Thursday, November 15, 2012

Morality and Expiring Tax Cuts on the Top 2%

A member of the studio audience has tried to explain to me how Republicans feel about asking those who make more than $250,000 pay a higher tax in order to deal with the debt.

I look at it as a moral issue. It is unlikely a household making $300,000.00/year got to that point overnight. It was probably a result of years of hard work and sacrifice. whether it was 8 years of college for a doctor or someone who worked for years for little or no pay to start a business. Now at the same time the government went for decades overspending on pet projects and is now facing a budget crises. The crises is not because the government is not getting enough money it’s because it cannot control its own spending.

Item 1: Actually, many of them did get there overnight. Their wealth was inherited.

Item 2: Why is it that it is moral to put a burden on somebody going to college to become a doctor, and not somebody who went to college and became a doctor? What gives a person who sacrificed to get ahead given immunities from burdens that must then be piled on those who are currently sacrificing to get ahead?

This is a lot like saying it is wrong to give a heavy backpack to somebody who has already climbed a hill and is standing on top. That, instead, to be fair, we must give the backpack to somebody who is currently climbing the hill and is trying to reach the top.

In fact, what this type of policy does is help those at the top of the hill stay their aline, by giving additional burdens to those trying to climb.

Item 3: Many of those who struggled to get to $300,000 did so with the government's help. They took out student loans or small business loans, used government roads, were protected by the military and police from domestic and foreign threats, obtained the benefits of government-funded research - much like Mitt Romney's father did. Government-funded safety regulations may well have kept them alive and healthy.

Item 4: We really need to take a look at these "pet projects" that are substantially responsible for our current situation.

In 2000, when Bush took office, the government was running a surplus - it was paying back its debt.

Pet Project #1: Bush’s 2001 tax cuts. These tax cuts substantially provided benefits to the wealthy. With these tax cuts, the surplus vanished and the government entered a period of deficit spending.
Part of the idea was that the government would soon be producing a surplus again. The "job creators" who got these tax cuts were supposed to invest their wealth, creating new jobs and initiating a new round of prosperity. This prosperity was then supposed to provide the additional government revenue that would pay off the deficit.

This was Bush's first pet project.

It failed.

Pet Project #2: Bush's 2003 tax cuts - which also provided substantial benefits to the wealthy. This was meant as a stimulus package to prevent (or to get us out of) a recession. It created even larger deficits.

Pet Project #3: An unfunded war in Afghanistan to fight Al-Qaida.

When you put the pieces of the argument together, in part, it boils down to this: "Morality demands that the top 2% not be charged for government pet projects - such as fighting Al-Qaida." Fighting Al-Qaida was a very expensive project - and it was paid for on credit.

When the country goes to war, it is customary to ask everybody to sacrifice something. The Bush Administration had no qualms about ordering members of the middle and lower classes (substantially, people making less than $250,000 per year) who volunteered to serve in the military to risk life and limb in the defense of this country. However, when it came to funding this war, they did not ask those making more than $250,000 to contribute even one dollar to the costs. Instead, they put all of the costs on credit, running up the national debt.

So far, nearly 100% of the cost of fighting Al-Qaida has fallen on the shoulders of those making less than $250,000 per year. Not all of it - but a huge portion of it. Many paid with life or limb. So far, those making more than $250,000 have been asked to contribute nothing towards those costs. It would seem fair – and substantially in keeping with the idea of shared sacrifice in the defense of this country – that those making more than $250,000 cover some of that debt. It is not as this war was merely a gift to the middle and lower class.

Pet Project #4: An unfunded war in Iraq.

It is true that this was a pet project of Vice President Cheney, Secretary of Defense Donald Rumsfeld, and several other members of the Bush cabinet. It is money that should not have been spent. It would be great if we could wave a magic wand and say that the government never launched this project and make this part of the debt vanish from the debt.

However, reality prohibits this type of solution. This war, like the Afghanistan war, was fought on credit, and now we have a bill that has to be paid. It has to come out of somebody’s pocket.

Whose pocket?

As with the war in Afghanistan, those making less than $250,000 per year have already paid quite a bit. They have given life and limb. They have given up careers and left their families. They have sacrificed opportunities to make $300,000 per year so that they can earn a soldier's pay defending this country.

