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No representation without taxation
Amity Shlaes
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TEXT OF COMMENTARY
Kai Ryssdal: Those famed secret Swiss bank accounts are going to be getting a little less secret. The Swiss finance minister said today he's going to loosen up secrecy laws to keep Switzerland off a European black list of tax havens.
Back here at home it's not tax havens so much that politicians are worried about, it's tax increases. President Obama's going to have to deal with criticism from both sides of the aisle in Congress as he works out his budget plan for next year. Commentator Amity Shlaes says the discussion can't forget the lower ends of the tax charts.
Amity Shlaes: Taxation without representation. That's what our nation's founders rebelled against. Subjects in the colonies were sending money home to the crown without getting say in their own government. The course of U.S. history can be seen as progress by those who are taxed to get representation. Think of women with the 19th Amendment.
Along the way we began to pay out money to groups that paid no income tax at all. There's Medicare, of course, for senior citizens, even if they never worked; welfare for the poor and struggling, at least through the 90s. And, more recently, there's the earned income tax credit, a break for low income workers. The credit was designed to make people want to work and to offset their heavy pension payments for Social Security. The result of expanding it, however, is that many people who work don't pay income tax. Instead, they get money back.
Do we want to help weaker citizens, especially in downturns? Totally. In fact, both parties have plans that relieve yet more taxpayers of their burden. Republicans like payroll tax holidays. And the Obama administration is zeroing out the income tax obligations of yet more citizens.
But a tipping point does come when too many are paying out and too few are paying in. Maybe that tipping point is now. Today, households in the bottom half of earners pay only 4 percent of the income taxes. One tiny group, the top 1 percent, pays close to 40 percent.
This can slow the economic recovery we're waiting for. Top earners won't want to keep producing if their burden gets much heavier. But the more important problem is a problem of civics. All presidents talk about the need for community. We strengthen that sense of community when everyone has to pay some taxes. Like jury duty, paying taxes reminds you that you are part of something; it reminds you of what you owe, not just what's owed to you.
The mood of the skeptics today is just the reverse of the mood at the Boston Tea Party. Then, we said no taxation without representation. Today, try flipping that line: No representation without taxation.
Kai Ryssdal: Amity Shlaes is a senior fellow at the Council on Foreign Relations.
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Whenever anyone attempts to make the same argument that Ms. Shales is making here, I always like to ask them a fun little question: if you had a choice between making $100,000 a year and being in the 28% tax bracket, and making $25,000 a year and being in the 15% tax bracket, which would you choose?
Right-wing economists often bemoan the fact that the wealthy pay a larger percentage of their income in taxes, but until I hear about a corporate CEO saying that he'd be better off as a Wal-Mart greeter, I won't be paying much attention to the whining.
Ah, Amity Shlaes. The tireless shill for the fat cats. Yes, the rich (including me in a relatively modest way) pay more taxes. That’s because our wealth is generated from the society and the infrastructure that taxes support. Our wealth is from civilization, and taxes provide the basis for that civilization. This argument should resonate with all but the insatiably greedy. And their pitchman Amity Shlaes.
What is interesting is people ignoring the UCSD study on Polarized America and examining the top 1% trends as a percentage share of the economy. During the heart of the Great Depression polarization fell and was lagged by the income ratio. Indeed in the extended years of high unemployment from '38-'41 this trend continued. It was only in the mid-1960's that polarization increased while the income disparity was at its lowest point and that would actually lead income disparity. Even now that mid-1960's trend continues with far more political polarization, now than at any time since the 1920's. Political polarization would then fall even as the income disparity increased and then both put on a declining path by the Great Depression.
This does not support the thesis that greater income inequality promotes polarization: just the opposite has happened in the post-WWII era where a flat, static distribution of wealth had an increasing polarization effect.
This proves to be contrary to the argument that being too rich causes polarization and, indeed, when there is a static dispersal and low share of the top 1% does polarization increase, not remain flat. If the theory that more 'equitable' distribution of wealth causes harmony, then the Great Depression having that disparity lag polarization needs to be addressed, as does the post-WWII era of flat distribution percentages. Political polarization *leads* changes in wealth distribution when it is in a state of flux from either high to low or low to high. And 'fair' distribution means that polarization starts up to start changing the 'fair' system, as seen from WWII to the mid-1960's. And the wild swings in the polarization only happened *after* the progressive tax system was put in place and has caused deeper swings both up and down since then, which wasn't supposed to happen with progressive taxation systems.
