The Verdict - HELP ME PLEASE

Is it Tuesday yet? No more politics after this... I promise.

I'm thrilled to say that I will actually not have to personally reply to the author of the e-mail in question (see last post) because many people beat me to it... and probably argued more eloquently and poignantly than I ever could have.

Below is a series of e-mails that were either forwarded to me or sent to me directly, including another e-mail from the gentleman who "authored" the experiment. "Authored" is in quotes because it turns out it actually wasn't his idea... the "study" was done by someone else and he plunked himself into it to make a point.

I should note: the said "plagiarism" makes no difference to me. I think he made an argument that many, many McCain supporters have made and whether it was his original idea or not, it doesn't matter. It's an idea that needs to addressed.

I haven't included the names of the authors because I don't know these people and I'm not sure how they'd feel about me posting their name (or their response, for that matter) on my blog. Should anyone request me to take their e-mail down, I certainly will.

One of my most favorite responses:

Let's keep something in perspective: Obama is proposing to raise taxes to what they were under Bill Clinton for people making over $250K/year. Did you think we lived in a socialist society, then?

I think you can make plenty of arguments about keeping marginal tax rates low, but calling a progressive taxation system "socialist" is simply lazy thinking -- oh, wait. Only liberals are lazy thinkers. I'm sorry...

Even Adam Smith in The Wealth of Nations proposed that a progressive tax system is perfectly reasonable. To wit:

The necessaries of life occasion the great expense of the poor. They find it difficult to get food, and the greater part of their little revenue is spent in getting it. The luxuries and vanities of life occasion the principal expense of the rich, and a magnificent house embellishes and sets off to the best advantage all the other luxuries and vanities which they possess. A tax upon house-rents, therefore, would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be anything very unreasonable. It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion. (from this Wikipedia article)

In my opinion, calling Obama (and like-minded people) socialists is just as bad as lefties calling Bush and his administration "fascists". It's completely bogus in both cases and actually trivialization the evils of socialism and fascism while dealing in bad faith with your ideological opponents. Let's think and make arguments, rather than throwing around negative labels.

As for Joe's original point: you're thinking about it simply from the perspective of "taking my money and giving it to someone else without my permission". This is fine as far as it goes, but I have a few rejoinders to that:

You're represented in your national, state and local government, and you get to choose whether or not to be taxed; your choice may not be the same as the plurality of voters where you live, but if you don't like it, you're free to move (both of which are generally not the case in socialist societies). You may be unhappy with progressive taxation, but most Americans aren't, and you're going to have to win your argument the way everyone else has to win theirs -- at the ballot box. And don't blame it on the media -- we get what we want from them, just like any other customer-oriented product.

The example Joe gives in his email comes only from the perspective of a person who's doing well, and uses the straw man of the "lazy homeless person" as a foil. Think about what would happen if your brother lost his job, and his son had a disease like Juvenile Rheumatoid Arthritis. Having lost his job, and in a bad economy, unable to find a new one, he no longer has insurance, and he can't afford to pay for the expensive drugs to keep his kid walking (let alone playing with the other children). Now, do you want to live in a community that says to your nephew, "tough luck, kid, hope your church group can raise money for your drugs"? Or do you want to live in one that makes it possible for those in our community with the least can actually live minimally decent lives?

The "welfare" that everyone is so upset about in Obama's tax credits: it goes to people who work but can't make enough money to get by on what they earn. There may be some disincentives in the structure of these credits to earning more money (I don't know for sure), but it sure as hell isn't "from each according to his ability, to each according to his need".

To many of us who earn quite a bit of money and pay a lot of taxes and aren't opposed to progressive taxation, this "don't take my money and give it to someone else" attitude frankly seems like rank selfishness. I understand that many people are genuinely opposed to progressive income taxes on principle, but the burden is on them to make the argument in a way that sounds principled, rather than selfish. As long as it sounds selfish, you'll never win the argument, irrespective of its validity.

Thus endeth the sermon...

The counter argument from the original "experimenter":

As the original “plagiarized” author of this email, I want to first thank every one for their input. I received several emails directly, and I have now added each of them to this email chain. I am truly thankful for this country and our freedom of speech that allows us to all share our views (at least until the Fairness Doctrine is reimposed by Obama). Further, I respect each of your opinions even if some of them are flawed....

