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Jun 29, 2011

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eric

One of the great achievements of the American corporate propaganda machine: Just as it is only "class war" when the working class fights back, it's only "socialism" when it benefits the have-nots. Taxing workers to subsidize the bosses is just good old American free enterprise.

Kim

In spite of my mortgage interest and standard deductions, etc., I still write the IRS a check, and I'm cheating the government? If I'm not taxed enough, it's a government expenditure?

Ed Cone

This comes up a lot in these threads, often in discussions of "paying" for tax cuts. It makes perfect sense in the context of making a budget. From the linked article:

Known in informal parlance as “tax breaks” or “tax loopholes,” these policies permit households to pay less in taxes if they are involved in some kind of activity or belong to a class that policymakers deem worthy of public support. From the time Ronald Reagan took office in 1981 until 2010, the number of such tax subsidies had increased by 86 percent, from 81 to 151. As of 2011, the federal government annually doles out more than $1 trillion in these tax expenditures...

As a matter of budgeting, however, there is no difference between a tax break and a social program: both have to be paid for, either by raising tax rates or by adding to the deficit. Eugene Steuerle, a tax economist and political appointee in the Reagan administration, said of the distinction between tax expenditures and direct social spending, “One looks like smaller government; one looks like bigger government. In fact, they both do exactly the same thing.” Certainly their status has not eluded the policymakers who crafted them; the Louisiana senator Russell Long, chair of the Senate Finance Committee from 1966 to 1981 and the father of the Earned Income Tax Credit, said of the term “tax expenditures,” “That label don’t bother me.… I’ve never been confused about it. I’ve always known that what we’re doing was giving government money away.”

Kim

And why does government want to influence behavior with its tax code? I get that my effective tax rate is lower, but I don't write the code and give myself "tax breaks" for children, mortgages, health care expenses, etc. It's not the governments money to give away, it's mine to keep as much as I can. Bring on the Fair Tax.

Bubba

"If I'm not taxed enough, it's a government expenditure?"

That's how the discussion is always framed in outlets like this.

"It's not the governments money to give away, it's mine to keep as much as I can."

That's a downright "unpatriotic" attitude according to some, Kim.

Bubba

"Taxing workers to subsidize the bosses is just good old American free enterprise."

And this guy complains about "class war" rhetoric!

WAY too funny.....

Ed Cone

Kim, you can call it string cheese if you prefer. Seems to me the more pressing question is whether and how to modify the tax code.

Kim

Agree, I just pay the bill that I am given.

Andrew Brod

Another point is that this is yet another justification for a progressive federal income tax. It's been long understood by tax economists that the rich enjoy certain benefits that poorer folks do not. It doesn't imply soaking the rich, but it does justify a rising marginal rate.

Preston Earle

Harvard economist Greg Mankiw addresses this question is a blog post today .

In a linked NYT op-ed he writes [my emphasis] "Pundits on the left are suspicious of any plan that reduces marginal tax rates on the rich. But, as Mr. Bowles and Mr. Simpson point out, tax expenditures disproportionately benefit those at the top of the economic ladder. According to their figures, tax expenditures increase the after-tax income of those in the bottom quintile by about 6 percent. Those in the top 1 percent of the income distribution enjoy about twice that gain. Progressives who are concerned about the gap between rich and poor should be eager to scale back tax expenditures.

"Pundits on the right, meanwhile, are suspicious of anything that increases government revenue. But they should recognize that tax expenditures are best viewed as a hidden form of spending. If we eliminate tax expenditures and reduce marginal tax rates, as Mr. Bowles and Mr. Simpson propose, we are essentially doing what economic conservatives have long advocated: cutting spending and taxes.

David Boyd

Simplifying the tax code and getting rid of tax breaks reduces government power. If there were no mortgage interest deduction, there would be no one advocating for its continuation.

eric

"And this guy complains about "class war" rhetoric!

WAY too funny....."

Thank you, Bob, for illustrating my point. You get a gold star and a lollipop.

Bubba

"You get a gold star and a lollipop."

You didn't pay attention in English class when lierary devices were discussed, did you? Plus, your concept of "humor" is almost non-existent/

You undoubtedly failed to understand "irony", but I find that to be a common failure among narrow minded radical/"progressive" counter culture warriors.

JustCorbly

The "my money is my money, not the government's," argument strongly suggests that those who make either don't want to fund government, or don't think it needs to be funded. Until they come clean on thereal obhective, they can't be taken seriously.

