Unfair to the readers

“you’re”

The Bush tax cuts (which Congress just voted to extend) are an affront to the most fundamental principles of fairness.

Which Congress just voted to extend? What exactly he is talking about – I don’t think Congress voted to extend anything, they passed a corporate tax-cut bill, correct?

abb: I believe they did both. Bush’s “middle class tax cut” (the one that directs more than half of the money to the top 10% vs. 14% of the money to the bottom 60%) was extended for the 4th year in a row. (An interesting way to finance a war). I think the corporate tax break (initially written to do no such thing) was a separate bill that passed.

There’s always an argument that they might be fair – It all depends on how you define fair! Maybe its fair since the rich deserve tax cuts because they work harder. In which case the author should say so.

Still I have to agree that this “clever – silly” style of economics writing has been in the ascendey in economics writing. Personally I put it down to the increasing tendency of texts and articles to describe groundbreaking/intelligent theories as being “counter intuitive”. This is indeed often the case, but as this articles shows the inverse does not apply, counter intuitive ideas are not necessarily intelligent.

You didn’t refute anything.

Stephen stated his opinion that progressive taxes are unfair.

You stated your opinion that proportional taxes are unfair.

You both agree on the numbers.

Despite your opinion that, ‘There’s probably no point in arguing at length over the “right” way to present data’, arguing about data presentation is pretty much, one way or the other, all you did in this post.

I support the idea of progressive taxation.

I have no real problem with the idea, that any tax cut should first relieve any existing tax burden on the lowest income earners, before relieving any burden on the highest income earners.

But I think it is a bit disingenuous to argue that a proportional tax or progressive tax cut is unfair to the poor because the rich receive a greater dollar amount in tax cuts, unless you would also argue that a proportional tax increase or regressive tax increase would be unfair to the rich, if they would pay a greater dollar amount in tax increases.

Again, for those incapable of seeing anything but straw and figments, I am not arguing that proportional or regressive tax increases are unfair to the rich, I am not arguing against progressive taxation, I am arguing that the reasoning that was used to present proportional tax cuts as unfair was disingenuous.

Just come out and say what you really mean.

Any tax cut no matter how progressive(can I use progressive that way, does it work?) is unfair unless every nickel of tax burden has been relieved from the poorest tax payers, before a nickel of tax relief is given to richer tax payers.

Or at least set your parameters.

(You can cut 1% from the highest income earners, even if they reap a greater total benefit, as long as you cut 50% from the lowest income earners)

LA Times: Bush Administration Suppresses CIA Report Until AFTER the Election!

http://www.latimes.com/news/opinion/la-oe-…l=la-util-op-ed

October 19, 2004

Robert Scheer: The 9/11 Secret in the CIA’s Back Pocket The agency is withholding a damning report that points at senior officials.

It is shocking: The Bush administration is suppressing a CIA report on 9/11 until after the election, and this one names names. Although the report by the inspector general’s office of the CIA was completed in June, it has not been made available to the congressional intelligence committees that mandated the study almost two years ago.

“It is infuriating that a report which shows that high-level people were not doing their jobs in a satisfactory manner before 9/11 is being suppressed,” an intelligence official who has read the report told me, adding that “the report is potentially very embarrassing for the administration, because it makes it look like they weren’t interested in terrorism before 9/11, or in holding people in the government responsible afterward.”

When I asked about the report, Rep. Jane Harman (D-Venice), ranking Democratic member of the House Intelligence Committee, said she and committee Chairman Peter Hoekstra (R-Mich.) sent a letter 14 days ago asking for it to be delivered. “We believe that the CIA has been told not to distribute the report,” she said. “We are very concerned.”

According to the intelligence official, who spoke to me on condition of anonymity, release of the report, which represents an exhaustive 17-month investigation by an 11-member team within the agency, has been “stalled.” First by acting CIA Director John McLaughlin and now by Porter J. Goss, the former Republican House member (and chairman of the Intelligence Committee) who recently was appointed CIA chief by President Bush.

