Thursday, November 30, 2006

"Who still thinks the GOP is the frugal party? Anyone? Anyone?"


Inspired by Slave Wage Awareness Week here at Not Right, Phillip sends us the latest Ben Stein editorial via e-mail. Here's what the Artist Formerly Known as Phizz had to say about it:

Yo Ian: party at my casa Saturday. Your turn to bring the goat and the duct tape. Also bring Spicy Nacho Doritos.

Whoops, wrong e-mail! But he did highly recommend Ben Stein's stance on who's really to blame for the current record deficit. Want to guess at whom the avid Republican and former Nixon speechwriter points the finger? Exactly!

Put simply, the rich pay a lot of taxes as a total percentage of taxes collected, but they don’t pay a lot of taxes as a percentage of what they can afford to pay, or as a percentage of what the government needs to close the deficit gap.

Something to think about the next time a dittohead tells you that the top 1 percent pays the top 182 percent of taxes, or whatever the official figure is this week. The only percentage that matters is the one they pay as individuals.

Here's a candy analogy: Suppose you have 100 Mike and Ikes, and I have 20. You pay 20 as a tribute to the Mob, while I pay 10. Why, you've given away twice as many Mike and Ikes as I have, you selfless philanthropist! You're also taking two-thirds of the burden of the payment we owe to the Mob. On the other hand, I'm paying 50 percent of my candy, while you've paid only 20 percent. That's barely a loss to you, whereas I'm starved for my real fruit flavors. And we still owe the Mob big anyway, because Mike and Ikes don't pay off gambling debts and flashy new war toys.

But wait a minute! Professor Stein, aren't you merely fomenting class warfare by blaming the current deficit on the rich?

Even though I agreed with him, I warned that whenever someone tried to raise the issue, he or she was accused of fomenting class warfare.

“There’s class warfare, all right,” Mr. Buffett said, “but it’s my class, the rich class, that’s making war, and we’re winning.”

And who is this Mister Buffett? Jimmy? Nope; it's Warren E. Buffett, famous zillionaire and economic realist.

Mr. Buffett compiled a data sheet of the men and women who work in his office. He had each of them make a fraction; the numerator was how much they paid in federal income tax and in payroll taxes for Social Security and Medicare, and the denominator was their taxable income. The people in his office were mostly secretaries and clerks, though not all.

It turned out that Mr. Buffett, with immense income from dividends and capital gains, paid far, far less as a fraction of his income than the secretaries or the clerks or anyone else in his office. Further, in conversation it came up that Mr. Buffett doesn’t use any tax planning at all. He just pays as the Internal Revenue Code requires. “How can this be fair?” he asked of how little he pays relative to his employees. “How can this be right?”

Simple--it's not! And, according to Stein (and most people who don't drink the punch), neither is the idea that lower taxes generate more government revenue. Indeed, Stein argues for higher taxes whenever appropriate. Gasp!!

The sad fact is that spending rises every year...spending has risen every year since 1940 except for a few years after World War II and a brief period after the Korean War.

The imperatives for spending are built into the system, and now, with entitlements expanding rapidly, increased spending is locked in. Medicare, Social Security, interest on the debt — all are growing like mad, and how they will ever be stopped or slowed is beyond imagining...

People ask how I can be a conservative and still want higher taxes. It makes my head spin, and I guess it shows how old I am. But I thought that conservatives were supposed to like balanced budgets. I thought it was the conservative position to not leave heavy indebtedness to our grandchildren. I thought it was the conservative view that there should be some balance between income and outflow. When did this change?

Oh, now, now, now I recall. It changed when we figured that we could cut taxes and generate so much revenue that we would balance the budget. But isn’t that what doctors call magical thinking? Haven’t the facts proved that this theory, though charming and beguiling, was wrong? [...]

If, in fact, it’s all just a giveaway to the rich masquerading as a new way of stimulating the economy and balancing the budget, please, Mr. Bush, let’s rethink it. I don’t like paying $7 billion a week in interest on the debt. I don’t like the idea that Mr. Buffett pays a lot less in tax as a percentage of his income than my housekeeper does or than I do.

Ben Stein knows a thing or two about money, having had enough to give it away every week on his eponymous game show. His government-spending ideal is classic paleocon: small government doing smart spending with big funds. As Stein said, he is indeed old; old enough to recall a time when taxes were fair and deficits did matter. The GOP would be wise to heed the words of one of its most ubiquitous voices.

10 comments:

GumboFilé said...

Good post. Great title.

Nick said...

"Here's a candy analogy: Suppose you have 100 Mike and Ikes, and I have 20. You pay 20 as a tribute to the Mob, while I pay 10. Why, you've given away twice as many Mike and Ikes as I have, you selfless philanthropist! You're also taking two-thirds of the burden of the payment we owe to the Mob. On the other hand, I'm paying 50 percent of my candy, while you've paid only 20 percent."

The problem with this argument is that income taxes don't work that way. The higher your income, the larger percentage of that you have to pay be in taxes.

If fact, many of the "poor" don't pay any income taxes. The last two years, my wife, as a working single mother, always got back a couple thousand dollars at the end of the year.

In regards to S.S. taxes, everyone puts in because everyone is SUPPOSED to benefit. However, we know that S.S. will not be around for all of us when we retire, at least I'm not counting on it.

