Last week, I wrote a diary about how much fun it can be--not to mention helpful to the cause--to leave Daily Kos occasionally to go where, as they might say in Buffy the Vampire Slayer, the vamps are, and get into the middle of some real ideological scuffles with the enemy. Of course this is a bit difficult partly because well--have you guys been out there on the internets? Your typical commenter at aol.com is hardly Jerome a Paris or Meteor Blades.
Part of this is the nature of internet discourse, yes--but part of it is also demonstrative of where Republican politics are this year. Faux scandal, manufactroversy, and McCarthyism is pretty much all the arrows in their quiver right now. So good luck even finding someone in most of these places who will even debate you on tax policy.
But then--amid all that squalor--there's economist.com, repository of the choicest delights:
Things started with a debate over a matter that engendered a bit of debate here, the motives of those West Virginia voters who supported Clinton. The Economist's article had asserted that voters' lack of education and susceptibility to racism was an issue, handing to one of the leading conservative commenters a chance to sound some populist notes:
tawp wrote:
June 09, 2008 13:32
I like how the Economist in depth analysis can come up with nothing better to explain the lack of white working class support than a lack of education and ignorrance. It seems to say that if only they knew more about Mr. Obama things would be different. While this may be true for some people, I believe you give this amorphous group far to little credit. It may just be possible that they recognize Mr. Obama as holding views that differ from and quite possibly are hostile to their own. Alternatively, it is quite rational to cling to guns and God when an elite is dismissive of these values you cherish.
So the problem I was faced with was how to address his argument without reinforcing his contention that blue collar Americans are ignorant and prejudiced, enabling him to score even more cultural populist hits on Obama or to continue to try to make common cause with dissatisfied Hillary Clinton supporters:
andydoubtless wrote:
June 09, 2008 15:25
Though I heartily support Barack Obama for president, I do agree with tawp that a more nuanced analysis would reveal some more complexity to the reasons Obama didn't do well in the Appalachian primaries. Ironically, the Economist notes that ignorance of Obama's health care plan was one of the reasons the people of states like Ohio, West Virginia and Kentucky did not vote for him.
Hillary Clinton ran to the left of Obama on health care by promising mandatory national health insurance coverage, and won solidly and consistently among those voters for whom health care was the deciding issue. For these working class voters in the states she won, the costs of higher premiums, higher copayments, denied claims and the lack of any insurance are keenly felt, and they chose to vote for only the most absolute guarantee of access to health care available to them.
If that pattern holds, and these same voters are given the choice between Obama's proposal of a system of voluntary universal health coverage and McCain's diletantish recipe of tax gimmicks that really offer very little comfort at all to most Americans caught in the vice of rising health care costs and limited access, the Republicans have absolutely no reason to celebrate.
And indeed they don't: Rasmussen's last poll has Obama down only eight points in West Virginia, and leading in the red states of Missouri, Colorado and Iowa.
Then, the topic shifts to long term capital gains taxes. In a comment that has now been removed for reasons I understand (but which was absolutely hysterical), one ForOurForeFathers assailed Obama for raising capital gains taxes and thereby hurting the ability of people to save for retirement. Here's my answer:
andydoubtless wrote:
June 09, 2008 15:56
To ForOurForeFathers,
The rationale behind Obama's support for an increase in the capital gains tax is that it is unfair for a person to pay a higher rate of income tax on the products of their labor than on the receipts from their investments. Not to worry, however: Obama also proposes a regime of targeted tax cuts, including an increase in the earned income tax credit that will also improve the relative positions of those Americans whose income comes from the sweat of their brow. For senior citizens, the first $50,000 of their income will also be tax free, which will make it easier for those Americans drawing income from investments in retirement.
Now, I confess I got a policy detail wrong here. Obama's proposal would raise capital gains taxes to 28% from 15%, when some earned income is still taxed at higher levels. So while my broad argument is correct in that this reduces the discrepancy between the rates respecting earned and unearned income, it still doesn't create a system where earned and unearned income is treated equally.
