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Contractual nonsense

April 15, 2010

The Tea Party types have a new political meme called “The Contract From America”.  It’s hard not to admire their daring, reminding us of anything with Newt “Mister Morality” Gingrich’s name on it.

Anyway, they are gleefully proclaiming a bunch of stuff that basically adds up to “Government bad!  Raauuuugghhh!” and “If Verne cain’t unnerstan’ it half drunk, it too complikated!” 

You think I could be exaggerating?  One of their provisions is a flat tax.  Sure, that makes a LOT of sense in a country where half the population has 2.5% of the wealth.  In fact, I bet a flat tax would be very attractive to the top 1%, who own 34% of the wealth, because they know the actual rate would be chosen by populist assent among the people who hardly have anything compared to them.

Waaaaaiiit a minute…  Do you suppose that richest 1% (and their neighbors on the next rung or two down the ladder) could actually be the ones promoting this flat-tax nonsense?

Nahh… couldn’t be.  Could it?  “Cui bono?”

Anyway, tax day seems like as good a day as any for ***Dave to take the “Contract From America” apart piece by piece, while actually suggesting a few good ideas to replace it as a side dish. A sample:

5. Restore Fiscal Responsibility & Constitutionally Limited Government in Washington

Create a Blue Ribbon taskforce that engages in a complete audit of federal agencies and programs, assessing their Constitutionality, and identifying duplication, waste, ineffectiveness, and agencies and programs better left for the states or local authorities, or ripe for wholesale reform or elimination due to our efforts to restore limited government consistent with the US Constitution’s meaning. (63.37%)

Yes, if only a Blue Ribbon taskforce were appointed (like every other such task force that every administration has appointed) to do a “complete audit” of the billions of dollars of programs and the entire government top-to-bottom, we could doubtless save massive amounts of money and shift most of Washington back to the states where, because the programs are duplicated 50 times over, I’m sure they will be more economical.

Again, everyone wants government to be more efficient.  But waving of hands, summoning of a “Blue Ribbon Commission,” and assuming that these folks will be able to (a) properly judge what’s wasteful, (b) what’s best left to the states, (c) what’s actually constitutional, and (d) actually get their recommendations enacted is both naive and, probably, unconstitutional itself.

This is very complete and masterful deconstruction that should (if they had the sense*) leave any Tea Partier cowering in the basement afraid to come out.  It’s also excellent ammunition, because we’re going to see this “Contract From America” all over the place and it deserves a very public humiliation.  Enjoy!

* (Of course if they had the sense, they wouldn’t say stupid stuff like that in the first place.)

As long as it’s tax day, when you get done at ***Dave’s, go over to Ed Darrell’s place and find out what Oliver Wendell Holmes really said about taxes.  It’s short and powerful, and apparently, historical (as opposed to apocryphal). 

Categories: Uncategorized
  1. April 15, 2010 at 23:01 | #1

    What gets me about the flat tax crowd is that they think it will utterly simplify the tax code. When I ask them why they think that progressive tax rates have anything to do with why taxes are complicated, they either stare dumbly or start telling me that I clearly don’t understand mathematics.

    The fact is that, at least in my day when they taught algebra at that level, that a reasonably bright eighth grader could figure out the tax rates. What’s hard are all those definitions that affect what is or is not considered taxable income, and all the other stuff that makes anything beyond what’s on a W-2 form insanely complicated.

    I suppose it’s yet another example of how innumerate we are as a country.

  2. April 16, 2010 at 05:19 | #2

    As far as I am concerned, the flat tax has nothing to do with simplifying the tax code in reality.

    It has everything to do with justice. If someone said, “Just because your skin color is different, I’m going to make you pay more money for a cup of coffee,” every honest person would see what is wrong with that.

    But if instead I say, “Just because you have the will to make more money than most people, I am going to take more of it away from you,” a ton of people that don’t have more money say, “Yeah, stick it to them. I don’t want to have to pay.”

