Today's installment in trying to persuade my swingstate relatives to join their extremist Son/Brother in San Francisco in voting for Obama. My Mother. I called my Mother to ask about Xmas and a little political discussion went on, and finally my wife pushed the button and said "Ask her who's she's voting for".
She went quiet and hemmed and hawed, and said "I've always been a Democrat but I'm not comfortable with going in a Socialistic direction". My parents are wonderful people who do amazing work for people who are not in the best of situations, taking people to the ER and staying late, paying for a lot from their own pocket. But Mom still frets over people who aren't pulling themselves out of that despair.
The undercurrent? That it's unfair for people who are doing the right things and making more money to pay more taxes that goes into the pockets of those who don't. This is the concept that McCain is counting on - and he's counting on people not looking at the bigger picture.
She talked about pregnant 17 year olds, repeating the cycle that prevents people from getting out of their situation. We went over several things - McCain/Palin's bad viewpoint on family planning, on the war, and I think she is on the fence and frustrated. This diary will go over her first point, which I think is the key current McCain "FUD" attack - "Fear Uncertainty and Doubt" - and that is "Socialism" or as McCain would say "Spreading the Wealth" (I think he also is trying to bring up FUD of letter "C" Cossacks boot stomping their way across the land...)
Disclaimer: I am not an economist. I am not a politician. This expose is only using nominal research because I have a day job I should be focusing on. Feel free to correct and I will update.
My first reaction to McCain referring to Obama's tax plan - of raising the top rate on income over $250,000 from 36% to 39% - as "Socialism" is that if this is socialism, then we are already Socialists. Richard Wolffe (he is great!) said it very clearly on Olbermann on Oct 20. We already have a progressive income tax system. Since we installed the income tax, it has been progressive. Sure, Obama is making it more progressive, but this is by removing the tax cuts that Bush installed (which McCain was against - and that prior rate was working well under Clinton). Under McCain's definition we are already Socialists, and he's not proposing a flat tax.
Beyond that - the tax system in the United States is a great deal for the wealthy, not the middle class and definitely not for the poor. This doesn't mean that anyone wants to pay more taxes (you don't get any additional value for extra dollars you pay) but the fact that there are taxes is the best deal people who have money get daily.
Taxes in and of themselves are (by my definition) "Socialism". There is not a "road company" that makes roads and we have to pay them to drive on those roads. Ditto Public parks, schools, you name it. We have as a society decided to do some things as a collective. My premise - the more money you make and have, the more this "Socialism" benefits you.
First - on the supply side - taxation. Income Tax is one type of tax. The rates are progressive, starting at 10% and currently capping at 35% at $357,000. This is not the whole story however. Lower income earners, and more importantly people who don't have houses, businesses, etc... do not get the array of deductions that people who do have these things. Capital Gains, which are earned by investment rather than labor - meaning they required one to have Capital to begin with - are taxed at 15% (Long Term - 1 year).
What about other taxes? Payroll Tax (Social Security) is actually regressive. You pay 6.2% of your income no matter how much you make. A flat tax. But it caps at $102,000. So the effective tax rate for high earners is lower. You don't accrue benefits for money you weren't taxed on, but the FICA tax is a higher percentage for lower earners who don't hit the cap. This is tougher on them because this prevents them from accumulating capital to allow them the goodies mentioned above.
Sales Tax - also a flat tax. This is also regressive. People with more money do buy more stuff, and pay more sales tax, but people with less money spend a higher percentage of their money on stuff - money saved does not trigger sales tax. Again, this keeps people from getting the goodies.
Property Tax - generally flat. Here is a situation where people with stuff pay more tax. But these taxes tend to go to local governments. People in Cherry Creek Colorado gladly will pass a parcel tax to pay for a new pool at CC HS. They are paying more taxes but it directly benefits them and only them.
Estate Tax - the people with money take it in the shorts here. Of course, the more money you have the easier it is to figure out how to tax plan to shuffle the money to your heirs or worthy causes before the Feds get their hands on it. Joe the Plumber does not have a series of complicated trusts set up for Joe Jr.
I'll refrain from going much further because I think it's more important to discuss where this money goes. It's very easy to demonize the welfare mother who soaks in a couple hundred a month doing nothing. But it's much harder to demonize one's self, even though if you look closer, the true nature becomes clearer.
42% of the Federal budget is Social Security and Medicare. People who had a lower lifetime average wage actually get paid more. "Socialism!" Of course, people who had a lower lifetime average wage die younger than people with money - and are less likely to collect as much money as people who were more wealthy. There has been a lot of argument about whether the payour structure makes it overall regressive or progressive, but my opinion is that it's a ripoff for the less well off, because they would make better use of that money earlier in life, building capital that has beneficial tax treatment (not to mention college educations, etc...)
9% is interest. Nobody benefits from that except bondholders - that's starting to become "The Chinese" but certainly the lower and middle strata of US society have less stake there. Of course maybe that protects them from default :(
29% is discretionary and mandatory spending. Some of this is the dreaded entitlements to the welfare/food stamp state. Where does the rest go? Answer? Bridges. Airports. National Parks in far flung places. Universities. Interstate Highways. Who benefits from these? All of us. Who benefits the most? People with money. We get more use from all of these nice things, and the companies we work for make huge amounts of money building these nice things. We buy more of the stuff that is cheaper to ship to our house on nice Interstate highways. This doesn't include things like "Invesco Field" which was paid for by a State Sales Tax (regressive) in Colorado that is filled with people who can afford expensive Broncos tickets. Granted this provides jobs for people who are less well off - 15 days a year.
20% - Defense Spending. This is a big one. There are 150,000 plus soliders over in Iraq getting paid peanuts to get shot at. If they do get shot, they get to fight for crumbs at the VA Hospital. If they don't, and they have the wherewithall, they can get a college degree off the GI Bill. Of course in this war, there are a lot of National Guard folks who were making more money back home and they are getting rooked. Meanwhile , a big chunk of that budget is going pay far more well off engineers and managers at Lockheed, Bechtel, Halliburton, Ball Aerospace (wink), and their ilk. The defense budget is a huge business and R&D budget for people who are more educated, paid for by everyone. "Socialism". If you care to be a conspiracy theorist, the war we are currently fighting is in large part to secure an extended period of lower oil prices. Who benefits from lower oil prices? People who use a lot of oil. The more money you have, the more oil you use - not just in driving your car but in the products you buy, and to ship organic bananas from Hawaii to New York, and to put Red Star Peonies from New Zealand in the centerpieces at your wedding. The defense budget benefits the haves, not the have nots, both directly and indirectly.
Whew. That's a lot. I think it's enough. Right now - the government is overspending, and we're going to have to correct it. In my opinion it is more than fair to expect those that have benefitted the most from our society, and yes from our current tax system, to pony up a little more. The system will in all honesty still probably be a great deal for those who make over $250k. And as Barack told "Joe the Plumber" (who wasn't even listening), putting some more money into the pockets of those who are not doing as well, will be good for the businesses of those who are. Win-Win. And maybe those people can get some breathing room to gain a little capital, stay in school, build a business, get access to better family planning, and turn themselves into old fashioned "Capitalists"!