Bush Era Tax Cuts

[KeithE]

I think Bernie Sanders hit a home run with

Don't think many of our elected officials listened but much good info and facts were given.

[ET]

[ET]

[ET]

[Bruce Gourley]

ET: Jefferson was anti-corporation and advocated taxing the rich, but not the poor. Do you now agree with him?

You : "More poor have been lifted out of poverty via the benefits of capitalism than those ancient skeptics would ever have believed."

Yet in America since 1980, government redistribution of money to wealthy elites has increased poverty, and shrunk the middle class.

The Bible, Adam Smith and Thomas Jefferson all testify against you in your defense of wealthy elites who use capitalism to line their pockets while stealing from the nation, shrinking the middle class, and increasing national poverty.

Perhaps the two of us could agree that the 1980-onward model of American capitalism is immoral?

Or perhaps you would like to call someone else to the defense stand of wealthy elites who enrich themselves at the expense of everyone else?

[ET]

[Bruce Gourley]

[KeithE]

[ET]

Related to my previous post and the original question I tossed out:

Back in the 90s, my maternal grandmother and great-aunt faced an estate tax issue. Decades ago - may have been as far back as the 20s or 30s -- , their father or grandfather had purchased shares in Schering-Plough (now Merck) and eventually passed it down to them and their brother. They also possessed shares in a small-town bank that their grandfather had opened in a small west Tennessee town maybe as far back as the late 1800s. By the mid-to-late 1990s, they were both within a few years of either side of 90 years old and, thanks to Claritin in particular, the Schering-Plough stock had appreciated significantly and they were now in a situation where at their death they would have to pay the death tax (back then I believe it was 55% on more than $675,000 or something like that). So they gifted their children and grandchildren, nephews/nieces (myself included in there) with money in order to decrease the value of their assets to avoid this. Now my grandmother was a teacher, as was my grandfather (teacher/principle/superintendent), in a county public school system in west Tennessee for all of their careers. My great-aunt was a librarian in the Atlanta metro area for all of her career. Hardly the careers of the "wealthy elite".

To the detriment of her financial benefit, my grandmother was too sentimental concerning that Plough stock since it had been in the family so long and instead of selling it before the Claritin patent expired and diversifying by selling at least some of it, she held on to it. When the patent protection on Claritin expired, the income and value of the Plough stock dropped significantly and the estate tax became a moot issue from that point on, as her other assets were not enough to threaten to have 55% of her wealth confiscated at her death.

The situation illustrates the point I have been making and ties directly into Jefferson's comment on arbitrarily violating the first principle of association. Had my grandmother and great-aunt died at the peak of their estate values, by what Christian principle -- or any moral principle -- does the rest of society show up to lay claim to anything they might have possessed? Just because their "fathers" (my great-grandfather and great-great-grandfather) exercised their own "industry and skill" and accumulated and passed down what society thinks -- "thinks", mind you -- is "too much"? Those men invested what was provided to them or what they earned and the fruits of their labors and financial decisions were not rightfully anybody but theirs, their descendants or whomever they chose to bestow that bounty upon.

[ET]

[KeithE]

[Chris]

I would give an award to Keith's most recent post, were I one of the authorized award givers.

[Bruce Gourley]

Republican Senator Lindsey Graham, , after sounding a warning to incoming Tea Party congresspersons:

"people in our income level, we're going to have to give up some of our benefits that have been promised because we just don't have enough money to do it all." ... "I'm ready, willing and able to make the hard decisions."

[ET]

[ET]

For Bruce....since you wish to use Adam Smith as evidence of your viewpoint, I shall do likewise. Adam Smith laid out four maxims for taxation. The text of those maxims can be found here:

In condensed form, they are:
1) The rich should contribute to the public expense in proportion to their revenue and even more than that proportion. That is, of course, progressive taxation.
The current income tax system is a progressive tax system, so it meets this criteria -- but only partially. More about that at the end.