Ian McGibboney said...

Gumbofile, thanks.

Nick: My analogy includes, though probably understates, the effect of payroll tax as well as income tax. Payroll taxes (the taxes withheld from your paycheck) are the real crusher for lower income brackets. But somehow, most of today's tax talk leaves them out altogether.

But going back to income tax: Stein argues that, while the rich pay a higher fraction of their income in taxes, that percentage isn't proportional. So they actually get away with paying a smaller percentage than their income would merit. Factor in tax loopholes, professional planning and expensive deductions, and higher brackets can pay far less than even that relatively small amount. Check out Buffett's quotes again. As a wealthy employer, even he's appalled!

oyster said...

Does Nick even read this quote from the article?

"It turned out that Mr. Buffett, with immense income from dividends and capital gains, paid far, far less as a fraction of his income than the secretaries or the clerks or anyone else in his office."

The income tax structure provides many ways for high income folks to divert, deduct and postpone taxes in ways that are unavailable or impractical for most working class folks. High Net Worth people don't merely pay their tax accountants to handle paperwork.

GumboFilé said...

I like God's tax, the tithe. Everyone is expected to pay ten percent but no one is forced. The state asks for much more and uses force to get it.

Anonymous said...

Here is a much better analysis breakdown of tax cuts by an economics professor. Pay particular attention to the last paragraph.

Tax Cuts - A Simple Lesson In Economics

This is how the cookie crumbles. Please read it carefully.

Let's put tax cuts in terms everyone can understand. Suppose that every day, ten men go out for dinner. The bill for all ten comes to $100.

If they paid their bill the way we pay our taxes, it would go something like this: The first four men (the poorest) would pay nothing. The fifth would pay $1. The sixth would pay $3. The seventh $7. The eighth $12. The ninth $18. The tenth man (the richest) would pay $59.

So, the ten men ate dinner in the restaurant every day and seemed quite happy with the arrangement, until one day, the owner threw them a curve.

"Since you are all such good customers," he said, "I'm going to reduce the cost of your daily meal by $20."

So, now dinner for the ten only cost $80. The group still wanted to pay their bill the way we pay our taxes.

So, the first four men were unaffected. They would still eat for free. But what about the other six, the paying customers? How could they divvy up the $20 windfall so that everyone would get his 'fair share'?

The six men realized that $20 divided by six is $3.33. But if they subtracted that from everybody's share, then the fifth man and the sixth man would each end up being 'PAID' to eat their meal.

So, the restaurant owner suggested that it would be fair to reduce each man's bill by roughly the same amount, and he proceeded to work out the amounts each should pay.

And so: The fifth man, like the first four, now paid nothing (100% savings). The sixth now paid $2 instead of $3 (33% savings). The seventh now paid $5 instead of $7 (28% savings). The eighth now paid $9 instead of $12 (25% savings). The ninth now paid $14 instead of $18 (22% savings). The tenth now paid $49 instead of $59 (16% savings).

Each of the six was better off than before. And the first four continued to eat for free. But once outside the restaurant, the men began to compare their savings.

"I only got a dollar out of the $20," declared the sixth man. He pointed to the tenth man "but he got $10!"

"Yeah, that's right," exclaimed the fifth man. "I only saved a dollar, too. It's unfair that he got ten times more than me!"

"That's true!!!" shouted the seventh man. "Why should he get $10 back when I got only $2? The wealthy get all the breaks!"

"Wait a minute," yelled the first four men in unison. "We didn't get anything at all. The system exploits the poor!" The nine men surrounded the tenth and beat him up.

The next night the tenth man didn't show up for dinner, so the nine sat down and ate without him. But when it came time to pay the bill, they discovered something important. They didn't have enough money between all of them for even half of the bill!

And that, boys and girls, journalists and college professors, is how our tax system works. The ones who get the most money back from a reduction are those who paid in the most. Tax them too much, attack them for being wealthy, and they just may not show up at the table anymore.

David R. Kamerschen, Ph.D Distinguished Professor of Economics 536 Brooks Hall University of Georgia

Ian McGibboney said...

CT, your "great analysis" wasn't written by Kamerschen. In fact, apparently nobody knows who wrote it, and those to whom it has been attributed tend to dispute it or remain mum on its veracity. And I can understand why; no serious analogy would throw in the typical wingnut joke about everyone else beating up the poor person.

But all that aside, it's a flawed analogy to begin with; because it incorrectly assumes that everyone in America eats at the same table.

dlc said...

Ian,

that is the weakest argument yet. B/c not everyone eats at the same table. what a douche.

Ian McGibboney said...

You want weak, dlc? Make an argument from a chain letter that can be debunked with a two-second Google search. Or rebut an opposing view by calling the debater a douche. That's weak.

I stand by my last remark. For CT's story to be even remotely true, we'd have to assume that everyone involved eats the same high-quality food, but pays differently. But a truer analogy would take into account that the richest people ate filet mignon, while the poorest settled for potted meat. That hardly seems like a bargain for anyone involved, except for those paying a cheaper price for the top-shelf grub. That is a much more accurate picture of taxation in this country.

Anonymous said...

The same table everyone eats from is called the United States of America and freedom to succeed or fail according to your own efforts. Everyone has the same opportunity to succeed as everyone else. However, when you do succeed then someone wants to take away you hard earned success.