Briker:
Gee, I never thought of that and I guess hardly anyone else has either.:rolleyes:
Well, I don’t think one could find a more succient statement of why all of us pay taxes than this. Just replace “employer” with “government”, “clients” with “citizens” (or “customers” or “employees” or whatever) and you have a wonderful explanation of the way people, especially the rich, benefit in our society. Do you think Bill Gates would be worth even 1% of what he is worth if he had to earn his money in a state-of-nature? The rich owe more to society because they are among the ones who would be so much worse off…probably by orders of magnitude…if the trappings of it did not exist and if the rules were not structured in the way that they were. Some self-aware rich people, like Warren Buffett and Bill Gates Sr., actually understand this fact.
I always wondered who was gullible enough to believe this garbage when it comes out of Bush’s mouth…Now I know. Give me a freakin’ break! First, this has an element of the rooster taking credit for the sunrise. The economy goes in cycles. It would recover all on its own. And, how is one to know it was the tax cut rather than the spending binge that did the most to contribute whatever small amount Bush’s policies have contributed to the recovery?
Second, at what cost have we bought this still-jobless recovery? We’ve gone from projected trillions of dollars of surplusses over ten years to trillions of dollars of deficits. And, at least a few trillion of that change can be attributed to the tax cuts. At the number of jobs that one might plausibly be able to argue have been created thus far, what would that work out to per job? As thoughtful economists like Paul Krugman has noted, Bush cut taxes in a way that provided the minimum bang for the maximum buck. And, you want to congratulate Bush for this?!?
Or are you one of those supply-side fantasizers who still believes that when Reagan cut taxes, revenues soared?
Do you think the economy of Silicon Valley would be worth as much if society had to do without Bill Gates (or someone who did very much what he did)? The argument goes both ways. And proves very little.
This is debatable also. Would Bill Gates have tens of billions of dollars if dollars did not exist? Probably not. Would the computer industry have been an industry without private individuals investing in it? Certainly not.
So, what if I turn your conclusion around? Society owes the rich more because it is the one who would be so much worse off…probably by orders of magnitude…if the contributions of those rich were stripped from the economy. 
Yes. 
Let’s actually try this shall we?
Paraphrase of Bricker:
Does anyone see how this analogy breaks? Am I the only one who doesn’t think we “work for the government” in anything like the same sense that we “work for [our] employer”? Is there any chance that the sorts of infrastructures in the two analogies are refering to the same sort of thing?
I think that a much more apt analogy to why we pay taxes could be drawn between the relationship between the customers and the business. One provides a service that the other desires.
But even if we grant the analogy in some sense, it still does not explain why the rich should be taxed at rates very much higher than the rest of us. When you consider how much of the tax revenue is going to “infrastructure” and how much is going to other things, it might not seem so logical to suggest that the rich should pay more because they use the services provided more.
Well, we had this discussion before I believe. And, my point is that Bill Gates is pretty expendable because there are plenty more where he came from. So, Bill Gates alone is not really worth that much to us. If we imagine society in negotiations with Bill and he demands $50 billion to do what he did…We’d tell him to go jump in a lake and we would find someone else. This is one of the characteristics of a “winner-take-all” society, i.e., the rewards at the top are out-of-proportion to the contributions that one individual has made.
As I recall, your counterargument had something to do with risk…I.e., that there were few like Bill who were willing to put in the risk for such a possible award. It seemed to be the most convincing counterargument one could possibly make although I personally didn’t find it too convincing.
(In response to: Or are you one of those supply-side fantasizers who still believes that when Reagan cut taxes, revenues soared?) And you believe this why? Do you care to demonstrate it with data?
Well, okay, I didn’t mean a literal word-for-word replacement. The point is that we all rely on the infrastructure of the government. And while a poor person may be quite a bit richer than he would be without it (e.g., if he was instead picking berries and shooting buffalo to provide for his family), a rich person is, I would venture, many orders of magnitude richer than he would be without it.
But that’s not a rationale for charging the wealthy person more. The government provides the same services equally to both. You’re suggesting that because the wealthy person can make better use of those services, he should be charged more.
If we provide blueberries, spices, and flour to three people: a schlub in the kitchen, a decent cook, and a Sarah Moulten-level pastry chef, they may create, respectively, an inedible mess, a decent blueberry pie, and an exquisite blueberry torte.
Under your theory, we should ask a higher price for the same ingredients from Sarah Moulten.
- Rick
Bricker,
An interesting point. However, I’d make the following 3 comments:
(1) I don’t think the analogy completely holds because the question of how you want to structure a society is different from the question of selling a particular product to a particular person. [I admit that this argument is a bit vague though.]
(2) I don’t think the analogy holds because it is not like each person is using the same amount of “blueberries”. Bill Gates is actually making greater use of our communal things like roads, etc. than the other people.