But still, it seems like a simple argument that we can all agree with, right? Fair is fair, and all that?
tawp wrote:
June 09, 2008 17:02
@ andydoubtless,
Government should not be in the business of deciding what income is morally superior. The argument that it "is unfair for a person to pay a higher rate of income tax on the products of their labor than on the receipts from their investments" is an argument ripped directly from 19th Century socialism. I hate to sound like a rabid alarmist, but you can find this argument in many socialist writings of the period. These policies failed because they are bad economic policy and is unfair. It ignores that at some point the capital that was invested and increased in value was earned from labor and taxed at a high rate then. Also, capital investment is a much more risky endeavor than laboring for a wage and therefore justifies a higher return. Fairness, if involved at all, would command against taxing this money twice earned at greater risk. Further, the taxation is counterproductive because it discourages the wealth and job creating behavior of capital investment. Capital investment increases value in the economy, allows for individuals to greatly increase the productivity of their labor, helps create new jobs, and provides more goods at a lower costs increasing standard of living. This is not behavior to discourage. So called targeted tax cuts will not encourage capital investment, will not help those making more money than the average person, and finally will not help those who lose their jobs or have their earning potential curtailed by lower capital investment. Economic necessity and reality will be no less harsh because of good intentions.
As I note in my response, tawp here mistakes the argument I'm making, in which I object to preferential treatment for unearned income, with a more classic redistributionist one in which I am arguing for preferential treatment for earned income. But what's more interesting is that he goes right ahead and argues investments should be treated preferentially, and in fact says the rich should pay less.
Now, in the more limited context of my response to him, I hit him repeatedly on the fairness argument and this is for the purposes I had at the time probably the best thing to do rhetorically. But the fallacies of his argument are so interesting to me that I'd really like to take the opportunity to walk through them.
tawp claims that investors deserve a tax preference because they choose to embrace risk when they engage in their wealth-creating activity. The simplest counterargument to that is that their choice to create risk is antecedent to their privileged position offered by the surplus wealth they possess with which they can invest. Those who lack that wealth must create their wealth by their work. For them, the option isn't "create wealth or spent it or let it collect interest." It's "create wealth by engaging in economically productive activity, or sitting at home and starving." So is there really a moral superiority in those who create wealth by dancing with risk, or are these merely the people privileged enough to engage in the same profit-making activity most people would, if possible?
Also, tawp relies on a simplistic binary of investing and working to discuss the politics of longterm capital gains. For instance, receipts of partnerships and unincorporated personal businesses are not going to be longterm capital gains, and they involve risk and the investment of assets and thereby in his view should be entitled to the same privileged treatment as receipts on investments.
But the last fallacy is the best one: tawp is making his argument at the behest of an ideology that holds the market should be unrestricted, and that the state should not put its thumb on the scales. In fact, he reflexively attacks me for making that argument, but fails to recognize really that not only am I the one not making the argument, but that he's the one making it. It's tawp who in his argument for the preferential treatment of investment income suggests that the market should make room for the hand of the state. In his world, it's fine so long as it's on the side of the winners. But of course this misunderstands the market fundamentalism he advocates: the proceeds from successfully engaging in risk is precisely its own reward. The state doesn't need to subsidize engagement in risk by favorable tax treatment.
If the state were to subsidize risk in such a way, large investment banks would be encouraged to make risky calls, put their money in unsafe investments, lean so far into the wind that they just might tumble over. It's hard to imagine, I know.
Nonetheless, setting aside all that for the moment, this is my reply:
andydoubtless wrote:
June 09, 2008 17:27
tawp,
The most basic function of the state is to decide what behavior to valorize and what to punish on the part of its citizens. If you disagree with that, you have more people to argue with than just the socialists (U.S. Supreme Court Justice Antonin Scalia is one). But I'll concede that it's usually not for the government to prefer either earned or unearned income to the other.
This then is reflected in the position of the Obama campaign, in that it reverses an existing preference for unearned income to attain parity in the treatment of the two. It's the current Republican policy to prefer one to the other in that they champion the "moral" superiority of heirs to their annuities and dividends over that of ordinary working people to their paychecks.
It's not Democrats' soak-the-rich politics we're arguing over, it's Republicans' dunk-the-poor. I have no desire to punish someone because they venture their assets in a market. But the alternative, and what is at issue here, is treating punitively someone who earns that money by their labor, whether with their brain or their arm.
I am quite content to have parity of treatment for earned and unearned income, with the exception of course of the same credits for earned income at the very bottom of the scale that people of all ideological stripes have believed necessary to protect working people from the perils of absolute poverty.
There are other ways to encourage growth than to rig the tax code to favor the very wealthy.