The official stressed that the report was more blunt and more specific than the earlier bipartisan reports produced by the Bush-appointed Sept. 11 commission and Congress.

“What all the other reports on 9/11 did not do is point the finger at individuals, and give the how and what of their responsibility. This report does that,” said the intelligence official. “The report found very senior-level officials responsible.”

By law, the only legitimate reason the CIA director has for holding back such a report is national security. Yet neither Goss nor McLaughlin has invoked national security as an explanation for not delivering the report to Congress.

“It surely does not involve issues of national security,” said the intelligence official.

“The agency directorate is basically sitting on the report until after the election,” the official continued. “No previous director of CIA has ever tried to stop the inspector general from releasing a report to the Congress, in this case a report requested by Congress.”

None of this should surprise us given the Bush administration’s great determination since 9/11 to resist any serious investigation into how the security of this nation was so easily breached. In Bush’s much ballyhooed war on terror, ignorance has been bliss.

The president fought against the creation of the Sept. 11 commission, for example, agreeing only after enormous political pressure was applied by a grass-roots movement led by the families of those slain.

And then Bush refused to testify to the commission under oath, or on the record. Instead he deigned only to chat with the commission members, with Vice President Dick Cheney present, in a White House meeting in which commission members were not allowed to take notes. All in all, strange behavior for a man who seeks reelection to the top office in the land based on his handling of the so-called war on terror.

In September, the New York Times reported that several family members met with Goss privately to demand the release of the CIA inspector general’s report. “Three thousand people were killed on 9/11, and no one has been held accountable,” 9/11 widow Kristen Breitweiser told the paper.

The failure to furnish the report to Congress, said Harman, “fuels the perception that no one is being held accountable. It is unacceptable that we don’t have [the report]; it not only disrespects Congress but it disrespects the American people.”

The stonewalling by the Bush administration and the failure of Congress to gain release of the report have, said the intelligence source, “led the management of the CIA to believe it can engage in a cover-up with impunity. Unless the public demands an accounting, the administration and CIA’s leadership will have won and the nation will have lost.”

Exactly right. That was one of the stupidest articles I’ve read of the “silly/clever” type in Slate. There is something to the pragmatic test of a belief — action. If Lnadburg actually believed it, he would be voting for Kerry in order to give the rich a tax break.
Myself, I think that, if a tax system is really based on a linear equation in which you figure out exactly how much you get out of government in order to figure out how much you put into it — than the wealthy should surely be paying around the Truman level, a 60 percent tax rate. Simply calculating, for instance, the effect of the Federal Reserve on accruing money for the dividend set, or the effect of the mortgage pools that are tacitly guaranteed by the Gov (in spite of the official rhetoric, we all remember who paid for the S & L blowout), gets us at least halfway there. As for the 400 billion that goes into defense, that’s pretty much a wash for the working class.

Finally, of course, your statement about “the opportunities for tax avoidance and evasion”, otherwise known as deductions, is spot on. If I compare the taxes paid, for instance, on two people with the same income, one of whom rents, and the other of whom pays a mortgage, it would be intellectually dishonest to ignore the homeowner’s deduction.

Landsburg piece was shot through with that kind of intellectual dishonesty. If he really believed it, he would have been an ardent supporter of Howard Dean, the only candidate who wanted to roll back the whole of Bush’s system — so his beloved rich people could gain an abstract and meretricious percentage spread like they used to enjoy under Clinton. Yeah, right. What a clown.

The justification for progressive taxation actually predates Smith and is due to Sir William Petty, who pointed out that people ought to be taxed “according to the share and interest they have in the Publick Peace; that is, according to their Estates or Riches”.

