Your Compendium Of Free Market Links For The Day
By Pejman Yousefzadeh Posted in Featured Stories | Miscellanea — Comments (39) / Email this page » / Leave a comment »
Behold:
- Flat taxes are becoming more popular and are quite successful. Boy, it really would be nice if the United States finally decided to reform its outdated tax structure, no?
- All you ever wanted to know about the history and background of school choice. And yes, Adam Smith was a fan, which goes to show anew that Adam Smith was a very smart guy.
- In addition to its other policy virtues, school choice saves money.
- Finally, tax cuts boost growth. I look forward to the day when making assertions like this will be utterly and completely non-controversial.
(Thanks to the Cato Institute for all of the excellent linkage.)
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Socialist to me... Actually, I would prefer that the "rich" (unknown definition) give their excess to a better distributor than the Federal Government (charities - more than most). After all, they already contribute the maximum (okay, only about 75% or so) to the social good... I'm sure that about 95% of their profits would be good enough for the rest of you... Hate the rich, love the poor, that's my motto...
Formally known as Deagle... "Golf is a way of life..."
You managed to turn supporting progressive taxation (the status quo) into socialism and knocked it down quite heartily. Good show!
Sorry, but taking from those that have and giving to those that do not have is socialism is the classical sense... That is progressive taxation to a tee (sorry for the golf term).
Formally known as Deagle... "Golf is a way of life..."
I'm not saying anything about taking from the Haves to give to the Have-Nots. I, like Smith, am assuming that governments cost money. Like Smith, I believe that it is just for those with higher revenues to pay a higher percentage of their revenue in support of their government for two main reasons:
1) Those with higher revenues spend a lower percentage of their income on the necessities of life, and
2) Those with higher revenues reap a greater reward from the state, in that they have more at stake in the state continuing to exist.
The decisions that the state makes when deciding to spend its revenue may be socialistic, but these spending decisions are distinct from the decision of how to acquire revenue need for, at the bare minimum, defense and law enforcement. I am not trying to justify government spending on the poor here, I am merely agreeing with Adam Smith that it is not unjust for those who make more to pay a higher percentage.
I understand your position, and would go along with it to a certain extent. I guess the end result is the bottom line...(where do you draw the line). Let's let it go at that.
Formally known as Deagle... "Golf is a way of life..."
Progressive income taxes systems are socialist (the fact that they are the status quo is irrelevant). If you have any doubt about this please review the platforms of various Socialist Parties during the early 20th century (see also the Communist Manifesto).
...a long habit of not thinking a thing wrong, gives it a superficial appearance of being right...
---Thomas Paine---
when they predate socialism (Wealth of Nations: 1776; Communist Manifesto: 1848)?
Socialism has to do with the distribution of property by the government. Progressive taxation is a means of revenue collection. Revenue collection and distribution are two distinct activities.
on this. You want to give an example of a progressive (i.e. rate varying according to income) income tax that predates Wealth of Nations? I'm fairly sure that income taxes prior to the 20th century were a flat tax and not indexed by income.
"A man can never have too much red wine, too many books, or too much ammunition." -- Rudyard Kipling
We knock you flat and take your stuff. Translated to Latin, it is the IRS motto of today.
Envisioning when all that is Left is the Right.
I was referring to progressive taxation in general, not necessarily to progressive taxation on income.
In the section which I cited above, Smith was discussing house rents. In the interest of brevity, I won't go into Smith's full discussion. In short, throughout V.I of Wealth of Nations, Smith determines upon whom each proposed tax would fall an in what proportion. He determines that a tax upon house rents would fall primarily upon the wealthy and in a greater proportion than in proportion to their income.
Traditionally, progressive taxation is defined as a tax in which the rate of taxation increases as one's income increases. Smith says that such a system is fair. Whether a progressive tax is collected via income tax, house rent, luxury tax, etc. is not really a concern of mine (or Smith's as far as I can tell).
As far as I know, however, you are correct that a progressive income tax is a 20th century phenomenon. I don't see how it is any more "socialist" than any other kind of progressive tax though.
I have trouble considering taxes of Smith's day as progressive in any regards. What was taxed was property and possessions. This works against the elderly, the infirm, at the time widows, etc.
In Virginia in the early 19th Century there was a tax on wagons and horses, for instance, and a tax on watches and clocks. One of the most common taxes was capitation in which a tax was assessed on males over the age of 16.
In Europe, as late as the mid 1980s it was common to find house value assessed on the number of rooms in the house (which is why German schranks and French armoires are so popular because a closet is a room). Again, this can tend to be a very regressive tax.
If we take even your discussion as the baseline, I still think you will be hard pressed to find a progressive tax extant before the late 19th century.
"A man can never have too much red wine, too many books, or too much ammunition." -- Rudyard Kipling
taxes prior to the late 19th century. I'm not well-versed in the history of tax policy.
