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Saturday, September 24, 2011

Class Warfare and Taxes

I received an EMail from a reader who suggested I was over the top in my post on Elizabeth Warren and her statement about getting a chunk of the earnings of factories for Government.  This person then went on to say that Republicans are waging Class Warfare against the poor and middle classes, in response to my saying Ms Warren's statement sounded like Class Warfare.

Perhaps the reason I received an EMail instead of a "comment" was that I had accidently dropped comments from the Blog Posts.  I apologize.  And, since an apology without restitution is questionable, I have fixed the problem.  Comments are back.

But, back to Ms Elizabeth Warren, when I listened to her on the news show it sounded to me as though she was putting a lot of emotion into what she was saying and she conveyed that it was time to go to the factory gates and take "our fare share".  She may not have meant it to sound that way, but to my ear it did.  As I said in the blog post in question:
She may not have meant to make it sound like class warfare, but it sort of did.
Now, to lay out how I feel about it:
  1. All taxes shape social policy.  This is inherent in taxes and it is why the US Congress needs to not be out giving exceptions to this or that special interest—and remember that there are over 300 million special interests out there, not counting when two or more of those 300 million individuals agree to form together as an additional special interest.
  2. The People should not elect to Congress folks who will give us programs that cannot be financed, in the short and the long term, out of revenues.
  3. There might be an exception for Rule 1, but for me war is the exception.  There are those who believe in Keynesian Economics, which requires deficit spending, and if we elect to go that way there needs to be a plan to run big government surpluses in the good times to balance out the deficit spending.
  4. When we agreed to an income tax, almost 100 years ago, we agreed to go by income brackets and that is fine with me.  At their highest it was 41% if you were making $10,001 pa, and 94% if you were making $250,001 pa.  (That was 1944, as we were hitting our stride during WWII.)  Of course, inflation has changed those base numbers, but I can remember thinking that $10,000 was a comfortable lower middle class number.
  5. Everyone should give something, but no one should give all.
Now, this brings us to that factory Ms Warren spoke about and a point I did not make well in my previous post.

As, for example, Kad Barma, tells us, corporations are not People.  I think they are, but when we get to the recent SCOTUS decision for Citizens United, many decry the decision to treat corporations as People.  While I recognize that the law sees corporations as People, there is one way in which I do not.

When I think of commerce I think of individuals exchanging items, as in the early days, before civilization.  Corporations (and here I include partnerships and the local corner convenience store and the guy with one truck and a grass cutting service) exist in a moment in time to facilitate those transactions.  Corporations come and go, but the People remain.  Thus, the job of Corporations is to facilitate interchange, either by moving something from person A to person B or by helping person B by taking bits and pieces from Persons C, D and E and forming a product that person B wishes to purchase.

Do People make fortunes as Corporations work as the middle persons in these transactions?  Absolutely.  So tax those fortunes, but not the Corporations, which are merely social constructs to facilitate commerce.  And, as previously noted, they come and go.  Look at the Fortune 500 list from 1955 and then compare with the list for 2011.  Walmart is top this year, but not even in the top 100 in 1955.  Actually, didn't even make the list.  Today it is Number 1.  In 30 years it could be well down the list.  We don't know.  That is the "risk" that come with free enterprise.

My point in my previous post was that not one dollar comes to a corporation except that someone invests it or gives it to them in return for goods or services.  If you tax a corporation you are either taxing me (as they will raise prices to compensate for the taxes) or they will take it out of profits, which will drive away investors, which will result in the company eventually losing market share due to lack of experimentation or expansion.

Is the Corporation a monopoly?  Break it up.  That is what we have laws for.  Sometimes breaking up a monopoly is good.  Isn't that why we now have all those cell phones?  Sometimes it is not good.  Isn't that why there is always confusion about who is provides us our electrical power?

As for that bugaboo, General Electric, the reason they paid no taxes last year is because the US Congress structured the tax laws to allow them to not pay taxes.  Not paying taxes when nothing is due is not a moral failing.  On the other hand, bribing Congress Critters to twist the laws in your favor may be.

The solution, from my point of view, is a radical simplification of the tax code.

Regards  —  Cliff

  If you don't think Corporations come and go, almost in the twinkling of an eye, look at Restaurants in downtown Lowell.  Cobblestones has been around for a while, but many others form, go away and then reform as a slightly different variety.

4 comments:

Craig H said...

