Wednesday, January 19, 2005

Rational Taxation

First we have to recognize the presence of an L-curve in the spectrum of American incomes. When you plot incom across individuals in the order of income you can see that the curve is slowly rises across the range of people until you get to the top 1% and above. Then the amount of income becomes astronomical. The curve looks like an L laid on its back. The top 1% commands more than twice as much as the combined wealth of the bottom 80%. It's hard to justify that these elite are that much smarter or more valuable than 80% of the population. They are the beneficiaries of economic windfalls supplied by our market economy. There are two reasons to heavily tax the super-rich. Heavy taxes are not going to cause great damage to their health and financial security. And that's where all the money is! Sometimes you can make money with volume but sometimes you just need to find one buyer who can pay a million dollars for an apple.

If we can increase the tax on the super-rich and get our deficit managed it will greatly decrease the taxes everyone's children will have to pay--even the children of rich people.

Another easy source of tax revenue is a solid estate tax. There is no reason for this country to allow the propagation of capitalist aristocracies. We can easily set a sufficiently high threshold for this such that the apocryphal family farm is protected. Even if the threshold is millions of dollars a high estate tax can raise an enormous amount of revenue. Who better to get money from than dead people who can no longer make use of it?

Along with revenue increases spending cuts are also necessary. There must be strict fiscal transparency in our government. The first target for cuts should be corporate welfare programs. We need to encourage American business to develop successful business models that don't depend on the government for bailout or support. If the purpose of corporate welfare is to give jobs to disadvantaged folks we need to channel money directly into good infrastructure projects in which people can develop the skills they need to compete in the general labor market. The fruit of the government-supplied money should be things that benefit everyone, not just the stake-holders in government-supported companies.

Another spending target is the military. We need to repair our reputation around the world as a bully by limiting our capacity to behave as a bully. There should be plenty of support for rapid-response and defensive systems but we should not have ourselves in a position where we can unilaterally wage war. This capacity makes others more dependent on us for their own military needs than they should be and it makes friend nervous and enemies paranoid. If we are limited in our capacity to project force, other countries will contribute more to mutual defense requirements and unwise, unilateral adventures will be prohibitive.

One thing we have sees is that you can't fix bad spending by limiting taxes because Congress can borrow all it wants. We need to cut bad spending because of our respect for the taxpayers. Taxation is a necessary evil that needs to be strictly controlled.

As much as possible we need to get the money-raising game out of our political campaigns. The need for money invites de facto corruption of our political process. I want my congressional representatives to legislate on merit rather than money. We need to get our officials out of the business of harvesting pork. The conflict of regional disputes over who is to receive the largesse of a government project needs to be resolved by some mechanism of disinterested, incorruptible third parties rather than by whoever holds the most power in the appropriations committee.

Raising taxes and demonstrating a positive revenue stream is the best thing for our economy. It keeps the dollar strong and attracts foreign investment.

2 comments:

Anonymous said...

So your logic is based around selling apples for 1 million each. Last I remember our market would make that buisness go out of business. If you give 90% of your apples out for free and charge the last 10% pay 10 times what everyone else charges, you will lose those last 10% as customers and in turn have no money. Logic like that is what seperates the rich from the poor.

Kendall said...

If people inordinately benefit from the market lottery or the birth lottery I think it makes perfect sense for them to bear a greater proportional burden than those who don't. Many of these lottery winners understand this and are conscientious about doing altruistic things with their windfalls. Why should megalomaniacal greed be a protected American value? The selfish fat cats have sold the lie to the masses that they benefit when the fat cats benefit when the opposite is the case. It's similar to how the Southern aristocracy got all those poor farmboys to fight to preserve slavery. No matter how poor they were there was always going to be a black man that further down to kick around. Today the deluded red-staters are kept happy with token tax-break crumbs while the super-rich take over the warehouses.