Whether there were or were not progressive taxes in actuality, my point is that Smith thought that taxes on house rents were progressive taxes, and he supported them for this reason.
My main reason for pointing this out is that often Adam Smith is viewed too heavily through the lens of Friedman, and everything from the flat tax to supply-side economics often gets hung around his neck. Smith was against tariffs (especially as a means of encouraging inefficient economic undertakings in the homeland) and mercantilism, and he was for for allowing supply and demand dictate what products people would produce. He wasn't Friedman, though, anymore than he was Keynes.
he is probably right in assuming that "house rents" would fall on persons of means. Of course, he ignores human reaction to economic stimulus, the idea of opportunity cost, or the concept of passing the taxes on to the tenant. This did come home in the early 1800s in both England and Scotland, the latter in the form of the Highland Clearances.
"A man can never have too much red wine, too many books, or too much ammunition." -- Rudyard Kipling
In order to redistribute property it is first necessary to deprive one group of its rightful property.
Marx's "scientific socialism" very clearly calls for "A heavy progressive or graduated income tax." See the Communist Manifesto.
...a long habit of not thinking a thing wrong, gives it a superficial appearance of being right...
---Thomas Paine---
heavily favored a progressive income tax. That doesn't make it socialist anymore than wearing red makes one socialist. Both progressive taxes and the color red were preexisting entities that were coopted as part of socialist philosophy.
If a progressive income tax is not coupled with economic redistribution by the government, then the tax isn't socialist. As I've noted a few times above, Adam smith favored a progressive tax, but he wasn't a socialist. Likewise, one can favor a progressive tax today without being a socialist.
You might make the argument that welfare, Medicare, Social Security, etc. are all socialistic in nature. I'm not talking about how the government spends its money, though. I'm talking about how it gets its money. The way it gets its money is via progressive taxation along the same lines that Smith proposed, and I believe that Smith was right.
If "...welfare, Medicare, Social Security, etc." are not socialist, what are they?
...a long habit of not thinking a thing wrong, gives it a superficial appearance of being right...
---Thomas Paine---
they are socialist. Most Americans, including myself support these programs. Most Americans, however, would never, ever call themselves "socialists," though. My anti-commie-to-the-bone Grandpa would knock you on your rear if you called him a socialist, but he sure likes his welfare check.
In short, yes, they are socialist; but, no, I wouldn't go around calling them that. Progressive taxes are socialist neither in fact or name, though.
Welfare is not popular that is why there was political will to reform it in the 1990’s.
...a long habit of not thinking a thing wrong, gives it a superficial appearance of being right...
---Thomas Paine---
I meant to say Social Security check, not welfare check. My grandpa isn't on welfare (he'd knock ME on MY rear if he heard me!)
Yes, I agree out of the three that I named, welfare is the least popular, but most Americans wouldn't do away with it altogether.
I just finished a search for polls on welfare, but I could not find any (internet polls do not count). Though I did find several general size of government/ welfare state polls like the this, which show widespread support for less government.
...a long habit of not thinking a thing wrong, gives it a superficial appearance of being right...
---Thomas Paine---
Socialism is an ideology not a phylosophy.
...a long habit of not thinking a thing wrong, gives it a superficial appearance of being right...
---Thomas Paine---
If so, it was hilarious.
(If it wasn't a joke, it's funny because Marx coined the term "ideology" to explain why his opponents were "blinded" to the truth of communism. He distinguished this from his political "philosphy." He was going to be the first philosopher to drive history instead of observe it, etc. He would roll in his grave to see his own weapon turned against him. Classic!)
Socialism is most assuredly an ideology not a philosophy.
- It creates dependency, which holds down large segments of society.
- The dependency of the downtrodden in Socialism is utilized in order for the establishment to maintain hegemony.
- It hides the “violence and exploitation” of the productive classes (under false rhetoric of caring).
- It creates and maximizes a patron client system utilized to maintain political power unethically.
Conservatism is a philosophy.
- The economic model supported by Conservative function through volition not coercion (thus no one is held down by it).
- Conservative advocate individual liberty, which provides each individual the ability to rise and fall as their efforts merit (“violence and exploitation” directly contradict individual liberty)
- Conservatives advocate limited government, which minimizes governmental patron client systems.
P.S. There are a great many thing in the world that would cause Marx to "roll over in his grave." I personally like the fact that China's Communist Party is now allowing entrepreneurs to join. The consistent failures of Communist schemes might also cause Marx a few undead quivers. The inaccuracy of his predictions about the size and experiences of the proletariat might additionally get Marx a moving.
...a long habit of not thinking a thing wrong, gives it a superficial appearance of being right...