ON THE CONTRARY. Tax less the poor and you will see their money spent in the local economies. Tax more the top 5% and you will have an incentive to invest (not just save after-tax income) for them. It is a misconception that all rich are "conservative"; in fact the US States where "liberals" traditionally win politically ARE the rich states. So, in reality, the rich DO understand that there should be more taxes on that top 5%. "Conservative" doesn't mean rich, this lady should stop blabbering those BRAINLESS phrases that she splattered in this article.
I turned on the radio. That voice...Those unbelievably stupid statements making my jaw drop and my eyes open wide with amazement and stupefaction. Yes! It has to be... Sarah Palin! ... Oh?... No? Amity Shlaes, a senior fellow at the Council on Foreign Relations, you say? So that's where Sarah might get a job after she finishes governing Alaska! (Remember, she has seen Russia from across the straits!)
Hey, here's another idea. Let's tax the squirrels. They may seem poor, but they should hand over a fair share of the acorns they hoard.
The Amity Schlaes' commentary was more of the same. She has nothing new to offer to the discussion and what she continually puts forth, that the high end of the income distribution pays too much in (income) taxes and the low end of the distribution pays too little, is not supported by 80 years worth of the evidence. When the top marginal rates were high, income inequality was low, and growth was fairly consistent (relative to now). When top marginal rates were low in the 1920s and 1980s-2000s, income inequality was/is high and we know what the growth pattern has been - big bubbles followed by big crashes. In addition, recent research has indicated that the higher your income, the less you respond to tax incentives to be more productive - the crux of Schlaes' argument.
Progressivity in the taxation system makes sense - the more you make, the bigger your ability to pay, and to a certain extent the lower marginal utility you get for each additional dollar. Aside from that, income tax is not the only tax we pay and many of the other are flat or regressive, undoing much of the progressivity of the federal income tax. I am repeating well-known facts but places like Marketplace keep giving Schlaes et al. a venue for pushing this idea that not only do the rich pay too much in income taxes and the poor pay too little, but also that income tax is the only kind that counts (not payroll, sales, state income, property). There is a lot more buy-in to be achieved by giving people the opportunity to participate in the system, not just pay for it, not to mention jettisoning this attitude of "I got mine, it is up to you to get yours."
I am very disappointed in Marketplace and its producers for giving a right-wing hack like Amity Shlaes airtime to peddle her intellectual dishonesty. Other posters here have already debunked her commentary of today far better than I could do, so I will only add that Shlaes is among the cadre of revisionist historians with books out trying to prove that Franklin Roosevelt's "New Deal" policies not only didn't help alleviate the Great Depression but actually prolonged it and/or made it worse. I can understand your wanting to be fair and providing a range of viewpoints, but if you must have a conservative on your air, you can do far better than a Republican Party/conservative movement sock-puppet like Amity Shlaes.
If I remember my high school history, there was an earlier time when the poor didn't pay taxes. It was called something like "The Dark Ages", I think. I guess the only difference is that the poor nowadays are called freemen instead of serfs. Oh, and nowadays the rich make their wagers on Wall Street instead of in the parlor.
Thanks for putting it all in perspective, Amity! I wonder what tax bracket you fall in...?
For the past three decades, income disparity has been increasing, see http://www.epi.org/economic_snapshots/entry/webfeatures_snapshots_20080618/
The economic regime has not only given the rich the rewards of their labor, but also a good deal of the rewards of everyone else's labor. At the same time, the marginal rates in the upper brackets have been reduced, as well as the capital gains rates, which mostly benefits the higher-income strata. "Top earners" have seen their burdens become lighter, not heavier.
As far as the sense of entitlement, nobody can top those Wall Street and executive-row suits who have been defending their perks and staggering bonuses, despite having brought ruin on their firms.
Meanwhile, the rest of us did our civic duty and voted for change, in an election with the highest turnout in 40 years.
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