How High Should Taxes Be?

70% on the ten-million-and-first dollar? A wealth tax? How high should we tax the wealthy?

First, why do we tax at all? The theory of taxation is that, contrary to those who call it theft, taxation is payment of debt. By virtue of the services rendered, the tax is how the services are paid for. Larger earners, conducting more commercial activity, using more of the legal system, shipping inspection, and so forth, are to pay a higher percentage due to their higher rewards and higher use.

Economists get into the effects of tax more than the reasons for it, or the fairness of it. Things like the Laffer Curve are drawn up, to theorize that taxation matters a lot and that government revenue can be equal at very different places along the curve, while private spending and overall economy can be very different. Politically-embedded economists thus focus on an apolitical, theoretical system to make a political argument.

But the woman waiting for a bus to take her to her minimum-wage job isn’t rewarded by such abstractions. She knows that the nominal rate and the effective rate are about the same for her, while they are a Grand Canyon apart for those who can afford a team of accountants. She knows that she could pay 100% of her whole life’s wages and never pay as much as some of the wealthiest should in a single year.

None of which answers the question of how high taxes should be. The ultimate answer to that query is that nobody knows, and unfortunately, we’re not planning to find out. The answer to how high taxes should be is that we should adjust them continuously, and find out based on the experimentation. That we have the knowledge and ability to do so, we lack only the political will.

For example, we could start with the current tax rates, and make half-point adjustments to all brackets, or add new brackets and adjust those too. As long as the timing is regular and the adjustments are gradual, we can account for a lot of the noise. As long as we are willing to tweak the rates based on current conditions, lowering taxes in recessionary times, raising them in times of health, the slow and methodical march of the tax rates could yield us with something better than arguing will.

The interest rate already works this way. Is it not time for the tax rate to join it?

Trends in GOP Policy (or the Lack Thereof)

On healthcare: work against it. Criticize any Democratic efforts to enact sane policy. On the environment: work against it. Criticize any Democratic efforts to enact sane policy. On taxes and IRS funding. On immigration. On trade. On housing. On transportation.

The Party of No is alive and unwell. And in power.

It’s hard to understand how folks support a policy vacuum. It wouldn’t be hard to understand if they simply had an alternative, but they have no policy on areas that matter to everyone.

Healthcare

Their work to-date has been to undermine the ACA (failed repeals ad nauseum, cutting advertising, cutting the enrollment period, cutting navigator funding, zeroing the individual mandate penalty), block Medicaid expansion, add work requirements, and expand scam insurance.

While they have put out policy papers in the past, outlining plans for market-driven healthcare, they’ve never made any real effort to enact them.

Take two doses of stupid policy, then elect Democrats when you realize the Republicans screwed it all up.

Environment

Their work to-date has been rolling back regulations that make the air and water cleaner. They want to undo the already-late update to vehicle fuel efficiency (and one is sure that they’ll not take increased traffic accidents into account when they approve oil leases and seek to keep gas prices low). They have no plans for enacting carbon taxes. They have no plans for what to do when the oceans rise, the aquifers dry up, the storms grow, the crops die.

Best I can tell, they don’t even bother with policy papers here.

Taxes

Cut, cut cut, cut cut cut, cut × 4, × 5, …

Their revenue policy is something out of a drug den. “Just need one more tax cut to clear my head, then I’ll actually accomplish something,” says the drooling, stupified Republican congressional caucus.

Again, no real policy papers. Just enough wishful thinking to fill a thousand fountains with pennies.

Immigration

Get rid of it. Under Trump, this apparently includes trade and tourism, too.

Some Republicans still support some types of immigration, but they don’t agree on which, and the end result is complete paralysis.


Once upon a time, there was a conservative party that shared policy goals with the country. They differed in the way to get there, but that was okay. We can all agree that we want pizza, but disagree on toppings.

Over time, they splintered until some in their caucus outright denied that eating was even necessary. They denied that pizza was a food.

At some point, the people are hungry. They’ll vote for Democrats that will serve them pizza with anchovies and pineapple and gummi bears if it means they get fed. The GOP really needs to stop simply criticizing every Democratic policy goal as impractical and too expensive. They need to get back to arguing about toppings.

On Taxes, Republicans Bet Against America

The Republican tax plans come together with a theme, which is a unifying feature that is found throughout. In this case, that theme is that America is a loser.

We see it in their continued indifference to maintaining a modern healthcare system with universal coverage. They plan to repeal the individual mandate without replacing it. They bet that either:

  • The mandate is ineffective, in which case the deficit rises by hundreds of billions more.
  • The mandate is effective, in which case millions will be without coverage.

In either case, healthcare costs will continue to worsen due to this bet, and there will be no benefit to the country.

We see it in their treatment of deductions and carve-outs. They leave subsidies for oil and gas and coal. They remove others, like deductions for medical care, school supplies. They bet that teachers and the infirm will suck it up. That teachers are not the backbone of the nation. That sick lives don’t matter.

They bet on debt, claiming that the cuts will result in unprecedented growth. They bet that all of the cuts in spending that will be required under paygo will either not occur, or won’t result in reduced economic activity. They bet on increased investment by businesses that themselves say they won’t increase investment very much.

And then they bet that the overall economy is not due for another recession. A recession that would be more harmed by the lack of opportunity to cut taxes further among other anti-recession treatments that would be needed.