As for government using financial and tax policy to advance social and ecnomic obejctives, it's been done from Day One. Presumably, this was settled when Hamilton bested Jefferson during Washington's adminstration, and Jefferson's silly notion of America as a bunch of idyllic (white) farmers quickly morphed into a perverse defense of slavery.

At the heart of this discussion is not so much the role of government, but the role of the corporate sector. Few Americans would be able or willing to go without the services government provides. So, if it stops providing them, logic dictates that the corporate sector will step in to provide them, for a cost if, and only if, they can be sold at a profit. The potential for the abuse of democratic rights in that scenario seems obvious. i wouldn't expect conservatives to worry about that, since, at heart, they are not advocates of democracy.

Bubba

"The 'my money is my money, not the government's,' argument strongly suggests that those who make either don't want to fund government, or don't think it needs to be funded."

It does no such thing. That's an absurd assumption not supported by anything but agenda talking point nonsense.

"Until they come clean on the real obhective, they can't be taken seriously."

And the real objective, in your infinite wisdom is......?

Billy Jones

Okay Bubba, we don't have a solution so what's your solution?

Kim

Corbs, your conclusion is a leap, I think we all know taxation is necessary to fund basic funtions of government. I don't know about you, but I work hard for my money and have greater priorities in life, like support a family, than funding government.

I've paid what they say I owe for 35 years. I also pay property, sales, and gas taxes.

I think a tax code reform would be a wonderful thing.

Andrew Brod

Kim's comment makes it sound like government does nothing to support families.

Roch101

I get the "my money is my money argument" and I get the desire to keep it. A progressive consumption tax has merit and should resonate with some liberal ideals; too bad its greatest proponents are bigots and kooks.

Kim

Andy, how do you mean?
Roch, do you think I am a bigot?

Roch101

No, not at all, Kim. Sorry for the confusion. I should have written "its most visible proponents," which is to say the likes of Boortz and Savage. I think it has merit too, and I'm certainly no kook -- as far as I know.

Kim

Thanks, I am intrigued with a consumption tax as well, it is a shame it doesn't get much consideration due to the messangers. I'd like to know Andy's opinion on that type of tax reform. Notice I didn't ask you if you thought I was a kook either.

Andrew Brod

Kim, you said, "I... have greater priorities in life, like support a family, than funding government." The implication of that sentence is that funding government is distinct from supporting your family. Perhaps that's not what you intended.

Of course not everything a government does "supports families," but much of its activities (most of them?) do just that. I won't get into whether government does it efficiently, but government educates your children, maintains roads your family uses, provides for your safety (via police) and your security (via the military). It provides medical insurance and financial support in your old age.

Again, maybe the government solution isn't the best one in every one of these categories. If the libertarians run with this in their usual direction, it won't be because I'm egging them on. But it's clear that government does a lot to support your family. Maybe "funding government" isn't such a terrible thing from that perspective.

Roch101

That did not escape notice.

eric

@Roch -- Robert Frank, a Cornell University economist & NY Times columnist, is perhaps the best-known example of a left-leaning, non-bigot, non-kook advocate of a progressive consumption tax. Another, less left-leaning but still relatively liberal, and certainly non-kooky, is Dan Shaviro, a tax professor at my alma mater, NYU Law.

Kim

All I meant was that I have a responsibility to support MY family with MY earnings,the more I keep, the better for me. I realize I enjoy benefits from government that I help pay for, I'm not going to apologize for taking legal deductions to minimize my tax burden.

Roch101

Thanks, Eric.

Thomas

"...the more I keep, the better for me."

There is a limit to that. Imagine you paid no taxes and there were no government. What would your family's quality of life be? How much of your income and effort would go to securing your possessions and your personal safety?

So there is a sweet spot where we pay sufficient taxes to get the government services necessary to allow us to pursue happiness rather than survival, but not so much that all our effort goes to supporting that government. Finding the balance is the trick. As Ed says, "if you want nice things, you have to pay for them".

Andrew Brod

No one's asking you to apologize for minimizing your tax burden, Kim. I presume we all do the same. Let's not turn this into something it's not.

Kim

I just balk when it's called a "tax expenditure", that's all.

Bubba

"I just balk when it's called a 'tax expenditure', that's all."

Plus, we've been paying too much for "not-nice" things dressed up as "nice" things for way too long.

Ed Cone

"Plus, we've been paying too much for 'not-nice' things dressed up as 'nice' things for way too long."

Agreed, although we may disagree on what counts as nice.

That should be an essential part of the discussion -- what Americans are really willing to pay for, vs what we're just used to paying for, or what has really good lobbyists and a lot of money behind it, etc.

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