Mr. Doughnut here. When I wrote Wednesday’s flat tax post, I mistakenly thought that point # 5 was obviously ridiculous. I misunderestimated that point. “The rich benefit more from government than the poor, so the rich should pay more for those services” is buried deep, and probably latched on like a parasite, in many minds. Since it’s not, I’ll address it here. I think it’ll be more efficient for me to reply to this comment directly rather than starting from the beginning. Consider:
I guess a snarky answer comes in handy when one doesn’t have a logical one. Is the notion that poor people are getting all those big welfare checks, while rich people are out there making money with no help from anyone? Get real. Clearly the rich benefit more from our stable system than the poor do. They (or at least, some of them) also make the system possible, which is why we’re talking about taxing them a couple of percentage points higher, rather than confiscating all their money.
I was aiming for exasperation more than snark, but where I may have failed in that, it was not from a lack of logic. I don’t think the poor are getting big welfare checks and I don’t think rich people are making money with no help. But that still doesn’t mean the rich benefit more from our
centrally planned stable system. And how is what amounts to little more than a use tax justified as a rational, progressive income tax? I don’t buy that argument, but if I did, I wouldn’t support it that way. But on to the logical answer, devoid of snark.
Anyone who’s paying attention to what I’m writing about the flat tax should understand that I also support governmental reform. It’s why I so thoroughly reject the revenue-neutral nonsense bantered about in this discussion. There are things the federal government does now that it shouldn’t do. While tasked with perpetuating the public good, we’ve somehow managed to include every crumb of American life as part of the national sphere. Our kids need education? The federal government can help. Our kids need a drug-free life? The federal government can help. Our kids need digital television? The federal government can help. But how? How is the government helping when kids still fail out of school, kids still do drugs, and kids will watch television, whether it’s digital or analog? We’ve migrated local and state tasks to the federal government, in a long-building abandonment of federalism. Now that it’s virtually complete, rather than admit our mistakes and fix the system, we perpetuate the notion that the rich get the most from the nanny state. Even if that’s true, the system is flawed.
But what should the government do? That’s the important question, and one which the commenter seems to almost get at. Consider:
I make a great living in the securities industry, for example. If it were not for government regulation of the securities markets, there would be no public trust in the markets and thus no money-making opportunities. Not to mention that our entire financial system relies upon government backing of our currency. Not to mention that our government negotiates trade arrangements with foreign countries that make our industries possible in innumerable ways.
Securities industry regulation is a viable public good, but who benefits? Just Wall Street people? Corporate CEOs? Doesn’t the public trust in the markets extend down as far into society as individuals wishs to take it? Consider the poor who won’t trust even their neighborhood bank, choosing to store their life’s savings in cash hidden in their house. Do they not have to pay for the public trust built into the securities industry by government regulation? Do those individuals have an external, rich vs. poor barrier that excludes them from participation, a barrier that is not in their mind? Of course not. If I buy a gym membership and never use it, do I get a refund or a discount?
I’ve read arguments that police protect more wealth and assets for the rich, so the rich should pay more. Carrying the idea further, the military could be said to do the same. Both police and military are a public good, for which everyone should pay, but is there a reasonable truth in the rich/poor divide on this? Of course not. As much as security forces protect wealth and assets, they protect the ability to earn and accumulate wealth and assets. It’s not tangible, but it’s a legitimate function. If I have to call the police because my house gets burglarized, do I get a refund? As much as securities regulation builds trust, security builds trust in the system. Anyone, rich or poor, can take advantage of that trust and strive for wealth.
A basic idea of our government is that the federal government serves everyone equally. “One man, one vote” and all that craziness. Is the issue federal under the Constitution, serving the public good, or is it left to the states, where communities can decide what’s best for them? (Think generous welfare without work instead of censorship, unmentioned versus protected by the Constitution.) We’re in the process of deciding that that Constitutional question is quaint and irrelevant for the touchy-feely goals we want but the Constitution never meant to convey. Hard work matters. Skill matters. Intelligence matters. I happen to believe that everyone can make something out of what they’ve got in life. Those who pretend that the rich must prop up the poor seem cynical and condescending about the poor to me. I came from a humble background, devoid of monetary wealth, yet I’ve managed to build a little for myself. I’m working to build a lot. I don’t want to support a government that rewards the opposite.
Yet, somehow I’m wrong on logic. When I say that we should remove non-federal issues from the federal government, pushing them down to the states where the represented are closer to those making the decisions, it isn’t clear that progressive taxes are unfair and unnecessary. The commenter, in ignoring what I’ve clearly included in other posts about the flat tax, transitions to this bit of logic to support his opinion that I’m wrong:
But put that aside. The real reason for a progressive tax system is that if someone has to pay a few extra dollars, the rich can give them up with less pain than the poor. Again, people talk as though there’s a 90% tax on the highest tax bracket, or as though there’s no incentive for rich people to make more money since taxes soak it all up. Of course there’s plenty of incentive to get rich under our current system, which is why so many people keep trying to do it. We’re talking about a difference of a few percentage points, an amount that is only meaningful to those who are barely scraping by.
I’ve never suggested hosing those who can’t afford it, going so far as to explain how to avoid doing so, but again I’m devoid of logic. I mocked the idea that progressive taxes are touted because “the rich can afford it”, but “the rich can give them up with less pain than the poor” is different? Right. It doesn’t make sense to me, either.