    Everyone I’ve ever seen complain about the flat tax either says it won’t fix the tax code so why bother or appears to have no motivation to make money in the first place because they are happy to have someone else pay their bills.

    > Yeah, a bit of trollin’, but it annoys me to see people put down – not only give up, but be against – personal liberties and freedoms just because it affects “them,” not “us.”

  3. April 16, 2010 at 06:32 | #3

    It fascinates me that people in lower income brackets are so concerned with the welfare of the very rich. 

    There aren’t any “very rich” in Somalia.  Reference the quote above from Justice Holmes: what you buy with your taxes is civilization.  Without it, there’s no getting rich, no dinner parties, no penthouse suite, no limousine, no private jet, none of that. 

    The majority, who own almost none of the wealth in the country, work for the very rich.  They can’t get to their jobs without roads, or if they’re sick, or if their kids are sick, and they won’t be very productive if they aren’t educated.  Without that majority, the rich won’t HAVE any wealth.  And the rich person’s wealth won’t be worth a damn if our country isn’t defended and that doesn’t come cheap either.  And living in a fortress among throngs of desperately poor people is inviting a revolution. 

    A country that wants civilization has to pay for it, somehow.  Click through to the stats on where the money is.  That’s where the money will have to come from.

    And yes, comparing a progressive tax (those who benefit the most pay the most) to racism is trolling.  I could apply other adjectives.

  4. April 16, 2010 at 08:23 | #4

    Damn lost my comment because I didn’t follow my own system.

    Anyway, David you failed to address the main point made by George which is the rich is obviously the most well off by the flat tax and makes little sense since they own the majority of the wealth in this country. Instead you lump us all together with one of those “Everyone I’ve ever seen complain about…” statements. Whatever show me how the flat tax is something more than a handout to the rich and we can talk. But I think you are going to have a hard time doing that.

    I think we have a progressive tax system because the wealthiest 10% in this country hold a majority of that wealth in this country. It makes sense to me. In a progressive system if your income pushes you into that next tax bracket, you don’t get all your income taxed at that higher rate, just the portion that is over the amount. It really isn’t a disincentive to get a raise at all and anyone that says that doesn’t understand how they are getting taxed. Further if the US tax system really creates such a disincentive to be rich, why is everyone in this country trying to be rich?

    Ditto Cujo, if you want a simpler system argue for less complexity or hire someone to help you with taxes. The years I’ve had to file taxes for just living in one state were amazingly easy to fill out and took me around 30 minutes. But every time it is always the state filing that gets complicated and takes most of my time.

  5. April 16, 2010 at 09:05 | #5

    Okay, I’ve a bunch of comments, so I’m going to try keeping them straight. They aren’t necessarily in order of importance.

    1. I am greatly in favor of a simplified tax system – I think a flat tax should be applied to all income above the federal poverty rate that is not specifically invested in a retirement fund, regardless of whichever supposed benefit I currently receive that I will be harming. Of course, I’d also like to greatly reduce the amount of federal spending to go along with that.

    2. Regarding the Holmes quote, yes, I by civilization, but whose? What say do I have in the civilization I buy? What if I don’t want to buy it?

    3. I have a job because someone RICHER than I am decided they needed something done, and I can do it.

    4. I am not concerned with the welfare of the very rich. I’m concerned with the welfare of any citizen. And their freedoms. Besides, maybe I want to become one of those very rich someday. I need to work to put in place the system I want when I get there.

    5. I agree that defense is a fantastic use of taxes. But the preamble to the Constitution says the *promotion* of the general welfare, not the *provision* of the general welfare. That is a financial impossibility.

    6. Yes, the flat tax will benefit the wealthest the most at the moment. But in the long term, do those wealthiest just horde their money? Or, as history shows us, do they spend it to employ more individuals, purchase more products driving the economy, and donate it to humanitarian causes, often more effectively than the governmental efforts? All of those benefit me. Even if they save it, that investment drives other improvements that still benefit me.