Seth has it right in comments above; the rich get more benefits from government simply because they are rich, because, to put it crudely, it costs more to insure a Ferrari than a Ford. Or as I seem to remember putting it the last time we went round this mulberry bush: if there was a revolution tomorrow, then my dustman would still be in his old job, but Warren Buffet would most likely be dead. Therefore Warren Buffet has a much greater interest than my dustman in paying for a social welfare system that keeps the poor from wanting to rebel.

abb1, it’s fair because some people work harder, put in more hours, and generally have lived a more responsible lifestyle. I resent your comment that one who is making good amounts of money is a lazy golf playing plutocrat, because it’s about as ignorant as the other side saying that working stiffs are bunches of sniveling half-wits who have never learned how to do anything except receive a handout from the government that is giving it. We should just go to a flat tax to end the griping from both sides about who is getting the short end of the stick. Additionally, it would help us curb this disguise of consumers using non-profits as tax shelters. You can write off donations made to churches, the same churches that allow a candidate to speak out of the pulpit in a worship service. And that is “fair?”
Please, to hear you people talk about “fair” like we were all born to acheive a similar outcome, irrespective of how much more productive one has been than the other makes me sick. We all do eventually have the same outcome…we die. The money we make before that outcome should remain ours if we so “choose.”

it’s fair because some people work harder, put in more hours, and generally have lived a more responsible lifestyle

Yes, that would be fair, indeed.

However, crony capitalism where a bunch of powerful plutocrats steal unimaginable amounts of money from everyone else is hardly that.

Don’t be a sucker, Mr. Winston.

The argument made by the original poster that Social Security and Medicare should be included as tax is also silly. These are more akin to user fees than progressive income taxes. I don’t think the argument that the “rich” get back their money for taxes. If and when they do, these and other welfare benefits should be cut.

I don’t deny that charlatans exist. However, I feel that a phony can be a wealthy CEO’s or just as equally be welfare citizen. Yes, there are those who steal, both rich and poor. What makes it okay for govt. to indescriminately “take back” in the form of a tax from those who have made an honest dollar versus those who have stolen?
There, abb1, is your injustice.
Very truly yours, A Sucker

You write:

“Suppose, in an initially progressive system, high income people initially pay 40 per cent of their income in taxes, and low income people initially pay 10 per cent. Then suppose the rates are cut to 30 per cent and 5 per cent.
Clearly, the high income earners have gained twice as much, relative to pretax income, as the low-income earners.”

In other words, you missed the entire point of the article.

The Bush deficits have made future tax *increases* inevitable. The right question is not “Who got the biggest tax cut?” (because the cuts are illusory). The right question is “Who will get the biggest tax increase?”

Point One: The Bush-era changes to the tax code has made the tax code more progressive. If that progressivity is maintained, then when the inevitable tax increases come along, the rich will, as a result of Bush, be bearing a higher share of the tax burden
in both absolute *and* percentage terms.

That in fact is the *main* point and you missed it completely.

Point Two: I happen to think the tax code is currently too progressive and therefore that this is a move in the wrong direction. You (apparently) happen to think the tax code is
currently not progressive enough, so you should think this is a move in the right direction.

Your and my particular preferences are really not germane to the main point here, which is, again, that a) Bush has effectively raised taxes and b) the bulk of the tax increase, in percentage terms and in absolute terms, will fall on the rich.

The Bush-era changes to the tax code has made the tax code more progressive.

Is it true, though? How is it possible with the top tax bracket getting the largest cut, taxes on dividends being cut and the estate tax being eliminated altogether?

Something is fishy here, professor.

Stephen, I agree with abb1. The tax code was not made more progressive with the Bush cuts (John’s footnote 2, which you would have done well to have read before shooting your mouth off about other people’s reading habits, refers).

The tax code was not made more progressive with the Bush cuts

Now you’re at least arguing about something interesting.

I haven’t carefully read the article you refer to. I have done my own calculations, accounting for cuts in income tax rates, payroll taxes, AMT, EITC, taxes on dividends, capital gains, corporate income, child care tax credit, etc. I’ve presented the results of those calculations in the Slate column. If you think they’re wrong, we have something substantive to argue about—and something that can, in principle, be settled one way or another by an appeal to the facts.

But I continue to insist that a) your and my preferences regarding progressivity, absent interesting new arguments, are not terribly interesting, and were not the heart of what I was writing about, and b) we are not talking about tax cuts; we are talking about tax increases, so that when you assert that “the rich got a bigger cut” you cannot be right.

