First off, anyone who has read my blog (thank you, both of you!) or has endured one of my DC Monuments tours knows that Economics is a love of mine. Having lived the blend of classroom education theory and seeing it in practice in the business world, I like to think that I have a perspective that defies having spent a decade living in the 60 square mile enclave bordered by reality.
Which of course, also stands to reason that I understand the insanity of the Obama administration’s insistence on amplifying the irresponsible fiscal policy of his predecessor. So what would lead me to think that tax increases would be a good idea right now? Follow me for a minute…
It doesn’t take a rocket scientist to figure out that when you make things more expensive, such as conducting business, you get less of it. Following A to B means that if we make elements of conducting business, such as regulation, hidden or direct taxes, employee wages, etc. more expensive we get less business. To run a business, one needs employees, therefore more business = hiring, less business = layoffs or closing the business. My apologies if this seems somewhat elementary, as I’m trying to explain this in terms that a DC politician can understand. So what kind of tax increase could possibly benefit our country?
Liberals are fond of all taxes, but lately they have had to become more creative in selling them to the public. Tough economic times have made the public less receptive to hand over their hard-earned money to pay for the latest boondoggle, or generous salaries and pensions for public servants who get to retire at the age of 55. So politicians introduce “sin taxes”, made more palatable by the fact that people are being charged for things they should consume less of, such as tobacco, alcohol, soda, or energy. OK, energy isn’t actually sinful, but try explaining that to a global warmmonger. The kind of tax increase that would help this country would be to place sin taxes not on items that harm individuals, but on items that harm our society as a whole. Here are my proposals for items that should be taxed more heavily:
- Lobbying – One of my biggest complaints about the Bush administration was how the MBA “Let’s finally run government like a business” mentality got applied to Washington, not in how the government would operate but in how those who bribe our elected officials operate. From 2000 to 2008 lobbying grewfrom $1.56B to $3.3B. Of course, curbing lobbyists would turn out to be one of Obama’s many empty promises, and in 2009 lobbying spending increased to $3.48B. Top lobbyists get paid at least two million per year, so why not impose windfall taxes on their profits? Lobbying makes everything more expensive as an added cost of business added to everything we buy – clothing, food, steel, energy, Egg McMuffins, etc. If lobbying becomes more expensive, its activity will drop, and so will costs of doing business. In addition, extra surcharges can be imposed on former politicians and staffers. This will provide the added bonus of pushing them out into the real world and contributing to society!
- Trial Lawyers – This one is pretty obvious. And it’s easy to shoot down the generic liberal straw man argument of “But who will stand up for the individuals who try to take on the powerful corporations?” Settle down, nobody’s suggesting abolishing this fine, respectable profession. But if we’re looking for an industry that brings in huge sums of money while hurting the industries that produce jobs look no further! The beauty of putting windfall taxes on trial lawyers but not on settlements is that it would still give citizens the ability to sue and collect damages where they deserve – the taxes would only be on the trial lawyers themselves. Of course, we would need some heavy-handed regulatory agencies to ensure that people trained in the law don’t use loopholes to avoid paying their fair share of taxes. Perhaps 10,000 new IRS agents? It would be amusing to see liberals argue against heavier regulation over any industry. One potential argument against this from the left is this will lead to far fewer trial lawyers and only the wealthy will be able to afford them, to which I have a simple solution – nationalizing the trial lawyer industry and making them all government employees. Liberals like the idea of nationalizing pieces of the private sector and putting them under government control, why not here?
- Campaign Contributions and Political Ads – Bear with me on this one. I’ll be the first to admit that I am a rehabilitated McCain-Feingold supporter. When I was sold on it I truly believed it would help the process while conveniently ignoring its constitutionality. Of course, it played out exactly as the critics predicted it would, and ultimately accomplished nothing. How does my proposal differ? Campaign contributions, political ads, etc. would still be completely legal, but they would have a heavily progressive tax attached to them. Taxes would be taken out on the back-end, so Joe Blow who wants to send in $50 to help his favorite candidate would still have no problem doing so. The taxes would come out of the recipient, whether it be for ads, signs, or hiring SEIU employees to “monitor” tea party gatherings. Or in the case of large advocacy groups they could be double taxed through funds raised and spent – not unlike the capital gains tax. Only this time instead of punishing the productive class, the tax would penalize the parasitic class.
Bear in mind as you read this that these are just broad strokes. The devil is always in the details, and I’ve no doubt that anyone can find specifics of my proposals to pick apart. But this is a stating point for the conversation. And I have no delusions that any of these will have enough of an impact to make any difference regarding the federal budget defect. But if we want to starve the beast, we’re not getting anywhere until we do something about the masters holding the leash and standing by with bags of treats.
Realistically, none of these ideas have any chance of seeing the light of day, as our elected officials aren’t going to bite the hands that feed them. But as any Robert Jordan fan can attest, these ideas are not the beginning.