    7. On trolling in comparing racism with progressive tax supporters. You fail to note that in a flat tax, those that make the most still pay the most. But to single out a group of people because they are different from the rest of the population is still wrong. Whether they are different because of skin color or bank account size. Why not instead say it is okay to increase the taxes on atheists because they don’t tithe? It’s just as stupid, in my view.

  6. April 16, 2010 at 16:44 | #6

    David, with that logic, you’d be very happy as a sharecropper or medieval serf.  Pray that no misfortune (and I use that term in its coldest literal sense) befalls you so that you are no longer useful to His Lordship.  You would find out on no uncertain terms what it means to be a disposable resource. 

    2. Regarding the Holmes quote, yes, I by civilization, but whose? What say do I have in the civilization I buy? What if I don’t want to buy it?

    Yes by all means, let’s buy only the lowest common denominator of civilization to live in.  I’m sure it will be just fine as long as nothing bad happens.  As to what say you have, I presume you are a voter, no?  And if you just can’t stand the thought of living in a less ruthless society than your Randian paradise, I have a suggestion for you.

    Taxes are actually at historically low levels, and they’re lower in the US than in countries with… better education systems, lower infant mortality rates, lower crime rates, longer average lifespans, cleaner drinking water, and several other quality-of-life measures.  Also here’s a famous economic analysis called the Laffer curve which plots economic productivity and taxes.  It’s possible for them to be too high, yes, but also possible for them to be too low.

  7. April 16, 2010 at 18:47 | #7

    (1) Interestingly, you can also go to to Ed’s site and read the comments (by me) about sourcing the quotation.  :-)

    (2) David says, ‘But if instead I say, “Just because you have the will to make more money than most people, I am going to take more of it away from you,” a ton of people that don’t have more money say, “Yeah, stick it to them. I don’t want to have to pay.”’

    By that way of thinking, even a percentage tax is unjust, and we should just charge everyone the same flat fee.

    Of course, that way of thinking assumes the rich are rich becaue they have “the will to make more money than most people,” and the poor are poor because, well, they’re lazy.  Which I’m sure has a few examples and many counter-examples.

    A progressive tax rate says, “This person earns $30,000 a year; they should pay very little or nothing because they need it all to survive.  This person earns $300,000 a year; they can pay more by proportion without undue harm.  This person earns $3,000,000 a year; they can pay much more and still live far more comfortably than either of the other two.”  That not only seems just (and I say that as someone who is not in the first category) by also moral.

    A flat tax would probably benefit me because of what percentile of income I fall into.  I still think it’s a sucky idea, not for me, personally, but for society.

    (3) The idea of a flat tax system is, yes, it would be simpler and (whispers in the ear from well-funded types) less expensive (for some). The irony is that many of the non-fabulously-wealthy arguing for a flat tax (or replacing income tax with a national sales tax) would actually be financially hurt by such a transaction.

    They also don’t realize that the complexities of the tax code are not in the graduated tiers of taxation, but in the credits, deductions, exemptions, alternatives, etc., that have been plastered in on behalf of various groups and for various aims, some of them scandalous, most of them laudable.

    So the Tea Partiers ought to be asked, are they ready to have their charitable contributions no longer be deductible?  How about their mortgage interest?  Or their 401(k) or IRAs handled as pre-tax earnings? Are they farmers benefiting from particular tax credits or breaks?  Everyone wants (especially at tax time) for taxes to be simple.  They just need to explain why they should get their credits/deductions but others should not.  If we can all agree on that, so be it.

    (4) By definition the wealthy horde a large amount of their income (unless they are literally living month-to-month, which a few do).  On the other hand, their spending doesn’t necessarily benefit others as much as that money would in other ways—buying large house simply shuffles money around, buying luxury goods usually benefits a small number of craftsmen. 