(3) Actually, the sort of catering price to demand curves is done quite a bit. Consider the airlines. I remember being puzzled over why airlines wanted you to stay a Saturday night in order to give you a lower fare when I thought about it only on the supply side. After all, if you fly out on a Monday and return on a Thursday, you’ve used the plane the same days of the week as if you fly out on a Thursday and return on a Monday. The answer, of course, turns out to be on the demand side. - Leisure travellers have a much more elastic demand curve than business travellers so the airlines were trying to charge a higher price to those who had the less elastic demand curve.
Sorry for the late response, been out of town this week with only limited access. While some have tackled the issue with varying degrees of success, and I see that jshore is hot on the trail as well, I raised the issue so it is at the very least my duty as an honorable poster to address the issue.
First, ideally, we are all net recipients from government spending in the sense we’re talking about here, since some of the idea is that the government can manage to do some things as such a large entity that others could not. While there are some, ah, interesting notions about privatizing the roads, for example, I think most of us would take it as a given that it could not be practically implimented without severely decreasing mobility and freedom. So, sure, we all benefit from roads. And you might say, “Hey, the poor are net recipients of taxation because they either have no or a small tax burden.” As if I were to assume that a welfare recipient is getting the better deal than the millionaire who has to pay 40% of his personal income. If this were true, no one would be wealthy, we’d all live off the state.
To some degree, of course, benefits of public spending are shared. We all benefit from roads, defense spending, (perhaps arguably) farm policy, a strong court system, and so on. But the question you pose is, can I give an example of where the wealthy are net recipients?
Let’s take the road example. Daddy Warbucks owns a factory and employs fifty workers, each earning $30K a year. Daddy Warbucks makes $100K a year (paid salary, not representative of what the company itself earns in profits). Further suppose that the tax rates, considered in aggregate (sales, property, and income), are roughly flat (which, most agree, they are). Since it is flat, we can set the rate to some arbitrary level without loss of generality. So for ease of calculation, we’ll set it to 10%. This means each worker pays three thousand a year in taxes, while DW pays ten thousand. Proportionally, the flat tax affects them all equally. But the question is, then, does what they pay for reflect this? Who benefits from the roads more, the workers, or the factory owner? I would argue that the owner benefits more, by being able to sell more product. These extra profits can go to capital expenditures, increasing worker productivity, and thereby increasing the amount he can produce and sell with the same amount of labor. So from this (admittedly small) perspective, he is clearly the net beneficiary. He gets to profit while the workers stay the same. Ask yourself this question: by building more trade routes, will a worker be able to earn more money as a direct consequence? That is, how would a network of roads increase any employee’s ability to demand wages? However, since DW sets wages, there is no impediment to increasing his own salary–he has no one to negotiate with. While it is not necessarily the case that he will raise his own salary, the roads increased his potential to do so without affecting the workers’ potential to do so at all. Net recipient: DW.
Suppose we look to defense spending by the federal government. Among various uses for the military, one is to protect the nation itself. Suppose each of DW’s workers have accumulated 45,000 in property and durable goods during their employement. Because DW has more disposable income after necessities, he can accumulate more property and durable goods–that is, this relationship is not flat. So unlike his workers, who accumulated 150% of their yearly salary, DW can accumulate more–say, 175%, or $175,000. This is the same amount of defense–the one military–guarding more stuff of some people’s than other for the same rate (since their taxes are proportional). Furthermore, since DW’s ability to accumulate property and durable goods is greater, he actually has less of a burden because his stuff is as well defended as someone who has less, and pays less (relatively speaking). Ask yourself: who has a larger interest in protection from loss, those who have more to lose or less? So who would be a net recipient in a (roughly) flat tax system? The answer is simple: those who earn or own more.
I don’t follow this.
In what way is Bill Gates making greater use of our roads than I am?
Nor is this argument remotely on point. In my example, as in the real world, the key element is the value of resources being provided to each. There’s no question that demand affects pricing, and people with inelastic demand needs are subject to potentially tougher prices.
What does this have to do with the value of services provided by the government? Don’t talk about the value that rich and poor may MAKE of what they receive – my point is what they get, at the start, is equal.
- Rick
Except that just such a negotiation did occur and we did in fact pay him that sum for exactly what he did. (Althoug I acknowledge that the negotiation did not occur in the sense you meant.)
Maybe, but this is a mischaracterization of our society. Everyone is perfectly free to negotiate any sum they wish for whatever service they are willing to provide. Its much more like a win win game than a winner take all.
Close. But not quite. My counter argument had more to do with the fact that the problem with this particular attack on capitalism is that it requires hindsite. It is the essential mistake that Marx made. It amounts to saying basically “That particular ‘mean of production’ could be run by any (or many) of us. Therefore its owner should not be rewarded any greater than the workers.” This may be true in some individual cases (and I am not admitting that it is, just acknowledging that it might be) however it can only be true in the past sense. That is, once the capital is collected, once the factory is built, and once the business has proven to be viable, only then can you debate who should be in charge of it. And therefore, you can only debate publicly who besides the creator of the wealth should benifit from it. Specifically, you can only debate publicly who to steal wealth from.
