Friday, July 20, 2012

Toddler Steps Towards An Ontology of Building Things

. Friday, July 20, 2012


I've been involved in comments to the previous post. In response to one I wrote this, in the form of a one-act play, but it got long so I thought I'd bring it up top. The point of the exercise, for me, is not to illustrate that the movement left is dumb or mendacious -- at least any more dumb or mendacious than the movement right -- but that this particular form of argument really doesn't hold up well to scrutiny. There are very good arguments for making the tax code more progressive -- and indeed I support doing so -- but this isn't one of them. For these purposes the "Rich People" are the top 10% of income earners, who take home roughly 43% of national income and pay roughly 70% of federal income taxes. I don't agree with all of the Rich Peoples' arguments, but this, I think, is their best shot. It's what liberals, egalitarians, and progressives have to be able to overcome to win the day.

Obama: You rich people didn't build public goods -- like roads and bridges -- that you use for your businesses.

Rich People: Maybe not 100% of it, but we contributed way more than anybody else did, so saying that we didn't build it is leaving a pretty wrong impression.

Obama: Nevertheless, no man is an island so therefore you are going to have to pay more.

Rich People: Wait a second, if no man is an island why are we the only ones who have to pay more?

Obama: Because you didn't build the roads.

Rich People: Yes, but we paid vastly more towards the construction of those roads than any other group did... only 10% of us paid more than 70% of the total federal income tax, much of which goes to *non* public goods like means-tested transfers anyway, and we only earned 43% of the money! So yeah: you could pretty much say we built the roads. 70+% of them, anyway.

People Who Don't Like Rich People: A-ha! Most of the roads were there before you got rich, so NO YOU DIDN'T.

Rich People: Are you serious? Fine, then the previous rich people paid the most for building the yesterday's roads, we're paying the most for building the today's roads, and other rich people will pay the most for building tomorrow's roads. Anyway, why do you all think that we got rich because we drove on the same roads as you? Why aren't you rich then? Seems like you've maybe omitted some important variables from your analysis.

Obama: You're right: the teachers. What about the teachers? You did go to school when you were a kid, right?

Rich People: Um, everyone got to go to public school. Not everyone is rich. Still not getting there. Anyway, we didn't go to public schools. We went to private schools, so our parents paid a bunch of money for a "public good" that we never even used. Do we get a refund?

Obama: No. Okay, what about the internet? "Government research created the internet so that all the companies could make money off the internet."

Rich People: You MUST be joking. Government research created a pre-internet communication system with no commercial applications. Several decades later innovators in the private sector figured out ways to put to it productive use and make money off of it. Oh, and the infrastructure used to send that communication via cable? Built by private companies -- mostly phone companies. Oh, as before, anyone that wishes to can use the internet. It's not gonna make you rich, tho.

Obama: Okay fine, Mr. Know-It-All. How did you get rich?

Rich People: It was a combination of factors, including good ideas, hard work, and luck.

People Who Don't Like Rich People: Ah-ha! You admit that you got lucky.

Rich People: Partially, yes.

People Who Don't Like Rich People: We should tax your luck. This is about fairness. You didn't do anything to get lucky.

Rich People: Define fair. It wasn't *all* luck, as President Obama often says, and we already pay a significantly higher percentage of tax than income we take. 75% more, in fact, and that doesn't include estate taxes, corporate taxes, property taxes, etc. So again... define fair.

People Who Don't Like Rich People: No.

RIch People: How about this: if we're all in this together, and we all benefit from public goods, then how about we all increase our income taxes by, say, 3%. Across the board.

Everyone: HELL NO!

Rich People: Why not? Wouldn't that be fair? Wouldn't that be coming together for the good of the nation? It's a pretty good deal for you, because I'm going to be paying in an extra $30,000/year, while those of you in the bottom 50% are only going to be tossing in several hundred. Think of all those extra public goods we could enjoy together!

Everyone: N TO THE IZZO! Are you crazy? That makes no sense. Haven't you heard of diminishing marginal utility? Your marginal dollar is worth less to you than my marginal dollar is worth to me.

Rich People: Yes I have heard of the concept, although I'm not sure how I feel about you defining my marginal utility curve for me. After all, I haven't gotten my private jet yet, and that sounds pretty freaking rad. But let's set that aside for now, along with the point that the law of diminishing marginal utility -- which isn't an empirical law at all -- refers to the consumption of one particular commodity, not the accumulation of money which may be spread over many different commodities. I mean, it's true in the limit, certainly, but I'm not in the limit. If I were, I wouldn't have all this new income; I would be on vacation, or retired. If we accept the principle anyway, at least as you seem to be defining it, it seems that we should redistribute until everyone's marginal utility for dollars is equivalent. So you're telling me that you want everyone to have a perfectly equal income?

Everyone: No! What are you, some kind of socialist?

Obama: I'm DEFINITELY not a socialist.

Rich People: Okay... so on what basis do you want me to pay more again?

People Who Don't Like Rich People: It is only fair.