---Thomas Paine---
of ideology you are using. Marx used the term to describe the deceptive worldview that those with power use to maintain their power. "Ideologies," for Marx, are those things which get in the way of the proletariat revolution. They are conservative by nature. On the other hand, "utopias" (to use Mannheim's term) seek to upend the status quo. At least in Mannheim's language, Marxist socialism would fall under this category (but Chinese communism, being the status quo, might be called an ideology).
When I say "philosophy," I merely mean a general conception about how the world works and/or how it should work. Ideologies, utopias, metaphysical systems, etc. can all be labelled "philosophies." That is not to claim that every philosophy is good, though.
As you use the terms, how does an ideology differ from a philosophy?
In regular usage ideology it is often used as a synonym for philosophy, but it does have a connotation relating to enslavement, or otherwise restricting human potential. Because socialism enslaves, or otherwise restricts human potential it is an ideology.
Socialism is in practice creates a large dependent class of individuals who are unable/unwilling to provide for themselves (they instead receive very small benefits from the socialist governments). This class is manipulated by establishment socialist politicians, and others who receive significant rents directly/indirectly from the dependent class. Upward movement from the dependent class is blocked by both deliberate and unintentional actions of the socialist establishment (enabling, low expectations, tracking, lies like "you would starve without us," etc.) Socialism also harms the productive classes. Socialism steals (through the coercive force of government) the fruits of the productive classes' labors. These fruits are stolen, not to provide benefit to the productive class, but in order to provide rents to the establishment socialist politicians, and their ilk (only a small portion reaches the dependent class).
P.S. The worst aspect of socialism is that it is not sustainable in the long run (its incentives are wrong). In socialism the incentive is to not produce (you get rewarded for not producing, and punished for producing). In consequence, over the long run socialist systems will everything else equal become less and less productive until they eventually collapse.
...a long habit of not thinking a thing wrong, gives it a superficial appearance of being right...
---Thomas Paine---
Given your definition of ideology, I'd agree about socialism. By the way, I'm no fan of socialism, either, despite my toleration of some "socialistic" programs. One of my favorite things about Clinton was that he moved away from the LBJ style "reward bad behavior" government intervention in favor of helping those who help themselves. (Granted the Republican Congress played a big, if not the major, role, in Welfare Reform, as well.)
I have no desire to turn America into France. I'm just not a big fan of Friedmanesque supply-side economic policy either. I like the way the things are now, more or less.
In essence you are claiming that progressive income taxes are a neutral tool. A tool that very conveniently achieves socialist ends, so socialists utilize it. This claim would be better supported if you provided a list of other economic systems that utilize progressive income taxes. I personally am not aware of any other system that would use them (the effects of progressive income taxes are such that they are not consistent with any other system).
...a long habit of not thinking a thing wrong, gives it a superficial appearance of being right...
---Thomas Paine---
might find progressive income taxes attractive. As I mentioned above, the facts that those who earn more have a more than proportional interest in the maintenance of the state and the fact that a lower proportion of their income is needed for supplying the necessities of life serve as justification for a progressive tax (while, of course, not mandating one).
Even if the government only consisted of a military and police force, given that the wealthy have more at stake in the government justifies their paying more. They have much more to lose were the government to collapse.
It only becomes socialist if the point of the progressive tax is to redistribute wealth. That's not what I have in mind, nor did Adam Smith.
Perhaps I miss-worded my earlier response (I did not include the word economic in front my last usage of the word system). I basically intended to ask which economic system(s) besides Socialism are progressive income taxes compatible.
My corrected earlier response is listed below.
In essence you are claiming that progressive income taxes are a neutral tool. A tool that very conveniently achieves socialist ends, so socialists utilize it. This claim would be better supported if you provided a list of other economic systems that utilize progressive income taxes. I personally am not aware of any other economic system that would use them (the effects of progressive income taxes are such that they are not consistent with any other system).
P.S. With the exception of Socialism most political and economic systems are separate entities.
...a long habit of not thinking a thing wrong, gives it a superficial appearance of being right...
---Thomas Paine---
where private ownership is allowed and that has a government in need of financing could resort to a progressive income tax, whether the economy be capitalist, feudalist, or socialist. I view taxes merely as a way to pay for the government.
I'm not sure how else to answer your question. What economic system is best suited to property taxes, poll taxes, tariffs, tolls, estate taxes, etc? All governments need funding, and every kind of tax has its benefits and drawbacks.
I listed the reasons above that progressive income taxes are a good choice. Drawbacks to them include hindering economic growth.
You seem to assume that there is some kind of "natural" tax (I'm not sure what kind of tax this would be), and that a progressive income tax would only be used for some ulterior motive, rather than just the least harmful way to fund the government, whatever its political structure or economic system. I don't care to use taxation as a means of social engineering. I just want the government to get paid for and no one to starve in order to pay for it.
are punishing those that produce more. And that if you want to discourage behavior, tax it more.