My intention in sending this email was to point out that every American at some level is affected by a redistribution of wealth. I thought the message would hit home because the “waitress”, a hard working American important in our consumer driven economy, doesn’t receive her tip and she is loses the earnings as they are to provided to the homeless guy. Something she is not likely to do under either Presidents economic plan. This seemed to be an extreme way to make a point. Enough said, let’s tackle the issues.

Under Obama, his economic proposals will create refundable tax credits for lower to middle income wage earners. Several of the credits are for a mortgage (10%), Social Security payroll ($500), college tuition ($4,000), half of their child care expenses (limited to $6,000 per year), etc. As each of you know a refundable tax credit allows a tax filer to receive money WHETHER THEY PAY TAXES OR NOT. I assume we can all agree that 47% of American pay no Federal taxes as we trust our own government’s data? Of these 47%, it is expected that 40% of them will receive a check from Obama’s plan. In my opinion, this type of economic plan (Robinhood?) will make these individuals more dependent on entitlements and less likely to work. Fred, while some people are truly in need many others lean on the system, and Obama’s redistribution of wealth caters to them. Obama and I simply disagree that it is OK to tax, tax, tax, without curtailing spending – THE REAL PROBLEM.

Obama’s desire to tax the “wealthy” is taxing the very people who fill the governments coffers already. Business owners, successful sales people, software designers, etc. We live in a country whose GDP is approximately 70% consumer / services. How on earth can you tax the spending class and expect the economy to improve with less of their hard earned paychecks in hand? Did the Bush stimulus plan work redistributing tax dollars to low / middle income earners? Did it change anyone’s life? $200k for a responsible individual / 250k for a couple is not wealthy. Do the math. With federal taxes, social security / payroll taxes, sales taxes, property taxes, and God forbid a little saving into a retirement plan, rainy day fund, or a college account and a family at $250,000 might take home 45% if they are lucky. The net is much less than $125k – I see real life examples daily. Obama simply misses it here on who is wealthy.

Further, to fund all of Obama’s “programs” government spending will increase compounding the real problem – GOVERNMENT SPENDING. SPENDING IS THE PROBLEM – NOT TAXES. And if raising your federal tax rate isn’t enough, let’s tax corporations on “windfall profits” (this is pathetic – call it a hatred tax and I’ll live with it), raise the already high business tax rates (the second highest rate in the world) and raise capital gains, estate and dividend taxes. I have asked this question before – HOW MUCH IS ENOUGH? Jack will you give an additional 10% at your income level? 15%? Businesses will be hurt, look at the layoffs, and corporations and jobs will leave for a more forgiving climate. The world is flat, and those jobs and dollars will end up in another countries kitty. Obama has proposed a 10% annual spending increase, even higher than our existing President who spent at twice the rate (6.7% vs. 3.3%) as Clinton. Perhaps the R’s under Clinton worked at reducing spending?

I don’t want to get sidetracked from my original issue of redistribution of wealth. Simply put, taxing to “spread the wealth” is a mistake, and it will stress an already shaky economy while directly affecting families and jobs. I didn’t even discuss the issues relating to “phase outs” of personal deductions, or the radical approach to change Social Security with a doughnut tax, again focused on the “wealthy”. There is a theme to every proposal Obama speaks about: “take from the haves and give to the have nots” and we will all be better for it. I don’t agree, and I don’t feel compelled, call me selfish to provide more money to wasteful government spending programs.

I simply do not have enough time to tackle the remaining issues today so I will rest. The only way to spur economic growth is to keep our marginal tax rates low for businesses and individuals while providing a free market system that allows capital creation and entrepreneurial opportunities for all to benefit.

Fred, perhaps tomorrow we can discuss health care as I assume you recognize that Cobra would allow your brother to stay insured?

And the rebuttal:

Thanks for this comprehensive reply. I'll address the other points, later, but let me hit on the last one, about health care:

The example is hypothetical (my brother has fortunately NOT lost his job), and
COBRA allows you to continue your coverage...if you can afford to pay for it. If you are out of a job long enough, it's not unreasonable to think that one might not be able to pay. I remember paying for COBRA when I was "laid off" at XYZ Company; it was quite tough paying for COBRA on only my wife's salary. Fortunately, I was healthy and only out of work for 2 months; and

I used that example because it seemed like it would hit closest to home to people on this thread (I made a lot of assumptions, not knowing anyone other than Joe); a better example would be someone who maybe works for a company like the one I joined when I came to Seattle: a small company that provided no benefits at all. A lot of people are employed by companies like this, whether in services or retail, or what-have-you. Insurance is incredibly expensive for companies to provide. But if the company should fold, or contract, and the employees lose their jobs (not to mention the loss of income for the business owner), there's no COBRA to be had. Getting real insurance for a family as an individual (that is, not simply catastrophic insurance, and not as a member of a group like a pool of employees) is virtually impossible in this state, and in many others; it's also incredibly expensive. It's one of the key reasons I have chosen not to strike out on my own and create my own company: the risks are just too great. My point being that the taxes vs. services debate cuts both ways.

