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.