Taxes: Who do you trust to produce prosperity?

Politicians or

Published on October 28, 2007 By Draginol In Politics

Often in debates you see Demcorats argue that we need to raise taxes in order to help society.

Hillary Clinton said it best:

“We’re going to take things away from you on behalf of the common good.”

This is the kind of thinking one would expect from people who don't have the foggiest understanding of real-world economics.

First, some facts to begin with:

The wealthiest income earners 10% pay the vast majority of the taxes (nearly 3/4ths of it).
The wealthiest income earners work harder and consume far less than their means than on average. (see this Washington Post article for specifics)
Our tax system punishes earned income while ignoring investment income and the "idle rich". (hence, we call it the "INCOME" tax).

According to Democrats running for President, we should confiscate the earnings of the most successful Americans and have the government spend it instead of them. That's precisely how taxes work. We take earnings from one person and then have the government decide how those earnings will be spent instead.

The result is that we are left with a stark choice: Who do you think will make better use of a dollar?

It's a subjective question and I invite you to invest all of your subjective prejudices to the question. Who do you think will do more to benefit society with that dollar? Who do you think will generate the most properity with that dollar? Who do you think will help the poor most with that dollar? Who do you think will create the most jobs with that dollar? And so on.

Let's look at the "rich" and the government. Make sure you've read the linked to article from the Washington Post. But if that's not enough, you can do your own research on the net as to the demographic info on "the rich" really is. It's not unknown. Similarly, who decides how money is spent by the government is not unknown.

The case for the rich. The highest income earners have already demonstrated the ability to take that dollar and turn it into many dollars. That is how their income is derived in the first place by definition. They indisputably are able to generate wealth and use the money in ways that benefits society since their money must necessarily come from other people voluntarily purchasing a product, good, or service from them. This creates jobs. Creates opportunities. Helps people across the entire economic spectrum.

The case for the government. Congress decides where money is going to be spent. Congress is made up of 100 senators and 435 representatives. Their qualification for making these vast decisions is that they were elected. Period. Moreover, while the "rich" group includes millions of people making individual decisions based on very adapted circumstances, the government's arbiters number exactly 535 (536 if you include the President and his veto). Conservatives complain that politicians are incompetent and corrupt. Liberals complain that politicans are bought off by "big business". In either case, there is absolutely no requirement that one of these 535 people have the slightest inkling of how economics works (as Hilary Clinton made obvious in her idiotic statement quoted at the start of this article).

If the rich make poor decisions with their money, they cease being rich. If politicians make poor decisions with money, they simply ask for more money in the form of higher taxes. In other words, one has an incentive to use money well, the other has an incentive to be wasteful with money.

So next time you see a politician argue that we need to take money from "the rich" in order to help society, think carefully about who is really helping society more.

Comments (Page 1)

cactoblasta

on Oct 28, 2007

So next time you see a politician argue that we need to take money from "the rich" in order to help society, think carefully about who is really helping society more.

You're ignoring something important here.

If you look at the figures over the last few hundred years it's pretty clear that rising education levels are behind the current prosperity. A better educated workforce is more productive, healthier and has better earning potential, making it easier to exploit it (in a good way) with innovative entrepreneurship.

Only government has proven itself prepared to invest sufficiently heavily in education to produce any widespread results. Nearly all first world companies piggyback on government education expenditure to some extent, and in non-US countries they piggyback on government health expenditure as well.

That's what you give the government money to do - infrastructure, education (and health).

Once you've achieved those things to your satisfaction it makes more sense to let entrepreneurs do their business. But until then you'll get better long-term returns from improving educational standards and essential infrastructure.

Whether you're at that sweet spot yet or whether you need to give more to either government or entrepreneurs is the only question.

danielost

on Oct 28, 2007

(deleted by moderator) Don't repost off topic material in comments please.

Draginol

on Oct 28, 2007

The states provide education, not the federal government (until very recently). So your argument about education is not valid with regards to the federal government spending.

danielost

on Oct 28, 2007

If you look at the figures over the last few hundred years it's pretty clear that rising education levels are behind the current prosperity. A better educated workforce is more productive, healthier and has better earning potential, making it easier to exploit it (in a good way) with innovative entrepreneurship.

yep all of that money we are putting into education right now. with the liberals trying to destroy the education system so that they can control the uneducated.

terpfan1980

on Oct 28, 2007

Even worse for the education lovers, I'd point out that education levels in many other countries kick the crap outta the levels in the U.S.A., and within the U.S.A. you typically find that the people working the hardest at getting the best educations aren't U.S. citizens, but are children of recent immigrants.