The fact is that a concious public debate did not occur as to who should be in charge of a monolithicly large software company in the late eighties because there was no such thing back in the late seventies. It was the desire to create such a thing and the ability to make it happen that created that particular means of production in the first place. Public debate concerning who should run it cannot happen in the sense that you describe. For instance, how far do you think such a negotiation for the leader of the company which produces most of the warp drives in the next century will go if we start now? If I apply for the job will anyone listen? If they listen, will they provide me people, funds, and facilities to begin development if I promise to only earn a modest salary?
Sorry, just pulling your chain a little. I did put a smiley after the yes. I did in fact look up some numbers. It seems that revenue doubled during the eighties. So, it did in fact go up. However, it also seems to have roughly doubled during the 70s and 90s. It may have grown slightly more during the eighties, but not significantly as far as I can tell from looking simply at the total federal revenue numbers.
I understand. But even this depends on what you mean by the “infrastructure of the government”. If you mean that rich people get value from the roads, laws, and armies of the state, then I agree. I’m not sure that they derive that much more benifit than poor people, though. Remember that if a rich person derives more from roads because he has lots of trucks carrying goods, he also has drivers in those trucks. I think that similar truths will pop out for the other “infrastructure”.
However, I don’t think you meant those sorts of infrastructural resources. I think you may have been refering to the other half of the federal budget. That is social security and welfare. I’m not exactly sure how you would make an argument that rich people get orders of magnitude more value from these programs than poor people.
Current coverage of the phenomenon…
I have to ask a couple question and trust that any readers can look up the example in your post.
1)I’m not sure how you get from roads existing to extra profit for the owner. How do they provide more markets without more emplyees? Won’t he have to move this extra product via employees?
-
Since ALL if the salaries in question come from the revenue generated by the business, I could argue that the employees are clearly getting more benifit from the infrastructures used. They are earning 1,500,000 to the owner’s 100,000. If we look at whatever infrastructure the government provide to make this possible, they are clearly benifiting more.
-
I would answer your first question as yes. More roads mean that workers can deliver more goods. This would be a very good reason to argue for more wages. If I deliver 100 packages last month and 400 this month, I could make a very good case that I should make more money. I might even be inclined to take the argument to another employer if necessary.
Having asked these questions regarding your first example, I’d like to say that I see more value in your second example. That is, if we agree that rich people have more goods, then an argument that they need more protection seems somewhat reasonable. But, it also seems that such an argument might be limited to the inequalities of a flat percentage tax. That is in your first example the owner paied far more taxes than any of his workers. I am not so sure you can dismiss the value represented by the “necessities”. It seems more reasonable to measure the 30,000 per year over some years (you did not mention how many) compared to the 100,000 over the same years. You could certainly add to this any dividends from interest or increases in value of durable goods. But you should not ignore the benifits recieved by having easy access to the necessities.
The man asks a question about how the rich benefit from government services more than the poor, and you post a link about tax loopholes?
If your point is that there are more loopholes available to those who can afford high priced accountants to tell them about them, well yes we all know that; but that doesnt answer the question as to how do the rich benefit more from government services than the poor? Tax loopholes are not government services. The govt isnt giving you anything, its just taking less. A service is something that is provided/given.
That link though is a very good argument in favor of a flat tax. Ill never understand how liberals can be for progressive taxation (and/or taxation as a tool of social engineering) when our tax system is the ultimate cause of much of the restriction of opportunity and resulting artificial inequities in our economic system (not to mention the value of congressmen as commodities).
It shouldnt take an Einstein to see that if a small percentage of people/corporations are paying a large percentage of the bills, there is over time going to be enormous pressure to protect the position/incomes of that small percentage. And protectionism is just another word for restricting the opportunity of everyone else.
The flat tax is one thing the largest corporations/richest individuals and the left can join together to fight; one side with a smirk on their faces.
That link discusses tax loopholes. That has nothing to do with services provided by the government, and whether the wealthy gain more, less, or proportionally equal benefit from those services, does it?
So why did you post it?
- Rick
President Bush - “See, free societies are societies that don’t develop weapons of mass terror and don’t blackmail the world.”
Er… I assume when he says “free societies”, he’s talking about us, and maybe the British and French, let’s say. We’ve got nukes. We’ve got chemical weapons. We even have stockpiles of bio-weapons (although the official line is “they’re for research into innoculations and so forth”).
What exactly is a weapon of mass terror then?