The following day, "Fred" sent out a follow up e-mail address "Joe's" original issues on:

Tax credits - Joe, in my understanding, you can't get these tax credits unless you're working; you can't file a tax return and get tax credits if you don't have any income. So your statement that this makes people less likely to work is untrue: you can't get the benefits if you're not working. This was the point of the welfare reform passed under the Republican congress and Bill Clinton in the '90s.

Windfall profits - 100% agreed on "windfall profits" taxes -- they're just an attack by the resentful. This is a shameful populist stance by Obama and I truly hope he drops it if he is elected on Tuesday. If spending is the problem, what spending will you cut? I asked you this before, and you said "all of it", but let's think a bit more about the results of cutting "all of it".

If you cut Medicare and Medicaid, which make up 21% of the federal budget, what are these people going to do for health insurance? What happens to the baby boomers who are just now at retirement age? Something has to change, for sure, since at our current rate of taxation for Medicare, the system will be bankrupt in a very short time under the pressure of this large group of retirees. But just cutting the budget without comprehensive reform would be a disaster -- see my previous email regarding health insurance costs. These people are on a fixed income, many living off of social security. Do you say to your parents (let's assume that they're like most people, and are clustered down near the center of the income scale), "Tough shit, it must suck to be old and to have so many health problems. Too bad you can't get insurance and couldn't afford it if you could."

How about Medicaid? Enough people already get free health care by the rest of us paying for it in higher costs. How is this going to be fixed by just slashing spending on Medicaid? For both of these programs, by cutting them significantly, you'll very likely see health care costs skyrocket, as doctors and hospitals charge people with insurance a lot more in order to pay for these people who suddenly don't have insurance. This means that our insurance rates go up, and businesses are that much harder pressed to make the profits required to grow and prosper.

How about the military, which is 20% of the budget? What do we cut there, while we're in the middle of two wars, with a resurgent Russia and a growing China, and the always-present concern about terrorism?

We can't cut interest payments, and that's 9%.

Social Security could be cut, but that's not being paid for by income taxes anyway (which I assume is the discussion here). We could reduce benefits in that case, too. I am less clear what the consequences of this would be, but more or more severe poverty among the elderly is likely. This program, as well as Medicare, could be means-tested. This would completely alter the nature of the programs, and would turn them into welfare -- this is unlikely to make it through Congress, but it sure would save a lot of money, if that's your goal.

Other discretionary spending makes up 18% of the budget, and this covers things like the Dept. of Veterans Affairs. Do you want to cut benefits to veterans coming back from Iraq and Afghanistan with PTSD, brain injuries or lost limbs? There's also the Department of Energy, which safeguards our nuclear arsenal. Should we cut that, too? Let's be specific about what should be cut.

In my opinion, we could cut farm subsidies; we could probably reduce funding for the Department of Education and just trust that states and local communities will take up the slack as our education system continues to worsen (though I don't think increased spending will solve this issue -- education in our country needs to be fundamentally re-thought, preferably without the unions); I don't think we should cut transportation -- we already have too many problems, there.

My point in all this is not to say that we have to increase spending or not cut anything. My point is to say that cutting will have consequences, and we'd better have a plan for dealing with these consequences, because many of them may be worse than what we have now.

Spread of wealth - As above, I'd like to know which programs are "wasteful". The National Endowment for the Arts & Humanities? The National Science Foundation? The National Institutes of Health? Or is it just the programs that help the less well off?

Keep in mind that a tax structure that encourages the growth in inequality, as the one we have now does, has its own consequences, and not all of them are good. There are a lot of people in this country who will put up with a lot of inequality in exchange for freedom; but under the current Administration, we've been getting more of the former and less of the latter. This will end badly if it continues.

Gotta start work. I'm enjoying the debate and I'm glad folks take this seriously enough to really think about the alternatives.