You Get What You Pay For? Part 2

Casey Stengel said, “You can look it up.”

So I did.

And what I found in Wikipedia told me that the personal taxes in 2005 “as a Percentage of Income” in the United States averaged about 29% and the corporate taxes were just under 40% – a little behind Japan which has the highest such taxes.

But I also found, in HuffPost, a chart from the Center for American Progress which stated that the United States raised only 2.1% of its revenue from corporate income taxes, and that this was well below the average of OECDⁱ countries. The highest was Norway at 8.2%.

It's confusing. I don't know what either set of the “facts” means. I raise the issue, however, not to compare countries or clarify that difference, but because so much of our thinking is based on our perceptions of our economic situationⁱⁱ and the information on that subject is so easily “spun” by advocates of one point of view or another. And, of course, the level of tax rates is the wrong question anyway. More critical issues are the legitimacy of taxation in the first place and, assuming taxation is appropriate, what does the taxpayer get for his money. A tax of 60% for which all of a citizen's wishes are provided will be better received than a tax of 50% with none of his needs addressed. In some countries there may be fully paid health care, in others food stamps, while still others will provide for different needs, in addition to education, highways, weather forecasts, and postal services, as well as a variety of other amenities and utilities. In some nations a citizenⁱⁱⁱ may be entitled to many, or all of these – or more.

The idea of a tax is to pay for the government to perform its work. The cost, therefore, depends on what work the government has. The more responsibilities it takes on, the higher the expense and the higher the taxes. But, as the saying goes, “You get what you pay for.” If the government were anything like a business, it would attempt to keep disbursements down, unless by raising costs it could anticipate an even larger income. And it would somehow link the charges to the customer (read: “taxpayer”) to the benefits it provided that customer. How much greater is the benefit of the weather report to the wealthy than to the average person? And how much more expensive are his food stamps? There has to be some other rationale for taxes, especially progressive taxes.

Karl Marx adopted the Robin Hood logic for running a society: “From each according to his ability to each according to his need.” The idea was that the rich are responsible for the poor,^iv and that force was an acceptable way of administering such a system. Marx understood the word “ability” to refer to means rather than skill, effort, or expertise.^v In modern terms, the government is responsible for helping those in need and, may do so by forcing those who have fiscal resources to support those who don't. The goal is a leveling of society – the elimination of classes.^vi

The idea that it is incumbent on those who are better off to help those who are not, was not a new one in Marx's time. The Bible spoke of the obligation to help the widow and the orphan and, indeed, all those in need, but compulsion was moral, not legal.^vii Charity was admirable – and voluntary giving still is.

Taxes, too, had an ancient origin but tax collectors and those who employed them^viii had little interest in helping anyone but themselves with the revenues. Having “legal” support behind them, however, tax collectors usually got their way. And their pay.

The American Constitution gave Congress the power to tax^ix for “the general Welfare” but, as I noted last week, the term was understood to refer to military protection, not to “welfare” in the sense we understand it now.^x Views change, of course, and we now consider all of our citizens entitled to whatever needs Congress views as essential, irrespective of the cost and whatever the arguments against. But it should be remembered that this was not the intent of those who framed the Constitution.

Who will pay for this largesse? There is general agreement that this should be the responsibility of the rich – both individuals and businesses.^xi Or perhaps our children and grandchildren. Tax them. But not us. They have the ability. We have the need.

Next episode: “Forever” – Toward a paperless society.

i      Organisation [sic] for Economic C-operation and Development.

ii     As former President Clinton said, “It's the economy, stupid.”

iii     Or even a resident – legal or illegal – who is not a citizen.

iv     Actually, the basic premise is that the rich made the poor poor. Whether or not this is true, it is irrelevant. The common view is that they can afford to pay the costs. No one seems concerned – or even aware – that they will be passed on to all of us.

v     To each according to his expertise makes more sense. Unless the goal is equality not of opportunity but of results.

vi    Actually, communism emphasized class distinctions rather than eliminated them. It taught the hatred of classes higher than your own, and revolution against them. If there were not always the bogeyman of a capitalist class which needed to be defeated, communism would not last. The ideal of a classless society was its opium.

vii    The obligation to help others held strong moral sway. For example, in Jewish communities it was clearly understood that all had such responsibility – even those themselves receiving charity. It was an accepted idea that there was always someone worse off than yourself, and that something, however minimal, had to be set aside for that person.

viii    And, consequently, were insulated from any contact with the taxpayers, and any knowledge of their concerns or their situations.

ix     Article 1, Section 8, Paragraph 1:

The Congress shall have Power To lay and collect Taxes, Duties, Imposts and Excises, to pay the Debts and provide for the common Defence [sic] and general Welfare of the United States; but all Duties, Imposts and Excises shall be uniform throughout the United States

x     However righteously indignant an individual may feel, a refusal to pay taxes and thus contribute to war and bloodshed contradicts the Constitution. A refusal to be forced to give charity, however, is not permissible because Congress has so decided.

xi    See the last two sentences of note number iv (4 for those who don't read Latin).