His charge is that the middle class takes on the tax burden to support the super rich. That is the subtitle of the book covered! I actually saw a portion of this interveiw, which made me think of your question. He made very clear that the laws are designed to cause the middle class to pay the taxes of the super rich - to subsidize them. While I’m not keen on the details, I’m pointing out that there are people making these arguments currently, who have national coverage and recognition.
It’s impossible for me to respond to an argument without the details. Your post amounts to, “This guy is making the argument, and he’s got national coverage.” Well, Ann Coulter has national coverage and recognition, but I assume you’d think twice before offering her as a source.
Possibly. Would DW take advantage of the extra business if all it meant was more overhead for the same profit?
I don’t see why this comparison is proper. The question on the table is whether DW should pay more than one of his employees, proportionally speaking. Not whether we may group together a number of people and come up with one group having more people making more than a single person. Of course that’s true.
They’d just hire three more drivers, probably. Again, I refer you to my first response: if there was no advantage to expanding the business; if, as (3) here seems to indicate, it would cost him money, why would he do it?
Presumably, this benefit would be shared equally so can be ignored.
Are you suggesting that the owner would not be willing to expand his business unless the expansion were free? I’m not sure I’m following you at all. You are aware of economies of scale, right? Mere expansion all by itself can result in greater profits as a percentage of revenue.
I may be babbling a little because I don’t follow you. I understand that you wanted to make the point that a rich person could make more money without expending more. I simply don’t think you have done so. At least no in this case. Perhaps if we restrict the case ridiculously. For instance, if the roads leading from the store in question went up to 1 mile away from a certain town, and then the road was extended into that town, we might be able to describe extra profits merely by having some of his drivers travel an extra mile. Extra effort on their part for which they might not expect or be able to ask for extra money.
However, such an odd situation assumes that he has trucks travelling to within a mile of the town full of goods already. Otherwise you still need more trucks or extra trips. Both of which would certianly result in more money for the employees.
I hope you can help me clear up what you meant.
Well, maybe. But there are costs asociated with hiring more drivers above the costs associated with simply giving me a raise. For instance, if the infrastructure changed such that I could deliver more packages with the same effort, then you assume that additional drivers could do the same at a lower cost. I don’t think that conclusion follows at all.
Lets specifiy this example a little more. Imagine a delivery based business. A factory, perhaps, which survives by delivering its product to stores and homes in the surounding area. To do this, they have to load the products on trucks and send them out.
Using such a situation, lets contrast two different situations. First is the case where the trucks have to travel on regular streets. The second is where the trucks have access to a freeway or expressway.
Now, with the expressway, the trucks can travel farther in the same time. Therefore, each truck can deliver goods to more stores in the same time.
Of course, this means that the factory could sell more goods. But unless it has been badly mismanaged it seems unlikely to me that those trucks would have been travelling around with lots of extra capacity in the first case. And it seems most likely to me that extra employees or more work for the current emplyees will be required to take advantage of the extra ability to deliver the goods.
I’m sorry, I’ve tried a couple ways now, and I simply cannot see how the owner of the factory gets orders of magnitude more benifit from the road than the employees.
I hope you can help me understand what I am missing.
Lawd, no. Merely suggesting that if he wasn’t to gain from it, then he wouldn’t do it. Remember our other discussion about taxes discouraging investment? If it costs him more to make less relative to existing investments, is this a sound investment? I don’t see how you get to have it both ways. In the other thread, investments meant risk, and this is true here as much as in taxes, because there is a known expenditure and an estimated return. If he wasn’t the net beneficiary of a move, why would he do it?
Well, honestly, no conclusion directly follows, but shipping is a 24 hour business. It is quite plausible, if not directly derivable, that more shippers does not require a significant increase in capital expenditures. It is not necessarily the case that more trucks must be bought, for example. Over the road drivers could leave on Friday for a Saturday delivery–not uncommon–and return by Monday for the weekly people. Also, I’ll cover the case below where different trucks are purchased. In any case, if we get too specific we lose the point of discussion, which was generality.
So stop comparing apples and orchards, if I may mangle the phrase. If I aggregate enough homeless people begging for change I can create a group that makes more money than a middle class individual. Arbitrary groupings are not a sensible means of comparison when the claim is that individuals receive the same benefits from government expenditures, so the wealthy should not have to pay more.
While it is certainly the case that one means of evaluating efficiency is using all of one’s resources to their maximum benefit, I don’t know a company on earth that doesn’t make capital expenditures with a slight eye to future expansion. Even so, in my original hypothesis I allowed for a time period where additional capital is purchased for the company in question. Once that capital is purchased, extra profits are up to DW to allocate. They have no bearing on what any particular worker can negotiate. Perhaps he buys bigger trailers, so that the same worker is moving more goods (increased productivity) but only putting forth the same labor. This is not a striking example of a worker being able to demand more. The point of capital expenditures is to increase worker productivity without increasing the amount of actual labor any particular worker does.