Yet, the call from conservatives it is immoral to have those making more than $250,000 to make a contribution.

Pet Project #5: Recapitalizing the banks after the 2008 financial collapse.

People making more than $250,000 per year decided to make loans on low-quality mortgages, bundle them in with other loans, and sell them to each other to produce tens of billions of dollars in profits, which mostly went into the pockets of people making more than $250,000 per year. When housing prices fell, and these bundles lost their value and the banking system locked up.

To save the economy, the Bush Administration (and, yes, it was the Bush Administration, not Obama) gave huge amounts of money to recapitalize the banks. It basically gave money to millionaires to save them from their own folly and save the nation from another great depression. The government took over their bad debts and put money in their pockets to the tune of hundreds of billions of dollars.

Yet, we are told that morality demands paying for this pet project by cutting services to those making less than $250,000 per year.


So, these are the five pet projects that brought us from surplus to our current state.

(1) Make the rich richer.
(2) Make the rich even richer
(3) War no. 1
(4) War No. 2
(5) Bail out the rich

And morality requires paying for this by cutting services to those making less than $250,000.

The projects have been carried out. They are done. We cannot go back and undo them. The only thing we can do is pay the bill.

So, is it the case that morality requires that 100% of this bill be paid by reducing services to those making less than $250,000 per year? Or is it the case that those who make more than $250,000 per year may be morally obligated to cover some of the cost.

the $1.6 trillion in revenue that Obama is asking for will not even cover the cost of the two wars. So, in effect, the question is, "Should the cost of those two wars be paid for entirely by reducing government services to those making less than $250,000 per year, or should those making more than $250,000 be required to pay something towards the costs of those wars?"

Morality does not permit the government to go to war where those making less than $250,000 pay nearly 100% of the cost.


Anonymous said...

Fair enough, but don't forget pet projects 6, 7, and 8, which do belong to Obama:

#6: Make sure no bankers are prosecuted for their role in destroying the economy and no big banks are broken up (even as they gobble up more and more tiny banks). Not only does it mean the money will never be recovered, it encourages the banks to try the whole swindle again.

#7: Make sure nobody in the Bush administration is prosecuted for their role in pet projects 1 through 5, thus ensuring that the next Republican to get into office will do it all over again.

#8: Expand every Bush military project as much as possible, so that we're bombing and invading even more countries (in a counterproductive way which creates even more enemies).

Without Obama's willingness to keep the guilty from suffering, we certainly wouldn't be in the mess we're in now. Bush started it, but Obama is complicit -- as are all the people who voted for him a second time, really.

Venture said...

"Morality does not permit the government to go to war where those making less than $250,000 pay nearly 100% of the cost."

80% of the federal taxes in this country, AFAIK, are paid by the top 2%. If so, there is no fair or reasonable accounting under which they are not paying their fair share.

Alonzo Fyfe said...


The top 2% pay about 50% of personal income taxes. The federal government gets about 40% of its revenue from income tax. The rest comes from payroll taxes (social security, medicaid, unemployment), terriffs, fees, special use taxes such as a gasoline tax, cigarette and alcohol taxes, etc.

The top 2% are substantially immune from payroll taxes because much of their income does not come from wages and, even where it does, only the first $110,000 is taxed.

However, I was talking about an additional expense above and beyond business as usual. We have an additional expense of betweem 1.4 and 3.4 trillion dollars depending on how you count it. Is it the case that 100% of this additional expense - above the status quo ante - should be covered by those making less than $250,000 per year?

Alonzo Fyfe said...

It is also relevant to note that the top 2% control about 48% of the wealth from which to pay this additional expense - and a substatislly higher percentage of wealth not dedicated to food, medical care, child care, and other essential expenses.

Steven said...

I would like to add that if I had $100, and another person had $5, and then an collective tax of $35 was invoked, it would not be fair for me to pay $30, and expect the other person to pay the remaining $5 just because I had already payed for 86% of the tax.

What percentage of income the government receives is not relevant. The only percentage that is relevant is the percentage of the indidual's income that is being taxed.

As for what percentage is fair... I leave such decisions to those with more education in these matters.