But they are a beginning.
Crossposted from Brother Bob’s Blog
Not following you at all here, BroBob. A “windfall tax” on lobbyists’ personal income? Would that be the consultant lobbyist? The in-house lobbyist for either a company or association? Where’s the dividing line of morality for which millionaire gets a “windfall tax”, and which doesn’t? Or should any millionaire be subject to the same?
My point is while you personally don’t like lobbyists or trial lawyers (and few do unless they are the personal beneficiaries of their actions…), to single out such activity for their income allows Congress to now apply a morality meter for income and particular industries.
Secondly, as individuals, they already pay income tax. So again what you are suggesting is higher “windfall” income taxes for particular businesses you consider demons.
Sorry… can’t follow you down that road. And I would like to add that the concept of lobbying isn’t a completely negative one. When done to purchase Congressional members, of course it is. But on the other hand, having a representative walk the halls of Congress to present an industry’s particular hardships or issues with pending legislation is invaluable. It’s not like the average citizen can get a group together and crash elected ones’ offices to express their concerns all the time. That’s one of the reasons industry associations and PACs exist… to allow the citizens to focus on their business while the industry lobbyist keeps an eye on legislation that can affect their profitability.
Your last one about campaign contributions is also a head scratcher. Apply a tax to recipient for the tax deductible contribution from the donor? Here’s the thing, BroBob…. that campaign money gets spread around the private sector as work…. production for ads, advertising income for radio and broadcast, sign makers etal, whistle stops and venues, etc.
So what have you accomplished? You pulled a significant money that could go to the private sector producers, and gave it instead to a spoiled child Congress who constantly spends over the projected revenue. What have you accomplished but shafting independent business, and feeding the Congressional beast with more cash? It’s not like they’d apply it against the debt, ya know.
What we should be doing is starving Congress of taxpayer cash so they have to start reversing this expensive entitlement goverment and it’s sundry agencies. For what is lost in needed services, a private entrepreneur or non-profit will pick up as a business opportunity.
WE also need more taxes. I think we should help our forrests by taxing newsprint. Also TV networks should pay for each affiliate they have. There shoiuld be taxes also on Berkenstocks and tie dyed shirts. In short we should tax everything that affluent and richliberals buy.
Let’s just remove the “non-profit” status of all organizations that do not perform a life-saving service, e.g., hospitals and blood banks. Also, any church that preaches politics, social justice, or global warming should pay taxes to offset the “financing assistance” they will be receiving from the Obama administration through the EPA, etc.
Citibank’s little-known 2006 “plutonomy” report:
http://jdeanicite.typepad.com/files/6674229-citigroup-mar-5-2006-plutonomy-report-part-2-1-1.pdf
Definition of Plutonomy: “Economic growth that is powered and consumed by the wealthiest upper class of society.”
From the report:
“Our whole plutonomy thesis is based on the idea that the rich will keep getting richer. This thesis is not without its risks. For example, a policy error leading to asset deflation, would likely damage plutonomy. Furthermore, the rising wealth gap between the rich and poor will probably at some point lead to a political backlash. Whilst the rich are getting a greater share of the wealth, and the poor a lesser share, political enfrachisement remains as was – one person, one vote (in the plutonomies). At some point it is likely that labor will fight backagainst the rising profit share of the rich and there will be a political backlash against the rising wealth of the rich. This could be felt through higher taxation (on the rich or indirectly though higher corporate taxes/regulation) or through trying to protect indigenous laborers, in a push-back on globalization – either anti-immigration, or protectionism. We don’t see this happening yet, though there are signs of rising political tensions. However we are keeping a close eye on developments.”
Basically, from the perspective of the “plutonomist”, the rich will and should become richer, while the rest of us–the bottom 90 percent–will become poorer. The negative consequences for the rest of us are of concern only to the extent that they engender political will to interfere with the arrangement. Declining savings rates, growing deficits, and the prospect of currency devaluation are similarly of concern only to the extent that they negatively affect the plutonomy. These things are actually a part of the arrangement.
Interesting reading.
How ’bout a progressive wealth tax? Anyone with a net worth of $5 million or more would be taxed at a rate beginning at 105% to a max of 135%. There should also be an alternative minimum wealth tax for those worth $1 billion or more.
The first 100% is for all sources of income including wages, interest, dividends, cap gains, fees, social security benefits, etc.
Of course, these taxes would be targeted to certain fields such as entertainment, for example.
Greg, perhaps you will point out to us what socialist nation’s “poor” have the quality of life of the US “poor”… i.e. cell phones, cars, HDTV’s, etal.
You concentrate on the “gap” while ignoring that what is considered poor in the US is considerably higher on the sustainable scale than socialist nations at large. And opportunity for wealth exists for all… they need merely figure out their particular path to that status themselves. Not so in socialist countries. Instead, they figure out a way to eliminate wealth, while lowering the standards of all denizens.