And once again, it's not even parity that the Obama campaign is advocating. What they want is something closer to parity than we have now. Now we get the inevitable rightwing answer to a fairness argument, the absolute re-writing of history and a monumental change of subject:
ForOurForeFathers wrote:
June 09, 2008 17:29
@tawp
@andydoubtless
Well said, tawp.
Obama's tax and social policies smack of 1930s American politics...ie socialism. Woodrow Wilson was a socialist and the tax policies of that time, raising the upper tax bracket to 90% to soak up 'excess income' was a downright disaster! The Depression followed.
Then we had Social Security. The idea was for the government to take 6% of your income and save it for you, to be returned when you retired at the ripe age of 65. At the time SS was instituted, 65 was a ripe age for dying. Meaning the government ripped you off as you were unlikely to collect on that money! The reason we're in a world of debt right now is because we were never meant to collect on that money in the first place. We're living far longer than imagined and thus creating a fiscal mess that because of a government boondoggle that should never have been created.
Andydoubtless and Obama believe it is unfair for some people to make more money than others. Therefore, we ought to create a level field by...bringing everyone down to a lower artifical level. Way to dream big folks. Instead of letting people fall into place they want to artifically create some type of communual utopia. If I remeber correctly, didn't Pol Pot want that, too? To forget about materialism and return to a more simple society? Worked real well.
It just roiles me that so many people can fall into the trap that 'rich' people are awful, they don't 'deserve' the money they make, that it is 'unfair'...and therefore we will 'steal' it under the guise of government. Maybe I am wrong, but when was the last time a poor person gave you a job, Mr. Obama?
Do I think it morally right for a Bill Gates to earn $1 billion a year and stuff it under his mattress till he dies? Not really, but i'm not going to force him to part ways with his money. That said, rich people often create charitable foundations, donate heaps of money, create companies, provide jobs, and actually do good. Just because it all isn't returned to employee's salaries doesn't mean that 'profit' is evil. Salaries of employees most often are dictated by supply/demand. Business must remain profitable above all or employees will get paid...$0.
Can their be excesses in the market, sure? Why does the CEO of Home Depot get a golden parachute for losing stock value? Beats me, but it wasn't the CEO that set his pay, it was the company board! So blame the company boards for golden parachutes. this mentality in the corporate world will subside when they realize they've wasted a lotta cash.
It doesn't mean the government should step in and play fascism with our economy like its some cute make believe tea party. We've seen socialism, we've seen communism and fascism...it doesn't work. Europe is trying to back track from the grips of socialism, look at France!
Instead of learning the lessons of their mistakes, we're blindly following them into that mess!
Pol Pot? Woodrow Wilson? Awesomely strange bedfellows they, in their advancement of "liberal" tyranny. Indeed, look at France! Didn't Pol Pot found the Fifth Republic?
andydoubtless wrote:
June 09, 2008 17:47
The West's adventures in economic redistribution must have been indeed traumatic, because there are some here who see specters of it wherever they turn regardless of the details at issue. Currently, the U.S. tax code provides for the preferential treatment of longterm capital gains, which gets a lower rate than earned income. Obama's proposal is to reverse this policy so that earned and unearned income are taxed at the same rate, which is the very principle of fairness tawp advocated for so strenuously, that income will be taxed at the same rate irrespective a decision from the government about its origins.
This is no utopian effort to reshape society, confiscate wealth, or to punish thrift or wise investing, and I dare anyone to argue that it is without admitting that by those standards the current tax code as written by Republicans punishes work. The goal of Obama's proposal is merely to return this appallingly rigged part of the U.S. Internal Revenue Code into line with a basic principle of fairness.
Perhaps if you can find George McGovern online somewhere he would be glad to debate with you his domestic platform. The poor man would likely be glad for the attention. But suffice to say, his policies are not at issue in this election.
And for the third and last time, I confess I got this policy detail wrong, because Obama doesn't even want to bring the rates on earned and unearned income completely into line, just closer. I was derailed from responding further that day because of work commitments (yes, I actually do something other than blog and comment, occasionally). But when I went back to check the comments after my last post I was pleasantly surprised:
tawp wrote:
June 09, 2008 20:33
@ andydoubtless,
The highest income tax rate and capital gains rate used to be the same until income taxes were raised. How bout we just lower the income tax rate? That would be fair.
Is there anything so sweet as the smell of surrender?