way, the home interest deduction is not such a break. It’s not something crafted to encourage home ownership. Any rational system that taxes income interest must also allow you to deduct interest paid out. For example, every proposed change to our tax system that does away with the deduction also exempts interest income from taxation. The way it is now, if I have a mortgage of $100000 and a bank account with $100000 in it, the only considerations I need to make to decide whether to pay it off are the respective interest rates, and how much I like the extra flexibility of having cash available. The home interest deduction does not come into the equation, because the taxes saved are offset by the taxes I pay on the savings account. To do it any other way would be insane.