@cubiclcecommando, I’m going to classify such a comment as exaggerated satire….
“You concentrate on the “gap” while ignoring that what is considered poor in the US is considerably higher on the sustainable scale than socialist nations at large.”
I cannot deny that, for the most part, we’re the luckiest serfs that have ever been. I’ve certainly improved my own lot over the course of my working life. No complaints there.
What shocks me about the Citibank analysis–what I would expect might shock a lot of people, assuming it sinks in–is the strongly implied indifference to the systemic economic problems that are of enormous concern to the vast majority of Americans. Deficits, falling real wages, low savings rates, immigration issues, the possibility of currency devaluation, etc–all are largely irrelevant, because the wealthiest of the wealthy, whose financial power keeps the current arrangement in place, are expected to permanently remain ahead of the curve. They profit from those very things that the rest might see as the sources of our problems. Alas, the rest of us will find the curve increasingly catching up with us. A very large segment of the population will find their status as the luckiest of serfs gone down the tubes.
Now Greg, I’ve come accustomed to your tongue in cheek exaggerations… Actually, for one of our regular lib/prog contributors, I generally find you to be reasonable (if not correct, IMHO) and civil in your discourse. But come on…. surely “serf” is a word you chose to exaggerate reality. Afterall we are all slaves to our assets… i.e. lenders who carry the bulk of our mortgage, cars, personal debt etc. But we chose that path. It was not forced upon us without volition. Nor is it due to laws/regulations, or the absence of laws/regulations. And “luck” has nothing to do with it. It’s the way our country was founded…. shunning ultimate government control over it’s citizens’ and their opportunities. Something this POTUS is busy trying to “remake”, BTW.
But you mention the wealthiest of the wealthy are expected to remain permanently ahead of the curve. Of course they would. Unless, of course, they get wiped by massive lawsuits (BP perhaps?), serious stock/shareholder losses (GS maybe? Toyota?) Would you expect to attain that wealth, then lose it?
The foundation of the US was not to equalize living conditions and wealth. It is to equalize the opportunity to achieve that, based on your efforts.
So what’s your point?
BTW… for those of you trying to figure out alternative taxation ideas. What’s up with that? Why do you continue to find palatable reasons to feed the Congressional beast? Very counterproductive. Starve that body… it is seriously obese.
Yeah, “serf” is a rather colorful word. I’ve got a fondness for colorful words.
I guess the point has to do with my perception that enormous accumulations of wealth are tipping the entire playing field to such an extent that, for increasing numbers of people, the rewards of hard work aren’t what they ought to be and aren’t what they used to be. For most people, even the rewards they’ve managed to hang on to from past efforts are in jeopardy. I don’t tend to blame those who have less than I do myself for that situation. To me, it looks like we’ve got an untouchable elite controlling a system that’s set up to reward them disproportionately, while playing the rest of us off against each other. Politics doesn’t seem to accomplish much because it’s generally kept focused on that matter of playing us off against each other.
Sorry. I’m having one of my recurring attacks of cynicism. Maybe I should just shut up for a while until it blows over.
Well, Greg, if you’re gonna wait “until it blows over”, then you might as well halt your ISP connect for… well… forever. I’d say dissent will exist until man becomes extinct.
If you’re talking about cost of living vs wages, I agree to a certain extent…. in that cost of living index is way over wage increases. But then, why is that? Government, of course. Regulations, taxes and government mandates make it more expensive to start up and run fiscally profitable businesses. The more your licenses, fees/taxes, mandated upgrades, monitoring and reporting processes, plus inventory overhead, the less you can afford on payroll. i.e. if a manfacturer gets hit with increased safety mandates and must improve the building or line to meet standards, that money doesn’t get recouped unless the manufacturer can raise his prices, passing along the extra cost. That extra mandated upgrade may cost that employer x amount of employees for payroll taxes, insurance etc. So is more government regulation the answer? Or just festers the problem?
INRE the rewards of hard work, I think you are confusing a commendable worth ethic with novel innovation or better than average skills/knowledge. Meaning being the “post it” creator, not the loyal, high performing worker in “post-it” production factory line. Or being the guy who sees the investment opportunity pay off, and knows how to structure an offer. The biggest market rewards (i.e. money) are reserved for those that have above average skill or creativity in a particular field. We are not a nation of millionaires just for showing up and doing a stellar day’s work… nor should we be.
Even at that, certainly there are… er, were…. jobs that enabled high paying work ethic in particular situations. Factory/manufacturer workers made good cash, if not becoming millionaires. This wasn’t necessarily higher education dependent either. Then there is the extreme reward in some of the creative (and not-so-creative) arts… where reality show stars hit the jackpot with cash and a hit series, unknown band hit nat’l/int’l distribution, struggling architects that nab a high profile building site, writers hit mainstream with a popular book, etc. And who can forget the long suffering civil servant who’s salary ain’t bad, and heavily peppered perks on the taxpayer’s penny?
