Monday, September 26, 2011

Bordering on politics

Warning - non market post. 

I try to avoid politics in this blog but I may be in violation with this post. It's just that something I saw on a financial news show last week was bugging me.

There is no doubt that the host of the show and all his side kicks are small government advocates and most likely will vote Republican down the line. The guest was as far to the left as I've ever seen. It was painfully obvious, uncomfortably obvious, that the host was ready to pop an aneurysm in his brain during the interview. You could see the froth forming in the corners of his mouth.

OK, the stage is set. The topic was how much is someone's fair share of taxes.

The guest said that people in this country got rich thanks to the government and the public. Of course, the host said they got rich by taking risks, getting educated and doing hard work.  I wondered, how much of the guest's arguments were true. After all, without roads, electric power, the Internet, police protection, courts, bridges, tunnels and food safety inspection none of the wealthy's businesses could exist.

She had a point. 

Then it hit me. The rich, the poor and everyone in between all benefit from roads, police, courts and food safety. Rich people do not use more shares of soldiers' efforts than poor people.

In fact, we could argue that poor people require more police and prison expense due to their higher rates of crime.  Before you flame me about that distasteful argument, rich people require more enforcement by the SEC and white collar crime units.  Let's move on.

Here is the real argument, in my view. Since everyone gets the opportunity of having roads and police - note I did not say uses them - then why are there rich people and poor people? The answer is what rich people do with the services offered. Do they drink beer or do they write that novel? Do they complain or do they hit the pavement looking for work? Do they do what they've always done or do they go to trade school?

Again, don't flame me. I am fully aware that the cycle of poverty is tough to break. Discrimination still finds its place everywhere. And it is still who you know that often makes the difference between moving up in the world or moving down.  I get it. Some people are dealt a crappy hand while others are born with a silver spoon.

Yet some privileged people head down while some poor people pull themselves up.The difference, as the host would argue, is the blood, sweat and tears they put into reaching their goals.

Yes, rich people got rich thanks to the bounty and taxpayer fueled services of this country. But for two people with equal backgrounds and limitations, one still manages to be a success while the other may not. The difference is their own efforts.

So how much should they pay in taxes? Oh, I am not going to go there. But for the argument that without the taxpayer they would not have gotten rich, I'll agree. But only if people like that financial show guest will agree that taxpayer bounty is there for all people, whether or not they use it, therefore rendering the argument moot.

Please be civil if you care to comment.


Normand said...

«...bounty is there for all people, whether or not they use it»

You are totally right.
Let's have the people who use it most pay for it.

Amalan said...

"The difference is their own efforts". How do you prove this? There is no proof of this anywhere, except in our own heads, because we think our work must provide results, and the result is success beyond that which someone else achieved because we worked harder or we are smarter. Only when considering averages does this come out true, and that is only because in general the work that uses more "education", gets paid more, on average. But, within the same segment, where all things are equal except the factor under consideration, there is no proof that the specific factor made the difference between success and failure.

Yet we'll continue to believe that we somehow know the factors of success. There is a whole industry trying to teach you to be successful.

It is nothing but bias that makes us look down on people without education, those that make less money, those that pay less taxes (amount, not just the percentage) and then say they should all be paying more in taxes.

One could also argue that the same segment that earns less and pays less in taxes have nothing but bias when looking at the wealthy too.

The only difference is that when the rich pay a bit more in taxes, their comfort level is not much compromised, whereas the poor will get worse if they pay more in taxes.

You say such thinking is socialism? Capitalism in its purest form never succeeded; there was a reason for instituting social security. Some amount of socialism ain't so bad. The question is what is the right proportion..

To your point of rich people using the services more effectively - poor people find it hard to break the cycle to even know how to use the services...which is one more reason we shouldn't have more of them. The more important question is what makes some of the not so poor become lazy and fall below the threshold and eventually end up poor.

patrick neid said...

This is just the modern version of Marxism vs Capitalism. The State vs the individual. Who creates whom? Thankfully, from my perspective, mutated capitalism is still winning the argument. The guest argument about fellow taxpayers/state is absolutely no different than the positions held by acknowledged Socialists, Communists, Fidel, Chavez, et al. One would think after seventy years of the failed experiment behind the Iron Curtain we would not even be having these ridiculous discussions. However in tough times with our government's crony capitalism on exhibit, populist sentiments like those expressed in Ms. Warren's viral youtube video temporarily gain traction.

My guess, with 10% of the people paying 70% of the taxes, this is a discussion that will be quickly forgotten during the next secular bull market. With some luck that market will be accompanied by a flat tax of sorts. Then everyone will be paying their fair share! Imagine a world with no deductions.