Responding to John Quiggin:

Stephen, having shown that the tax code was not made more progressive (even your own graph shows this!) I didn’t feel it necessary to go further.

“Progressive” is, of course, not a precisely defined term. What I see in those graphs seems to me to count as an increase in progressivity. If you disagree, that’s fine. The graphs stand on their own.

But I don’t see the last stage in your argument either. We can’t predict how the deficit will be made up, but it seems likely to be some combination of tax increases and spending cuts, which will leave the rich (as net contributors) better off.

I agree that this is the weakest point in my argument (i.e. the point where I am most likely to be wrong). It seems to me, based partly on a casual reading of recent history and partly on gut feeling, that it is easier to make the tax code more progressive than to to make it less so.

You seem to be arguing that there is some asymmetry here, but it’s unclear what it is.

“Arguing” probably overstates the case; I haven’t given anything that merits the honor of being called an argument. But I’m willing to take a bet on how this goes.

Progressive” is, of course, not a precisely defined term.

Yes it is. A tax system is progressive if the average rate is an increasing function of income.

Steven Landsburg writes:
“Point One: The Bush-era changes to the tax code has made the tax code more progressive. If that progressivity is maintained, then when the inevitable tax increases come along, the rich will, as a result of Bush, be bearing a higher share of the tax burden in both absolute and percentage terms.
That in fact is the main point and you missed it completely.”

I doubt that the Bush tax cuts made the tax burden more progressive, but I’ll accept it here for the sake of argument. Now I had been rather confused about what Stephen’s argument is, since he argues that the unfair tax “cuts” aren’t (except pedantically) really “cuts” at all. He can’t be arguing that non-existent tax cuts are unfair. But now I think I see his point; he thinks that the tax cuts have made “inevitable” future tax increases that disporoportionately burden the rich. And *that* is what he thinks is unfair. Not the fact that under the Bush tax cuts, some poor people got $500 back, while some rich people got $300,000 or so.

“If that progressivity is maintained” (in any hypothetical future tax increases) is the important qualification here. Of course, under a reelected Bush administration, we have no reason whatsoever to think it would be – because they might go about balancing the budget with regressive tax increases on income, or taxes on consumption which are highly regressive, or regressive cuts in expenditure that hit medicare and social security. So let’s just be intellectually honest and point out that what Stephen is arguing is not really *that the republican tax cuts are unfair*, but that *the democratic replacements to cut the budget deficit likely would be*.

Personally, I disagree with him, for the reason that were there no government, economic infrastructure, and widespread cooperative economic activity, there would be no very rich people either. That means that rich people extract *very much* more benefit from government (and from other people) than poor people do. They just don’t get the benefit from government so directly (for example, in the form of welfare checks). Given their greater ability to pay as well as their greater benefits received, it seems to me to be no bad thing that people who have enjoyed more opportunity, or more economic luck, are asked to take on more of the share of the burden when it comes to sustaining the system we live by. Now I happen to think that this is not all a matter of personal opinion, and that if more magazine writers with columns would explain why regressive taxes are a bad thing, a lot more people would agree with me. But Stephen doesn’t think there are “interesting new arguments” here, so that’s off the table.

On the other hand, excepting the (unargued for) premise that tax increases less progressive than the system they are introduced into are politically inexpedient, Stephen’s own “interesting new argument” doesn’t seem to offer much. It says that (i) Bush has created a budget deficit, (ii) (controversially) the tax cuts resulted in a slight increase in the progressivity of the tax system overall, and (iii) when we plug the gap, we can either (a) put more of the burden back on the rich, or (b) regressively tax the poor. Stephen’s claim that “the Bush tax cuts are unfair” seems in fact to be a highly misleading way of expressing the claim that he personally favors (b). I just wish that’s what he’d *said*!

Apologies to Mr. Landsburg for misspelling “Steven” in that last post

Blast! Stephen is actually making a (slightly) stronger claim that mathematically I probably should account for. I mean since he’s being such a pedant and all. Insert the word ‘strictly’ in the appropriate place in the second sentence of my previous comment.