Hang, in America, if you perform the right sexual acts with the right person at the perfect time, you too can become as famous and wealthy as Monica Lewinski. The US has a pretty low bar for “get rich quick” requirements, depending on how much of an arse you want to make of yourself publicly. So it’s not like opportunity doesn’t abound, even for the non-MIT grads, or not-so-well connected or wealthy families. One just needs to be “flexible” in the trade offs.
About cutting on payroll to meet overhead increased by gov’t regulations…. I know the liberal in you will want to say, “but still, there should be a bottom line minimal wage to be *fair*”. But who gets to decide what is “fair” bottom line? Government?
I think the inherent difference between progressives (or liberals) and conservatives is that we are firm believers that the market forces can make the best decisions for our economy and business practices, and not our government. We like the innovators to decide how to attract the best talent for maximum business profitability with salaries and perks. Not the government, who will not only put a miniman wage in arbitrarily, but is now trying to control the top wage as well. Businesses will then be, effectively, blocked in and doomed to mediocrity. The cannot differ from each other too much… no cream of the crop or top of the ladder opportunities.
Will there be those that aren’t “fair” in their own practices? Yes. And they will either get sued for breaking some of the ga’zillion laws we have on the books, or workers will leave that company for a better company offering more for their loyalty.
Here’s the problem with believing government control is in the interest of being “fair”. Liberals believe they can legislate good and honest behavior into men. You can’t. Impossible. Laws stop nothing in behavior. They only give you the chance to slap ’em up side the head for doing it. But it’s not about being “fair” really. It’s government protection racket – because all these laws do is collect corporate money up front, and use it to spend on something. And every time, whenever the gov’t collects more money from business, there are less benefits for those at the bottom of the work food chain, and the buying consumer.
We are far beyond the law of diminishing returns on any and all taxes.Any raising of any taxes will will knock down total tax revenue period.
Can we tax Presidents and Law-makers for NOT reading the law?
Tax hike = civil war. Pass cap and tax and see.
@ MataHarley:
First off, thanks for commenting on my post!
The windfall tax proposal is not unlike what Congress is always proposing on industries like oil companies and drug makers who (to steal a line from WFB) “Keep us warm and keep us healthy”. Why not apply it to businesses that are just expenses to society? Yes, some lobbying is a necessary evil, but when the business model shifts from building a better product to bribing politicians for massive subsidies or regulating upstart competitors out of business we have a problem.
And suggesting that campaign contributions getting spread around the private sector isn’t valid any more than government spending projects are. This goes back to Bastiat’s broken window theory:
http://bastiat.org/en/twisatwins.html#broken_window
Yes, we see the signs and ribbons and bunting that gets stimulated by campaign money, but we don’t see what doesn’t get created by how that money would have otherwise been spent. I’d rather see a business spend money on hiring more sales reps or R&D than on trying to buy politicians.
I’m with you 100% on starving the beast, but not sure how taxing contributions puts more money on the hands of politicians.
@Greg:
I enjoyed your back & forth w/ MH, but you leave me with one question. How do you propose handling this upper class? History has proven that making the rich poor does not make the poor rich. I still don’t understand how you consider us serfs, when your average American lives better than an old feudal lord.
BroBob… INRE your comment:
There is no correlation whatsoever between gov’t “stimulus” and campaign contributions. Contributions are given freely by donors, not mandated by the point of an IRS pen, gun or under penalties of jail or asset seizure. In other words, campaign money is cash given of those choosing to support the political agenda, and not stolen from a nation of the unwilling at large to support projects they do not necessarily approve of.
Taxing those contributions puts in government in as the useless middle man. The donors gave to their political cause direct… they did not want to have any of it creamed off the top for the elected elite – including those of the party agenda they do *not* support – to spend as they see fit.
Not related… even an iota.
If you have a friend who is an uncontrollable alcoholic in denial with multiple DUI arrests, you don’t solve the problem by giving him more booze and a new car. What you have to do is take the bottle and his keys away.
Besides, we can’t afford anymore taxes.
Not all campaign contributions are voluntary. I doubt that every last union member supported Obama, but they got to send their dues to finance the campaign. And employees get to indirectly fund candidates through their employers’ donations. I worked for a large company a few years back where everyone at manager level and above was advised to contribute to the company’s PAC.
Look at how much campaign spending has increased over time. I know that the chart has not been adjusted for inflation, but even so these numbers are insane:
http://www.opensecrets.org/pres08/totals.php?cycle=
Let’s make politics and interfering in our lives more expensive – we just might get less of it
To paraphrase our fearless leader, “You’ve raised enough.”