That neither side wants to call this tug of war "class warfare" is disingenuous and counter-productive. We have a massive Federal debt and deficit, and we are negotiating who it is to pay for it. D's say not the "middle class" and presume it goes without saying those less well off than that shouldn't have to pay at all. R's say the least well off need to start paying or nobody should chip in an extra nickel. This is a class argument. D's have taken 99% of the population on their side, and R's the remaining 1%. (The discussion on the table being the tax breaks Dubya granted to the most well off. D's say it's about time they came back. R's say the rich already pay enough, it's time to hit the poor up for some dough).

Elizabeth Warren decided that we ought to bring corporations into this discussion, and the author hear says "hell no". (In so many words). This, too, is class warfare, since the top 1% owns all the stock in these outfits.

Some at the bottom have rightly pointed out that it only gets called "class warfare" when the lower classes fight back. Observing census data that shows unequivocally that the wealthy have gotten wealthier these past couple decades, and everybody else has paid for their good fortune with a reduction in theirs, it's a pretty reasonable suggestion.

I think that 39 1/2% is not unreasonable. I don't think we ought to be chasing pennies at the bottom of the income scale, but if R's feel that strongly about it, I'd be willing to discuss it AFTER they do the right thing and repeal the tax breaks which have NOT CREATED ANY JOBS. (The R position is that the wealthy are the "job creators", but, seriously, no jobs are being created so what exactly is the argument to preserve these tax breaks beyond that?)

But, yeah. It's class warfare, and it's going to get worse before it gets better, because the lowest classes are broke and without prospects. In a lot of places, they go into the streets and resort to violence for less. The wealthy (and the Republicans) ought to at least consider the inevitability of such.

Anonymous said...

Its only class warfare if one class intentionally and purposefully sets about actively depriving one class from that which other classes enjoy.

That is NOT the case in today's screwed up socio-political environment. In fact, this class warfare bogey man is symptomatic of two opposing ideologies trying to get a leg up on each other.

If either the D's or the R's were even minimally concerned about fairness in funding our great socio-economic experiment, they would (in an unprovoked bipartisan effort) trash the IRS code and produce a simple Excel table that lays out a standard percentage of income required from anyone who receives money....from anyone...for anything. Flat tax.

This approach levels the playing field (which of course neither the D's nor the R's ACTUALLY want) in that titles don't mean anything. If you are a corporation..fine....as a "person" you make money and you need to pay your required percentage...the same percentage of your earnings that your janitor pays...or your CEO....or your stockholder. IF YOU RECEIVE MONEY FROM ANY SOURCE....YOU PAY A PERCENTAGE IN TAXES.

Beyond that....the only remaining issue is what is the percentage.

Oh...and BTW...WELFARE is receipt of money. I would add the provision to welfare or unemployment payments that in order to receive either from the government, you must attend training that results in employment and that while attending training, you perform some sort of community/public service. Everyone else has to work to put food on their table and a roof over their head....and you must as well.

Advocating anything less than the foregoing and you are NOT serious about fixing the problems.

JoeS said...

The Class Warfare starts at the top, when people use other people's efforts to skim excessive amounts of cash from the operations.

Just look at the recent debacle with the Special Education Collaborative - not only did the chief take a $500K salary, he managed to expense millions on top of that. And that is peanuts compared to what some others take!

Money is power - and those that have it have unfortunately been able to make the rules to reward themselves even further.

Tax rates can mitigate that, such as in the 1950s and 1960s when the top rates exceeded 70%. In those days it was not effective to raise salaries at the top to the excessive levels, as most of it would go to the US Treasury.

The class warfare started when those rates were significantly reduced, now as low as 15%. Although the 23.7% rate for millionaires is higher than other groups, it is still not enough to limit their thirst for more. And where 23.7% is the average, the more cunning can pay quite a bit less.

Just simplifying the tax code would help, and sunset all those special provisions that do nothing to help the economy, but give special rewards to some.

Anonymous said...

There are all sorts of class warfare, and they interrelate and are symbiotic. And it doesn't always reside top down. The entire socialist movement is predicated on class warfare, the working class against the owner class. In many ways, the American labor movement is class warfare and has to one degree or another proven the fallacy of one class over another.

The real danger in class warfare as it it being pitched today is that one quite literally destroys the other...there can be no compromise....only one tin soldier can walk away. What is being promoted by one party today is that wealth is morally wrong and that it must be redistributed in the holy name of fairness. No matter how high you push the tax rates on a given level of income, those beneath it will always cry foul and demand even more....until they have precisely the same that those at the top have.......and magically....there will no longer be a top....it will be one class......