I would be very much interested in a philosophical analysis of the arguments presented at http://www.taxwisdom.org. The essential argument is that the progressive income tax does not impose any real burden on taxpayers in terms of purchasing power because it preserves the relative “bidding positions” of all taxpayers within the hierarchy of all disposable incomes.

Can anyone offer a cogent counter-argument?

Thanks,

Linette

Ooh, I wished I’d checked CT earlier today. The Case for Looting was one of the most idiotic attempts to apply economic thinking that I’ve ever seen.

there is no widely agreed upon definition of progressivity.

Yes there is; dsquared already reminded you of what it is, and as a Ph.D. economist, you know it perfectly well. You may not agree with it, but virtually all economists not named Steven Landsburg do.

The Bush-era changes to the tax code has made the tax code more progressive.

You have presented no data that bear on this question. The percentage change in dollar amount of taxes paid is not the relevant number; as you know, progressivity is measured by looking at the percentage of income paid in taxes. To demonstrate your point, you would have to present data (not just a chart, but the underlying data) on that percentage, or use some other recognized measure of progressivity, as used by Brian Roach in the article John linked to.

Finally, I want to reiterate that I was especially disturbed that, in complaining about the “unfairness” of the Bush tax cuts, you simply pretended that the well-established principles of tax equity, which I referred to earlier, do not exist. You did not address them at all. For a Ph.D. economist, well-versed in these matters, to discuss tax fairness without addressing these issues is, to say the least, highly irresponsible, if not downright dishonest.

The looting thing is obviously tongue-in-cheek, typical Slate/Kinsley-style contrarianism, the “why idiots make better presidents” kinda stuff. Call it ‘silly-clever’ if you wish, but it’s often good, it’s funny.

And I thought the ‘Bush tax-cut benefits the poor’ would be one these things too. But if the guy who posted here is indeed Steven Landsburg, then it’s a bummer – he actually believes it. Instead of saying: hey, where’s your sense of humor, folks, this was merely a parody of the Heritage – he actually defends it.

Perhaps over the years these Slate people have gotten brainwashed by their own shtick.

Come to think of it, this is also very funny.

It is rather funny that a man who writes for a blog called Marginal Revolution seems blithely unaware of the historic roots of the progressive income tax. Martin Daunton’s essay in History and Policy, “Quality and incentive: fiscal politics from Gladstone to Brown” shows that Adam Smith’s precept for taxation — that it should involve ‘equality of sacrifice” — was recalibrated by the marginal utility economists, like Alfred Marshall:

“Alfred Marshall’s Principles stressed the marginal costs of producing another unit of output, and the marginal satisfaction to be derived from consuming it. In this approach, an additional pound did not produce the same satisfaction for someone in receipt of an income of 1,000 as for someone in receipt of an income of 100. The meaning of equality of sacrifice was more complicated than writers in the past had appreciated. Did equal sacrifice mean each taxpayer should surrender the same proportion of their total utility?

“That is, the aim should not be to take 10 per cent from all income levels ( 5 from an income of 500 and 10 from an income of 1,000), but rather to extract the same proportion of happiness or satisfaction, which varied according to income. Or did it mean an equal marginal sacrifice in order to produce minimum disutility? By this definition, the aim was to calculate the additional satisfaction produced by the final increment of income, and to ensure that the rate of taxation on that income imposed the same loss of utility or satisfaction. Thus the final 10 of income for someone earning 500 might produce three times as much satisfaction as the final 10 for someone earning 1,000, so that the tax rate could be three times as high on the larger income with the same marginal disutility.”

But an economic sophist like Landsburg is, of course, not going to be aware of this history, or interested in it, even as he uses the theory.

Typical.

Quiggin, Is there proof that high income earners also use more government services and therefore are rightly charged more in taxes? I’ve heard this argument before but I haven’t seen anyone point to reliable research that tries to calculate exactly how much more government services are used by high-income earners.