U.S. children are typically lazy, especially inner city and urban children that are dragging down the scores of the education systems in their areas.

So, pointing at education and saluting that as an area where the Federal dollars are really needed and are returning well on the investment is just not a great example at all.

On to the question raised by Draginol in the original article, I most certainly don't trust the Democrats and liberals to come up with any sort of 'fair' tax plan. The plan that Charlie Rangel has suggested is yet more of the rob from the rich and give to the goverment so they can enslave the tax paying public to the government. Once they hook you on sucking from the government tit, they'll have your votes and your attention for all of their plans.

Thanks, but no thanks on that.

Let me have as much of my money to do with what I will and do the same thing for everyone, rich and poor. Let us invest the money, or give it to charities, or use to pay for our needs or whatever we wish. Give some minor incentives to invest intelligently and put the money where it can do the most good, but otherwise back away from the wallets.

Sadly I don't think the Democrats will ever be able to understand how prosperity works and what it comes from, or at least if they do understand it, they certainly don't want to let it happen without their being able to take far more credit for it than they deserve.

Noumenon72

on Oct 28, 2007

Again, that Washington Post link is to an excerpt of "The Millionaire Next Door." That is not a scientific or representative study of America's wealthy. Here's how they gathered their data:

On page 250, the methodology is (sort of) explained by the authors: they sent out 3000 questionnaires to households in neighborhoods that were identified as having high net worth. Of those, 1115 were completed and analyzed. Of those, only 385 even had a net worth higher than $1 million. That is a pretty small sample, if about 3.5 million households in the US have over $1 million net worth. The authors also say they supplemented this with data from alternate surveys. They don't explain the methodology for how they found those people, only that they were people htey spoke to over a period of 20 years, and that only another 500 or so of those people had over $1 million net worth. On page 11, they also say that the people they interviewed were paid $100-250, so they might be skewed towards people for whom that amount of money is a bigger incentive.

"The Millionaire Next Door" is an interesting portrait of a segment of the wealthy that doesn't get much media coverage. It's a sympathetic segment, too -- the segment that got rich by adhering to middle-class values like frugality. It just can't be said to represent the attitudes and behaviors of the wealthy in general.

Noumenon72

on Oct 28, 2007

I have a page bookmarked that makes the argument that education doesn't improve economic growth at all. I'm pretty sympathetic. Primary-school education and literacy, of course, are essential.

(While looking for that bookmark, I also ran across the Onion article Education Is The Key To Cleaning Up This Apartment -- good for a chuckle.)

cactoblasta

on Oct 29, 2007

The states provide education, not the federal government (until very recently). So your argument about education is not valid with regards to the federal government spending.

I didn't realise we were only talking federal taxes, but okay. I still believe there's a trade-off where it's more widely profitable to trust government with some services than to let private enterprise manage them for prosperity (security and infrastructure for two fairly broad areas).

I have a page bookmarked that makes the argument that education doesn't improve economic growth at all. I'm pretty sympathetic. Primary-school education and literacy, of course, are essential.

It's an interesting article, but by education I wasn't meaning skills training so much as the general education he talks about (although I didn't know it 'til I read that article so thanks!) - I don't think it does anyone any harm even if it doesn't immediately cause any obvious economic benefit.

One of the key benefits of it in my view can be seen from the various liberation movements. We now get more productivity out of women, ethnic minorities and sexual minorities than ever before. And so far as I can tell that's largely due to the encouragement of a more liberal viewpoint (liberal in the actual sense, not the US political sense). What will be liberated to the point where it can be better exploited economically next?

Only more education will find out, but that relies on government believing in education over training, so maybe Draginol's right and it's time for the swing to head towards private, innovative enterprise.

We just don't waste talent quite so readily any more. I reckon that's a good thing for overall prosperity.

Whether those developments have been intended results is another matter entirely, so maybe the 'does education count' argument is not immediately relevant to this discussion. It is fascinating though.

Dr Guy

on Oct 29, 2007

One of the key ingredients of a millinaire is risk. They risked a lot and made it (many fail). There is no risk in government. Revenues fall short? Increase taxes. Revenues do not materialize? Borrow more. They do not understand the concept of risk, and therefore do not know how to spend money (just look at the Lottery millionaires to understand what lack of risk does to wealth).

Who do I trust? Not a politician that is for sure.