    The fact is that the wealthy can *afford* higher taxation without suffering more than only being able to buy three Ferraris rather than four, or having to dine in occasionally with a $20 bottle of wine rather than dine out nightly with a $200 bottle.  Nobody’s suggesting leveling everyone to that $30K limit; but it seems fair that we do what we can to support one another, and to that end, I know I should take on more of the tax burden than some others.

  8. April 17, 2010 at 08:19 | #8

    Speaking of the rich and the flat tax, wasn’t Mr. Forbes, when he ran for president, a big proponent of the flat tax? In fact, wasn’t that basically his only plank?

    Here’s how I’d simplify the tax code (which I believe should be progressive): take out all provisions which are in the code to promote (subsidize) any businesses.

  9. April 17, 2010 at 11:11 | #9

    Yes, that was Forbes’ one-trick pony. It’s understandably popular among folks who don’t understand how it would affect them, since it does seem a sort of Gordian Knot cut of the tax code.

    I don’t know that I’d automatically strip out all the business-promoting credits, though that seems another good, (too) simple solution. 

    Maybe the populist approach is good one:  line out all the current tax provisions and their estimated effects.  Hold, if not a poll to decide them, a survey so that folks can voice what they think about each.  If nothing else, it would illuminate why the tax code is such a mess, and get people involved in the process.

  10. April 17, 2010 at 11:31 | #10

    Maybe the populist approach is good one:  line out all the current tax provisions and their estimated effects.  Hold, if not a poll to decide them, a survey so that folks can voice what they think about each.  If nothing else, it would illuminate why the tax code is such a mess, and get people involved in the process.

    I like that, because it starts with understanding the problem.  I hear politicians saying all the time; “We’re going to cut wasteful spending!”  I want to ask them; What spending?  Please provide a list, along with what percentage of the total your cuts will amount to.

  11. April 18, 2010 at 03:23 | #11

    As far as I am concerned, the flat tax has nothing to do with simplifying the tax code in reality.

    It has everything to do with justice. If someone said, “Just because your skin color is different, I’m going to make you pay more money for a cup of coffee,” every honest person would see what is wrong with that.

    You know your upper class has become a bunch of self-indulgent whiners when they come up with stuff like this.

    These people benefited more from society than the folks who are poor and lower middle class, which is about where the upper tax bracket starts these days. They went to better schools, and they lived in better neighborhoods. What’s more, they require more government services. Poor people don’t have to worry about whether securities are properly regulated.

    I spent better than half my career in the upper tax bracket, and I didn’t mind one bit. That’s partly because I could afford it, but it was also because I knew perfectly well that my fortune wasn’t entirely my own doing. I was lucky enough to grow up in a place that was secure and went to schools where students could learn. Then I went to a good state-supported college. I was lucky enough to have a mind that could acquire the skills people would pay for.

    I’ve been well off and I’ve been poor. Let me tell you something, being poor sucks. Being well off is much better. Anyone who doesn’t think so needs to spend some time in someone else’s shoes.

  12. April 18, 2010 at 16:48 | #12

    David say:
    1. I am greatly in favor of a simplified tax system – I think a flat tax should be applied to all income above the federal poverty rate that is not specifically invested in a retirement fund, regardless of whichever supposed benefit I currently receive that I will be harming. Of course, I’d also like to greatly reduce the amount of federal spending to go along with that.

    I’d like to decrease spending in certain areas too, like military or just use some of that money somewhere else. What areas did you want to cut? Also, we all know you support a flat tax but you never really told us why. How would it actually benefit you and in what ways? Or if you want to answer what George or ***Dave already said that would be fine too.

    2. Regarding the Holmes quote, yes, I by civilization, but whose? What say do I have in the civilization I buy? What if I don’t want to buy it?