2) Each tax that the individual pays should be certain and not arbitrary and transparent and plain.
If anything can be said of the United States Tax Code, it most certainly is NOT transparent and plain. Thousands of pages and nuances. I would also argue that it is neither arbitrary nor certain because with each passing year, politicians use it to buy votes by regularly offering proposals to benefit one party at the expense of another. One industry is rewarded while another is punished. Think "invest in green technology", for example. Or "invest in biofuels to make us energy independent". Or nuclear energy or the Chevy Volt or Big Oil or Big Steel or Big Ag or fill-in-the-blank-with-your-favored-special-interest. Deducting gambling losses? Puuhllleaazzze. :eyeroll: And that's just the personal income tax. The corporate income tax is even less transparent and plain.

Our tax system FAILS this criteria, whether for individuals or corporations.

3) The third maxim is convenience, whereby "every tax ought tobe levied at the time, or in the manner, in which it is most convenient for the contributor to pay it."
In other words, a consumption tax. People find a sales tax convenient because it is paid as they purchase the item and is figured as part of the cost of the purchase. The purchaser is at liberty to buy or not buy the product and therefore decide whether or not to pay the tax. This directly relates to your assertion of Smith favoring a taxing of the rich. His proposal - and the quote by Jefferson you threw in -- was directly tied to a consumption tax, not an income tax.

Our tax system FAILS this criteria.

4) The fourth maxim was that every tax should be organized in a way so that it took out and kept out of the "pockets of people as little as possible over and above what it brings in into the public treasury of a state."
In other words, tax simplification. Nothing would be more simple that a straight national sales tax or flat tax, even if it is progressive. Our current system is nowhere near simple. As pointed out in an earlier post, the original length for the income tax when it was first proposed was four pages. Today, businesses have to employ accountants, lawyers and HR or tax workers by the legions to navigate all the insanity and social engineering that has been embedded in the United States Tax Code. We little people have to use computer programs such as TurboTax or work thought multiple worksheets and hundreds, if not thousands, of pages of instructions to ensure that we do not pay any more tax than necessary.

According to the IRS, back in 2000 Americans spent 3.21 BILLION hours and almost $19 BILLION to comply with the federal income tax. Just just the income tax. That doesn't include all the other taxes, fees and stuff that the government collects (gas tax, telephone user "fees", etc.) for which businesses have to dedicate personnel to maintain compliance.

The current income tax FAILS this criteria.

Now back to point one. Adam Smith objected to taxes on income and profits (capital gains, "stock"). While the income tax is progressive, Smith opposed income taxes, so in the end we can say that the federal income tax code fails all four of Smith's maxims on taxation. While progressive, Smith opposed taxes on incomes. The tax code is not transparent and plain. The tax code is not convenient and the tax code is not efficient.

What kind of tax system would I support? I could live with a progressive income tax system of some sort as long as it meets the other three of Smith's maxims. While Smith makes a valid point about a progressive system being justified because the "rich" have more wealth at risk in the economy, there is also a legitimate point about equality under the law as it relates to a progressive tax system and the thinking behind an income tax, which basically turns your salary into a government allowance. However, since there are no ideal solutions to any given problem, then we must settle for compromises.

If in the end we had a simplified, progressive tax system, even if is was based on income instead of consumption, and as long as it was clear, transparent and was not endlessly tinkered with, then I could live with that. There are proposals to simplify the tax code down to postcard size or just a couple of pages. If nothing else, those should be starting points.

Also, Smith specified various legitimate government functions: national defense, justice, universal education and roads and communications. Again, I assert that a large majority of the functions of the federal government are not in conformance with Smith's philosophy.

[Bruce Gourley]

[KeithE]

[ET]

Goodness gracious, Bruce and I might be close to agreeing on something in the political realm!!! Simplify the tax code. Yee-haw!! Some very hot places must be freezing over.

I am aware there are some historical issues with using Smith's views, as the modern capitalist system and the interdependence of an industrial society is a whole different animal than 250+ years ago. However, I'm not going to subscribe to the notion that Smith was a supporter of the extensive regulation that you support, but nor do I view him as a "laissez-faire capitalist" when that is defined as a largely regulation-free marketplace.

[ET]

[KeithE]

[Jim]

An emeritus philosophy professor at my old alma mater of nearly 60 years ago delivered himself of something along this line: . I couldn’t resist, naturally: .

[ET]

Well, I had been working on another post for this discussion, but I think I'll just grant a late Christmas present and let this one go and wish everyone a Happy New Year!