COL Gene

on Oct 29, 2007

It is clear you do not have the most basic understanding of what drives our economy. Demand is the main driver and when we increase spending that increases demand. The most recent proposal to reduce taxes for over 90 million middle income wage earners will provide the cash for increased spending and thus increased economic activity which will increase profits. To pay for these tax cuts to the middle income Americans the democrats are talking about a small increase in the income taxes for people with incomes above $500,000. That makes sense because we can not afford to add to the deficit with another tax cut and people who make over $500,000 will not cut their spending from the added 4.5% surtax. That will come from their surplus.

The Bush tax cuts have shifted the distribution of wealth toward the upper income Americans. This proposal will help shift the income distribution more like it was during the 1990's. The rich claim taxing them will cost jobs and thus harm the middle class. Nothing could be further from the truth. The increased spending by the middle income from their tax cut will CREATE both jobs and profits. The issue for the wealthy is very basic-- Pure GREED. They will not he harmed by this small tax increase and the masses will benefit as will the overall economy from the added spending the tax cut on 90 million will create. There is a basic economic reality-- The more a person makes the less of each added dollar they spend. It is also true that most middle income workers will spend almost ALL of the added cash they would receive from a tax cut like the democrats are talking about.

We have a simple choice-- 1.5 million wealthy pay a little more tax that will not cause them ANY financial harm so that 90 million can have more to spend to help the overall economy!

Who do you trust to produce prosperity? Bush and the GOP have produced prosperity for the wealthy in America. The middle income and the poor are worse off then in 2001. That is a fact. The Bush economic policies have shifted the wealth from the middle income and the poor to the top 10%. If you are wealthy you trust Bush and the GOP. If you are not wealthy you got NOTHING from Bush and the GOP Policies!

Island Dog

on Oct 29, 2007

The middle income and the poor are worse off then in 2001.

What is the poor doing to get themselves out of their situation? Waiting for you and the government to help probably.

Jythier

on Oct 29, 2007

You say increased spending increases demand, but you don't apply it to the labor market? It applies there too. More demand for labor will then increase spending in every other market. So a tax cut to the wealthy will increase demand for everything. Right? Isn't that what you just said, except you refuse to follow your logic to the labor market?

Say we decrease spending on labor, by taxing the wealthy more. Then, there's less demand for workers. Then, less people are getting paid less. Then, there's less demand in every other sector of the economy.

danielost

on Oct 29, 2007

That makes sense because we can not afford to add to the deficit with another tax cut and people who make over $500,000 will not cut their spending from the added 4.5% surtax. That will come from their surplus.

lets see gene. you increase spending by 1 to 2% and raise taxes on the rich by 4.5%. that is not supposed to be felt by anyone making over 500,000 a year. we have already established in another post that that would be 22,500 a year in more taxes. that means that 1. the income of the rich will go up by 1 to 2% that would be at most 10,000. 2 the taxes on these same people will go up by 22,500 plus 450 per year for the income increase that is 22,950. so the net lose to these people would be 22,950 - 10,000 = 12,950. meaning that i think that they will feel this and either fire someone or raise prices.

Noumenon72

on Oct 29, 2007

It is clear you do not have the most basic understanding of what drives our economy. Demand is the main driver and when we increase spending that increases demand.

What do you think of the saying, "Supply creates its own demand?" As in, I might "demand" a diamond-encrusted keyboard and daily pizza, but that doesn't make them spring into existence unless I actually produce something that's worth trading for them. I really think it's supply that drives the economy, and demand is only important if it gets ahead of or behind what the economy is producing.

COL Gene

on Oct 29, 2007

What is the poor doing to get themselves out of their situation? Waiting for you and the government to help probably.

The sad fact is many service jobs that NEED to be done do not pay enough for the people with these jobs to get out of being poor. Many of the service jobs Bush talks about pay between $9-12 dollars per hour. A job paying $10 per hour, 40 hours per week does not equal the Federal poverty level. Jobs at $12 per hour are just above the poverty line.

The low income Americans has not experienced much of an increase in their hourly rate during the past 7 years. However the cost of things that are essential such as food, gas, clothing have gone up which means they are WORSE off because they have not had any real wage increase but must pay more for essentials.

Middle income workers have had some increase in their wages. However because essentials they need have increased in price, their after inflation income has not increased and for many has actually dropper a bit.

Now look at the upper income groups. First the got a BIG boost from the Tax Cuts. Then their compensation has gone up significantly. Those in the upper income group are also the people who own the vast majority of the stocks that have been increasing in value. Thus the wealthy got a triple whammy-- Big tax cuts, higher wages and increased wealth from the investments! YES the wealthy are pleased with Bush and the GOP Congress!

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