Rich People: DEFINE "FAIR".

People Who Don't Like Rich People: No.

Rich People: So let me get this straight: because, like everyone else, I used a public good (which I paid for far more than anyone else by any measure), I now have to pay more (again) because under your definition of "build" the money I paid in taxes does not count towards the construction of infrastructure, but the money you did not pay somehow does?

Everyone: YES.

Rich People: This is wrong. To the extent that anyone can be said as having "built" public goods, I did. To the extent that anyone is continuing to build public goods, I am. To the extent that anyone is receiving private goods distributed the government, I'm paying for them. If you want me to pay even more, well that's what we have elections for. But don't sit there and tell me that *I* am leeching off of *you*. That's bullshit and it hurts my feelings and is, as it happens, empirically false.

People Who Don't Like Rich People: You can't use empirics to prove or disprove a normative concept like fairness.

Rich People: a) I'm not; I'm using empirics to disprove the allegation that I have not contributed to the provision of public goods, but nevertheless have enjoyed the benefits from them. I am using empirics to rebut the insinuation that *I* have been free-riding off of *you*. b) Define "fairness".

People Who Don't Like Rich People: No.

Rich People: Please?

People Who Don't Like Rich People: Fine. Okay. It's like... "justice". I think Rawls said that, so the matter must be settled since everyone likes Rawls.

Rich People: It isn't, actually, but let's go with it. If I ask you what "fairness" is and you reply "justice" and reference Rawls, I'll go and read Rawls and discover that he said something a bit different: "justice as fairness" not "fairness as justice". So we still need a definition of "fairness". One such definition of "fair", used often in the common tongue as well as more technical fields like probability and statistics, is equivalence. As in, a fair die has an equal probability of landing on 1, 2, 3, 4, 5, or 6 when rolled; a fair coin has an equal probability of landing on heads or tails when flipped. Applied to this conversation, such a definition would imply that you are saying that it is unjust that I have contributed an unequal percentage of my income so that others may benefit from my provision of public goods. If that's the case then I agree, but it's no biggie; I'm doing alright.

People Who Don't Like Rich People: No, that's not what we mean at all. Nor Rawls. He wanted redistribution and the provision of a basic minimum standard of living. And he also said that if I didn't want to live in a place with income inequality, then it was unjust for me to live there. So give me your money.

Rich People: Yes, but we've already established that we're redistributing from me to you. You're saying that we need to redistribute more, and I'm disagreeing. Rawls can't settle that one. He didn't say what the top marginal tax rate should be. I can make a strong argument that the conditions Rawls set for a just -- and thus fair -- society are being met: "equality of fair opportunity", by the very public goods you are saying that benefit all of us equally; "the difference principle", by the progressive taxation that provides for those public goods, as well as a system of means-tested transfers, to mitigate the luck factors that you're concerned with. And I'd also note that by the end of his career Rawls was becoming increasingly worried about the potential for moral hazard that systems of transfers could facilitate. As for the veil of ignorance, we're clearly not in "overlapping consensus" territory here.

Obama: Look everybody. We need to put this partisan bickering behind us and come together as a country to solve the problems we all face.

Rich People: Sounds great. What do you have in mind?

Obama: Your taxes go up. Nobody else's does. Some peoples' go down.

Rich People: How is that coming together?

People Who Don't Like Rich People: Just shut up! This is why business should NOT be allowed to interfere in politics.

Rich People: Wait, what? What about deliberative democracy? What about an open and inclusive public sphere? What about the marketplace of ideas? Okay, so if business is not allowed to interfere in politics, does that mean that, like, politics isn't allowed to interfere in business?

Everyone: Of course politics is allowed to interfere in business, silly. How else would we get you to pay for public goods?

Rich People: Well, as long we're all going to act in our own self-interest while pretending to embrace high ideals I guess I'm voting for Romney.

People Who Don't Like Rich People: Elitist asshole!

Rich People: Whatever. I'm eating a Douche Burger for dinner tonight. It wouldn't be half the fun if it only cost $665. See: the marginal buck actually can make a big difference, even if you're rich. You guys can eat cake, for all I care.

Academic Who Comes in Late: Hey guys, you do know that -- since they are rival in consumption and are also excludable -- roads and bridges and the internet are technically not public goods, right?

Everyone: Did that weird-looking thing over there just make some kind of noise?

Academic Who Comes in Late: Forget it.

News Media: BREAKING! Tom Cruise and Katie Holmes are getting DIVORCED! And coming up next: Lots of people go see mediocre superhero movie. Stay tuned for more.

11 comments:

JR said...

All the major tax breaks - from Kennedy to Reagan to GWB - also decreased taxes for non-rich people. All European welfare states (Western and Nordic, anyways) tax ALL their income brackets higher. If you're a freelancer in Germany getting paid more than 400 euro a month, 19.5% of your pre-tax income MUST be paid to the German pension system. Generally speaking, if you're not a recipient of government aid in those countries, you're a payer.