    So you don’t want Police, Emergency respondents, schools, roads, communication systems, etc? Or you want to pick and choose? That doesn’t sound to appetizing to me. I like knowing I can drive on 80 from one side of the country, or the middle to the another side and not having to worry if there is going to be a gravel patch ahead. I like knowing that everyone in the country has access to education, even if they do not make much use of it or the education is taught poorly. At least we have a floor in this country of basic knowledge people can freely acquire. And that benefits everyone.

    3. I have a job because someone RICHER than I am decided they needed something done, and I can do it.

    I’m not sure what the “RICHER” part had to do with this. I have been hired by plenty of middle class people to do jobs, some that still make less than I do now because they work for charities or volunteer organizations. What income has to do with hiring is beyond me. Are you trying to make the argument that we need to support the rich because they create the jobs?

    4. I am not concerned with the welfare of the very rich. I’m concerned with the welfare of any citizen. And their freedoms. Besides, maybe I want to become one of those very rich someday. I need to work to put in place the system I want when I get there.

    If you are concerned about the welfare of every citizen like I am I guess that means you would support universal health care, and spending on social programs. You probably also support treatment programs for people with drug addictions rather than jailing them too right? Then at least we agree here.

    5. I agree that defense is a fantastic use of taxes. But the preamble to the Constitution says the *promotion* of the general welfare, not the *provision* of the general welfare. That is a financial impossibility.

    I do too and our military is one of the best which shows how government money can be spent in good ways, even though I think there is a lot of waste in military spending. Anyway, one way to promote general welfare is to support initiatives for that welfare. If you don’t like the way promotion of general welfare is being done, what are your suggestions?

    6. Yes, the flat tax will benefit the wealthest the most at the moment. But in the long term, do those wealthiest just horde their money? Or, as history shows us, do they spend it to employ more individuals, purchase more products driving the economy, and donate it to humanitarian causes, often more effectively than the governmental efforts? All of those benefit me. Even if they save it, that investment drives other improvements that still benefit me.

    Yes they do horde their money. In my economics class we learned that the richest 10% of the US save the majority of savings in the country. Since I no longer have my economics book for reference, here is a link I found, click here. Scroll down a quarter of the way to Table 2. The bottom 90% account for only 12.2% in total investments. Where is your evidence to suggest the rich spend their money?

    But think about this one. If you don’t have much for income, you are going to spend what you have to live and save little right? If you have no debt and make a higher level of income you might spend any extra income you get, but I suspect that is not the case most of the time. All the rich people that Dave Ramsey talks to save and budget their money very tightly, that is how they became rich.

    And what is all this stuff about how rich hire people anyway? Unless I’m missing something businesses hire people, rich people don’t really hire people (for the most part with a few exceptions). If you give Bill Gates a tax break MS isn’t going to go out and suddenly hire a bunch of people. Gates is going to do with his money what he always does, spend and save how he regularly spends and saves. Even small business owners have business income/expense and personal business income/expense. How does helping out the wealthiest 10% improve the hiring situation?

    I guess one could make the claim that maybe the rich will go and start another business with that tax break, but I suspect that would be difficult to prove because we dont know if they truly would of started it anyway and the tax break was just icing on the cake.

    7. On trolling in comparing racism with progressive tax supporters. You fail to note that in a flat tax, those that make the most still pay the most. But to single out a group of people because they are different from the rest of the population is still wrong. Whether they are different because of skin color or bank account size. Why not instead say it is okay to increase the taxes on atheists because they don’t tithe? It’s just as stupid, in my view.

    David if you think a progressive tax system is comparable to racism I would recommend you go talk to someone that has experienced racism in their life like a minority. Go pick up a history book and read about acts of genocide anywhere in the world. Read about WWII in Germany or what we did to the Japanese, or look at what we did to blacks in this country. Are you seriously trying to compare any of that to having rich people pay a progressive tax?

    The rich are asked to pay more in this country because we know they can support themselves not because our government (made up of mostly RICH white men) likes to single them out. If rich white men have it so bad why do they stay here? Why does everyone want to be rich in this country?

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