In short, the Republican tax plans continue their march against knowledge, defying physics and reason. They even bet against their own reelection, as when the mess of this risky nonsense unfolds, there’s no way that folks are going to send a majority of the designers of misery back to DC.

The kicker to all of this is that all these cuts will be reversed in the aftermath.


Everybody expected the Republicans to cut taxes as part of tax reform. Nobody expected them to be fully-responsible stewards of our government, as we all know that’s not who they are. But once again they show themselves to be far worse than our expectations, as they did with healthcare.

Instead of pushing for a conservative bill, they push for a monstrosity. Instead of doing away with almost all subsidies, deductions, and credits, which would be the conservative move, they have chosen to write bills that are extremely lopsided.

We need real conservatives that actually hold to their notions, to balance with the progressive impulses of their counterparts, but we get faux conservatives that care not for governing responsibly. They will raise the deficit and debt. They will not create balanced legislation. They are snot-nosed brats that should be sent to time-out come 2018, come 2020, and until they are willing to govern with the integrity the legislature demands.

Medicare for All Cometh

Senator Bernie Sanders of Vermont has introduced his much-touted Medicare-for-All bill with a good slate of cosponsors joining the effort. And it sets the opposition out to pick at the draft with calls of calamity.

There are those opposed on principle, but the most common criticism seems to have to do with cost, which is interesting in itself. Basically, if you aren’t opposed to the idea that everybody be covered, and be covered through a Medicare-style system, then all you have left is to say that we need to work out the details (or maintain, farcically, that no iteration can work).

Arguing that a Medicare system isn’t workable, period, doesn’t fly. Medicare itself is strong evidence that it is workable. Other countries have their own systems, too. Universal healthcare is entirely achievable.

Cost is the main target now. How to fund it, and are the benefits correct?

The benefits are possibly too generous, but not by a lot. They would be adjusted down in any serious negotiation to pass this bill. That would lower the costs, at least a little. But serious costs, the bulk, would remain.

To pay for this bill, or one like it, will require new revenues. Primarily, there will be new taxes imposed on some combination of employment and income. The tax increases will be offset by the reduction or elimination of individual and corporate costs for healthcare. There is a reasonable expectation that the tax burden will be less than the current burden of paying for healthcare, as there is widespread agreement that healthcare costs are artificially high.

People don’t want to pay taxes. That’s mostly a function of an anti-American narrative built by the right wing. ‘Taxation is theft,’ and other such nonsense. Taxation is debt. It is owed, not taken. Norquist doesn’t say to the restaurateur after his meal, ‘I want you to sign this pledge saying you’ll never adjust the cost of your food.’

More importantly, within the range of contemplatable taxes (i.e., up to the actual revenue needed to fund government), tax isn’t a problem. It’s a distortion in the minds of the wealthy that has led to such fear of taxes, even to the point where they are happy to overspend on a necessity like healthcare to avoid a lesser tax. That sort of distortion begs correction.

Given the inability of the Republican party to offer an alternative proposal that could even pretend to be universal, Medicare for All or some other system will happen. Taxes will be raised to pay for it. If the Republicans don’t like that, their only possible move is to formulate a state-level plan that ensures universal coverage. They will have to fight like hell, and with haste, to get it enacted in all 50 states before the Democrats have a chance to set up a national healthcare system. They will need to solve portability between states, too.

But they have run the clock out on not moving the nation to universal coverage.

Paths to Tax Reform

The Republicans have two basic options. They can go for expediency, raising the deficit in the short-term for tax cuts, avoid stepping on any toes, or they can go for real reform that involves dealing with blowback from special interests and being fiscally responsible.

It’s a hard choice. The early signal is they will go for the coward’s cut, since they are seeking to use reconciliation and not starting from a place of bipartisanship. It’s the route used under President George W. Bush, which is why his tax cuts expired.

But let’s say they want to go the responsible route, instead. How do you deal with the real estate lobby that will count the sitting president among its members? Or the carbon fuel lobbies that will want to keep their own favorite tax toys? Or pharma?

One way, maybe the easiest, is to reduce all of their loopholes equally. If they all get a haircut, it’s hard for any one of them to claim they were singled out. And the stock reply to their wailing becomes, “We did it across the board, fellas. Suck it up. Walk it off.”

Now, some of those groups may find pressure points to lean on, but if they are all pushing at once, it’s possible that they create a keystone arch of pressure, all pushing against each other, and leaving a pocket that allows the thing to pass. The weak point, they keystone, would be the president, who would probably cave on real estate treatment, and the arch would collapse.

Another option would be a sort of parametric tax code. Basically, you would formulate a point system based on size of business (gross revenue, number of employees, etc.) among other factors. Then the business can spread their points among various tax strategies as they see fit. Some might have more points in capital investment, while others might have more points in employee perquisites. But the overall deductible income would be minimized, and the tax code could be modified not only to strengthen or weaken the areas of deduction, but to increase or decrease the points available.


We really do need tax reform, and if the Republicans would take it seriously they could do a lot of good. Nobody expects them to set the rates high enough, but that’s the beauty of the tax code: the Democrats or future generations can always increase the rates to a responsible level. Right now, it’s more important to see the code simplified, even if it means the rates aren’t right.