Back to the US, regressive taxation at the state and local is a problem - but that's a problem for state's and their populations to sort out at the ballot. It's not clear why the Federal government needs to adjust its tax code to make up for peoples' choices in their local elections.

According to OECD data, the US spends roughly the same percentage of it's GDP on (public) social spending as Canada and Australia (most recent data is 2007). So sure, let's have the conversation about making a more progressive tax code - but let's have it simultaneously with a conversation about why our social spending seems to be less effective, and maybe stop treating words like "cuts" and "reform/restructure" as pejoratives.

JMS said...

"It's what liberals, egalitarians, and progressives have to be able to overcome to win the day."

Actually, no. All they need are the votes on election day. And envy always gets more votes that cold, rational analysis.

Anonymous said...

Obama wants more taxes as in Europe, and in order to get more money out of the taxpayer, he wants people to live as they do in Europe - renting apartments, rather than owning a home, and taking public transportation, rather than owning a car. A lot of young people are giving up on buying homes and cars.

Anonymous said...

I have to laugh when people suggest we emulate Europe these days.

LFC said...

Haven't really read the previous conv. betw. you and 'Latinamericanist', but w/r/t this one-act play:
1)would the outcome/position be different if you factored in *wealth* not simply income when considering how much 'the rich' have contributed?
2)Rawls did not say anything like "if you don't like living in a place w income inequality then it's unjust for you to live there". One might judge societies as more or less just depending on how close they come to R's ideal, but that's a different matter. Shd be kept in mind that 'Theory of Justice' is an exercise in 'ideal theory' (definition of which can be found in TOJ). R. himself, I think it's fair to say, was somewhat cautious about 'non-ideal' applications, though it is clear he was distressed by the increasing inequality in US over last several decades.

Anonymous said...

Funny! Thanks for the insightful laugh.

JR said...

According to http://www.faculty.fairfield.edu/faculty/hodgson/courses/so11/stratification/income&wealth.htm, the top 10% control roughly 70% of the wealth. More current sources show the same data. As Winecoff indicates, the top 10% of income earners pays for 70% of income tax revenue. So I don't think it affects very much. Since they're more or less the only ones who have financial wealth, they're the only ones paying capital gains taxes.


You're on better footing look at property taxes, or even looking at the percentage of personal income paid, rather than overall amount contributed to the pie (think Mitt Romney's 14% federal tax rate).

Anonymous said...

JR,

But wealth is a cumulative measure, while income and tax paid are annual measures. It makes little sense to compare wealth and one year's tax payments. By that logic, as a person gets older and wealthier, they should pay a higher and higher percentage of their income, which makes little sense. Presumably they are saving for retirement, why should you punish them for doing that? It would create a huge problem by deterring work with astronomical marginal rates for the wealthy. Should someone be able to avoid all taxes by spending all their money? Saving is a good thing.

Anonymous said...

"Obama: Okay fine, Mr. Know-It-All. How did you get rich?

Rich People: It was a combination of factors, including good ideas, hard work, and luck."

I recognize that this wasn't a major part of the piece, but I felt compelled to chime in just because I think there are 2 significant and related factors that are often left out: investment and risk. Sure, luck/chance is involved in success just as it's involved in every outcome. Jobs, Edison, Ford, Gates, all had a break in one way or another, even if it was just being in the right place at the right time. But in order to have luck pay off you need to have the nerve to put the bet on in the first place. Wealth is the reward and incentive for incurring extreme costs (both direct and opportunity). If we feel that "lucky" businessmen should be taxed more heavily, should we reward "unlucky" businessmen that failed?

Kindred Winecoff said...

LFC -

1. Maybe it would and maybe it wouldn't, but Obama wasn't talking about accumulated wealth. He was talking about future income. There's too much shifting of the goalposts in this conversation.

If you want to expand the conversation to include wealth anyway, then you also must concede that that wealth has already been taxed, numerous times and in numerous. It has been taxed as labor income, as business income, as capital income, as property, etc. At some point, surely, any conception of a just society that permits ownership of private property must conclude that some level of taxation is excessive, onerous, and unjust. This gets into what Anon@12:38 was saying w/r/t cumulative vs. annual measures, and the point s/he made is a good one.

2. Yes, it was meant to be a tongue-in-cheek reference to those who routinely cite Rawls (one part of him anyway) but have clearly not read or understood him, much less read or understood any of his many critics.

Anon@1:32:

Yes, I agree. It's very difficult to quantify "risk-taking" in the sort of casual social justice discussion we've been having, but it's certainly an important factor. In terms of policy, though, it might not matter as much. I.e., if you care less about "fairness" and more about redistribution in pursuit of a high social goal, then you don't really care whether income was gained legitimately or not.

Of course most on the left are hesitant to put it quite that way, but I suspect that that's how many of them really feel.

Kevin Kleen said...

The liberal request is that tax rates on the rich move towards historical levels. The rich today are piggybacking off the infrastructure built by their predecessors' contributions.

Toddler Steps Towards An Ontology of Building Things
 

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