4.23.2011
Should President Obama Pay More in Taxes?
Tax day has passed, but that hasn't quite stemmed the flow of tax-related articles droning around the blogosphere. We found one in particular to be of interest, this piece by one of our personal favorites, Gregg Easterbrook. In it he analyses President Obama's tax return and has a little bit of fun with numbers. While the Obamas are very generous on the charity front, and though their average tax rate is higher than most individuals lucky enough to find themselves at the First Couple's income level, Mr. Easterbrook nonetheless concludes that Mr. Obama's money is not quite where his mouth is...
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I liked this article. I think the counterpoint I was looking for was posted in the comments by sdn1965. [I am not sdn1965]. Sadly, I had to read a lot of vitriol from left and right before I found a reasonable counterpoint, but you can skip to it using your browser's "find" feature.
ReplyDeleteIf you don't care to, her/his point was that Mr. Obama paying more in taxes would effectively subsidize millionaires who chose not to do so. Taxes are not just about making room for government consumption, they're also social value programs, and Mr. Obama's social values might not include subsidizing Paris Hilton's lifestyle by reducing the need to raise her taxes.
This also reminds me of an excellent post by Steven Landsburg at http://www.thebigquestions.com/2011/04/18/the-man-who-cant-be-taxed/ which argues that Paris Hilton CAN'T be taxed. Landsburg's argument, however, pulls a bit of a fast one by forcing non-economists who think of taxes as about revenue to think about it as consumption.
For my part, once I understood his argument, I think Mr. Obama (and I) would say that BECAUSE Paris Hilton can't be "taxed" is the very reason to tax her! After all, the consumption taxed when we tax the idle rich is diffused throughout the economy, whereas the consumption taxed when we tax the poor is concentrated on a single family, and in the form of rent, prescription medicine, or a child's braces.
Whether we tax the poor or Paris, ripple effects are sent out that cause people to "cancel their vacations and car purchases and factories." That's not unique to taxing Paris. But by taxing Paris instead of the poor, we raise the same nominal "revenue" and the consumption taxed is merely a fraction of each of those things--and in some cases, may actually be socially BAD consumption that we'd love to tax (like making cigarettes). Of course, Landsberg leaves that part out, because that would spoil his fun. But it's still a neat post.
Thanks for the excellent thoughts and helpful link.
ReplyDeleteA few thoughts if I may...first off, much as it pains me to say so, Ms. Hilton is not necessarily a member of the ‘idle’ wealthy class. Whether or not you find some of her activities to be of any redeeming social value, she has/does stimulate consumption through her television show, clothing/product lines, music 'career,' modeling, book sales and yes, even her...ahem...movie career. Unless you don’t subscribe to the monetary theory of value, it would be tough to argue this point.
However, we can agree that there is indeed a class of individuals out there who can rightly be classified as idle wealthy. We can also agree that, if pressed (and probably not even that hard) Mr. Obama would admit that he would not want to subsidize those who fall into this category. However, there has to be an acknowledgement of the flip side of this coin as well...namely that some wealthy are not idle, and that they are probably making value judgments as well. Many of them would not want to subsidize the idle poor. Or parks. Or highways. Whatever it might be, this will always be the 'problem' with taxing and spending; it is nearly impossible to match up everyone's social values correctly with the money they are contributing to the nation's pot.
Social/value judgments aside, I personally don't have a problem with Mr. Obama's tax return. I don't even find it hypocritical, as Mr. Easterbrook seems to. The President is criticizing the system while still playing within its current rules. No problem there.
However, to the extent that Mr. Obama/we criticize the system, it is also important to consider alternatives. One way to think about this through the question (since we are on value judgments) of 'what would the fairest system be' with 'fair' factoring in everything from social justice to personal choice to reality. Would this simply mean getting rid of all of the subsidies and credits to make marginal brackets a reality more than something to avoid? A higher zero bracket? More or less personal deductions? Thinking in some of the terms you noted above, perhaps a consumption tax?
This would certainly allow everyone to better match up their outlays with their social values. Mr. Obama could spend on food, clothing, charity, education for his girls…whatever he wanted and without any concerns that what is currently a tax gap would have been wasted on those who were unworthy in his mind (ie the idle wealthy whose own tax gaps he would hypothetically be subsidizing).
All ‘solutions’ to the tax code problem and all of its inequalities of course have costs and benefits. And, as you note above, repercussions. Consumption taxes could reduce purchases...or they could stimulate the economy if in lieu of income-based taxes. Eliminating progressivity could decrease social justice; increasing the zero bracket could reduce the federal coffers and thus the ability of the government to fund programs. Increasing average taxes could hurt business.
The truth is that any solution to the tax 'problem' will have vehement supporters and detractors, often in equal, and equally loud, measure. And both sides will inevitably be able to find qualified and even Nobel economists to support and advocate their points from the op-ed pages of the New York papers to the committee hearings of Congress. I suppose that is why economics is a social, and not a hard, science...we can probably both agree upon that!
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