But the truely wealthy have ways to avoid taxation anyway. Just take a look at the Kennedy Trust or John Edwards' finances if you want to know how.
Socialism doesn't work. It looks nice on paper, but it's been tried and it's failed miserably every time (usually accompanied by widespread death and suffering).
Proud member of the V.R.W.C.
I personally don't see Friedman's arguments against a progressive tax as weighty enough to counterbalance Smith's arguments for it, but ultimately that's going to be a judgment call. There are arguments on both sides.
Your second point does point out a real problem, but not with a progressive tax. The problem is the extraordinarily convoluted series of loopholes and stopgaps that plague our current tax code. These could easily be eliminated while maintaining the progressivity of our system of taxation, though.
I read the Cato post on tax cuts boosting growth and found it unconvincing.
1) Every time I see the argument tax cuts did X I'm left wondering how they ruled out all the other inputs. I know that lowering the fed funds rate to absurdly low levels a few years ago to stimulate the economy resulted in corporations and individuals investing in their future because money was cheap. Let's not forget HUGE numbers of people re-mortgaged their houses and took money out during that process and ended up spending it. So far as I can tell no effort to address the economic impact of either input is ever made. I'm not saying that cutting capital gain tax rates didn't help the economy, but ignoring significant inputs into the equation doesn't give me confidence in their conclusions. Especially the argument that tax cuts pay for themselves which Cato in the linked argument above did not try to make, but Larry Kudlow again today over at NR does.
2) There is no doubt in my mind that historically low capital gains rates caused a huge number of people to sell appreciated assets and move into what they think will be better performing investments. What isn't clear to me is that we haven't sacrificed total income for a short term surge. Given the odds that Democrats are going to raise these rates there's a percentage of people who did so now instead of later...
3) What effect does the falling dollar have? Perhaps it makes the benefits of the tax cuts bigger, but I'm sure it has an impact one way or the other and ignoring it altogether doesn't convince me it was meaningless whereas a few words could.
I assume that the previous years and the effect of Taxes vs Tax cuts are still ambiguous...well, I guess that means that the past results are still unknown (at least to some).
Surely would be nice to have a flat no-nonsense tax...
Formally known as Deagle... "Golf is a way of life..."
I spent many, many hours preparing my income tax this year as well as those of my elderly mother and young son. I lost many hours of my precious life (of which God has granted me only so many) and the IRS just took from me, never to be returned. The tax code is a farce and every congressman should be required to prepare their own taxes every year, which just might serve to punctuate the issue.
I am convinced that the Fair Tax is the right way to go. I think it would much clearer to those of us that provide the revenue to the State if we saw the tax printed right on that sales receipt. This in turn would lead us all to be better consumers of government.
The Fair Tax has the equality of a flat tax, in that everyone pays the same rate. It has the benefit of a consumption tax, without the endless levels like the European VAT, and it makes sure the poor are able to have relief. The IRS is eliminated.
And best of all, we don't have to squander those hours on arcane tax rules.
See www.fairtax.org
The government debate is not looked like a business. We should be arguing return on investment of government programs. We should be arguing ways to make government more efficient. Government should have the burden to prove to the people that they are getting results.
Most of the arguments are about how do we raise more money for a bottomless pit. Money does not solve anything by itself. Money put to good use(like any other resource) should be the goal. Sure their can be good or better ways to derive income (progressive, flat, fairtax,etc..) but that only addresses the collection of revenue.
If we gave the government 20 trillion a year to spend they'd find a home for it and I bet the average person wouldn't be much better off than they are now.
If you always find yourself arguing the exceptions rather than the rule you just might be rapidly sliding down your own slippery slope to irrelevance.
The public has been imprinted to a certain set of beliefs about government services and the funding thereof. Since most Americans never see the money that is confiscated from their paychecks and employers, they have no way of knowing how much they are paying into the system. Instead, they have been propgrammed to treat the 'refund' like some kind of Christmas Club savings account, when instead it is simply an interest-free loan to the feds. As consumers of goernment services, people have no idea what is paying for teh service they are requesting (or being given without request).
The only solution that makes sense is to make sure the citizens know what they are paying. Make it obvious. The two ways this could be done are to (1) Eliminate withholding and force everyone to write a check every month, which is doomed to failure since people do not recognize taxes as something they have to 'save' for; or (2) Charge a flat sales tax on new goods and see the tax printed in plain numbers on your receipt, just like state sales taxes today. People would get a strong sense of what government cost and would immediately begin to lobby for a contracting rather than expanding federal budget.
Check it out: www.fairtax.org

"It is not very unreasonable that the rich should contribute to the public expence, not only in proportion to their revenue, but something more than in that proportion" (Wealth of Nations, p. 513), and Adam Smith was a very smart guy.