Thursday, April 28, 2011

Tax Debate

I'm back!

There is a huge disconnect in the conversation about taxes in this country.  On one side we have the liberals who see a fundamental unfairness or inequality in this country and think that the government needs to raise taxes to collect more money to spend to fix these problems.  On the other side we have the the conservatives who say we need to cut taxes and slash the size of the government.  No prizes for guessing where I fall on this spectrum but the conversation is too simplistic.

I think there is a lot of room for debate here on policy.  What is the goal of taxes?  Is it to fund the government or be an instrument of re distributive "justice?"  To pay for the Constitutionally enumerated powers granted to the Federal Government or to control the lives of citizens?

We know where our Dear Leader stands on this issue.  When I saw this debate it completely blew my mind, I thought Obama had completely ruined his chances for election.  Presented with facts on the capital gains tax, admittedly different from the income or corporate tax rates, that increasing marginal rates leads to lower revenues he said that he wanted to raise rates anyway in the interests of some abstract idea of "fairness."  Ignoring the fact that life is not fair an nor is it the job of the government to try and bring it as close to fair as possible, this is an unbelievable statement.  Obama wants to spend.  He wants to Win The Future (WTF!) on "investments" in education, infrastructure (High speed rail FTW!), and stimulus in general.  The taxing part seems to me to be what you try not to talk about as you go along talking with the totally awesome fun of giving away free stuff.  If I believed in the Keynesian School, the important thing to me would be having more money to spend on whatever alternative energy, Pigford Settlement or SEIU bailout that I thought would help the country.  I would not care too much where it came from, but if there were a simple way to have more money for the government to WTF with, I would not go out of my way to do something that would 1. Piss people off and 2. Lead to me having less money to spend.  This was a purely idealogical push for punitive tax rates on "the rich."  Class warfare, envy or whatever you want to call it that served no purpose aside from polishing his populist credentials while spitting in the face of logic and reason.

This brings me to my larger point, I do not think the argument should be solely over marginal tax rates and class warfare.  Personally I think the argument that 45% of Americans pay zero income tax is a more compelling argument than the envy and populism that comes with railing against "the rich," but what we need to focus on is revenue.  Tax increases never lead to the increased revenue promised because people change their behaviors when the circumstances of their environment change.  The focus of the conversation should be revenue, where can we walk up and down the Laffer Curve to find a point where revenue is maximized with the smallest rates possible?  Lower marginal rates, on corporations, individuals and capital gains encourage investment, expansion and innovation.  If lowering taxes and increasing individual accountability, responsibility and freedom actually leads to higher gross tax revenues in an area like the capital gains tax why not try it elsewhere?  Is it not about the gross tax revenue at all and rather more focused abstract, nebulous ideas of "justice" and "fairness?"  What do they value more, the disadvantaged that they claim to care about or taking the highest percent possible from the "rich" and the "greedy speculators" and whomever else they hate at the time?

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