Friday, January 8, 2016

Spreading the Wealth?

It brought back memories of Joe the Plumber.  That was the fellow who had a campaign-stop conversation with presidential candidate Barack Obama in Ohio in 2008 about tax policy.  Joe, a Republican, didn't like the idea that Obama thought it was a good idea to "spread the wealth around."

This time it wasn't Joe, and the candidate wasn't Obama. Two friends of mine, both in EMS, were commenting (on Facebook) about the idea that Bernie Sanders is a "socialist."  One of them, Ken, said Sanders "wants to share my money with people who work less."  I promised Ken I'd write back later to explain why that isn't really so.

A little more than a century ago (February 1913) we amended the US Constitution to allow for a federal income tax.  Many Americans look at their paychecks or their tax returns every year and wish we had never done that.  But there are a lot of things we expect the government to do, and they all cost money.  The consequence of that is that we have enacted a dizzying array of taxes.  It seems as though any time money changes hands the government wants a cut.

When people are asked about taxes, most say they don't have a problem with paying money into the federal treasury so long as they can be confident that it is being spent wisely.  And there's the rub, to borrow an expression from Hamlet. The late Senator William Proxmire of Wisconsin created the Golden Fleece Award, presented monthly from 1975-1988, to call attention to examples of what the senator considered wasteful public spending.  In the 1820s and '30s famous frontiersman Davy Crockett served two terms in Congress and was noted for his belief that members of the House - where bills related to raising revenue and spending it are supposed to originate, according to the Constitution - should be as careful with the people's money as they were with their own.

We do not, in general, believe that our elected representatives are careful with our money.  English Prime Minister Margaret Thatcher said, "The trouble with socialism is that eventually you run out of other people's money."  As a matter of fiscal policy, of course, that's complete nonsense, because the stream of revenue flowing from the people into the treasury is continuous.  But Thatcher's quotation does make the point that if public officials don't spend public dollars wisely, the money does run out, and that leads to deficit spending and ever-growing public debt.

But we don't have socialism in the United States, so this isn't a problem, right?

The idea that socialists are spendthrifts and capitalists are frugal is, to be charitable, comical.  Dwight Eisenhower warned us about the "military-industrial complex," and if you look back over the last century, we have done an astonishing amount of deficit spending and creation of debt to engage in wars of dubious merit (to say the least), and capitalists running companies with fat defense contracts have vigorously promoted all of that.

That brings us back to Ken's worry that Bernie Sanders wants to share some of his money with people who work less.  What Ken should understand is that his money is not being funneled directly to some lazy bum sitting at home collecting a welfare check and other benefits of social programs.  No, if you take one of the dollars Ken sends to the federal treasury and divide it up according to the federal budget, that's a pretty small fraction.

But Ken's remark does highlight something that is a striking feature of the national conversation, to the extent that we have one, about spending on social programs.  People with moderate incomes are having their opinions shaped by the very successful efforts of the wealthy to focus our attention on how our tax dollars are spent to help the poor - specifically the undeserving poor.

Traditionally, for many centuries, there has been "class warfare" that has pitted the poor against the rich, from the peasants of Europe versus the noble aristocracy before democratic governments began to replace monarchies, to the working classes of the modern industrial age against the capitalist robber barons.

The wealthy are keenly aware that this kind of class warfare is bad for them. And they have succeeded in using the corporate media to help them mold public opinion, so that now class warfare is between the struggling working-class folks - who often live paycheck to paycheck but get by without any help from government social welfare programs - and those who have it even rougher and rely on some of those programs for subsistence.

How do they do this?  After all, while we are in many ways a nation of rugged individualists, we also believe in helping the less fortunate.  So they do it by finding examples of the undeserving poor, the small fraction of people getting stuff from social programs by working the system, people whose problems stem more from being lazy and shiftless than from misfortune or disability.

Remember the California surfer dude using his SNAP card (what used to be called food stamps) to buy sushi and lobster?  It doesn't take many stories like that to make the working class feel as though the poor are the enemy, at least economically.

The trouble with those stories is that there is just a little bit of truth to them - after all, no "entitlement" program is going to be completely successful in screening out the people who really aren't entitled to any help - but they fail to mention that the percentage of the dollars going to people who don't deserve them is very small.

So what about Bernie?  What is he going to try to do if he gets elected?

For one thing, he would like to see far less money spent on an astonishingly bloated defense budget that often has far more dollars in it than our military leaders ever requested.  While I am no expert on defense policy, I am skeptical of the need for the American taxpayer to spend more on defense than all of the other First World nations combined.

More directly to Ken's point, though, is where the money will come from (besides a shrinking military budget) to pay for the things Bernie believes are worthwhile, like rebuilding our crumbling infrastructure and funding education so the US can reclaim its position as having the world's best-educated workforce. (We were once #1, and we are now #12.)

That income tax I mentioned earlier is supposed to be "progressive."  That means that, as you earn more money, and the amount you earn rises ever higher above what one needs to live on, the percentage you pay in federal income tax rises, too.  As a high-income-earning professional (a physician), I am in the top marginal tax bracket.  What does that mean?  Well, on the calendar, before we've gone too far past the midpoint of the year, about 40¢ of every dollar I earn is going to the US Treasury.  The top marginal tax rate used to be much higher.  I'm old enough to remember when it was 70%.

What about Social Security?  That is a very different situation.  The tax on that stops - that's right, stops - before I reach the midpoint of the year, because there is a cap on the amount of my income that is subject to the tax.  What that means is that the more I earn, the smaller the percentage of the total goes to pay that tax.  That is what an economist would call a regressive tax.

So, does Bernie want me to pay higher taxes?  Yes, he does.  He wants to lift the cap on my Social Security tax.  Am I happy about that?  No, of course not. But in another ten years I may start to collect Social Security, and I might actually need the money to avoid a dramatic decline in my standard of living, so the adequacy of the revenue stream that funds the system is important to me.

What about Ken's taxes?  Would they go up?  I'm not Ken's accountant, so it's hard to be sure.  But look at the overall picture.  Ken is not a front-line medic. He's a small businessman - like Joe the Plumber.  If Bernie gets the single payer health care financing system he wants, Ken and his employees, in the aggregate, might pay a little more in taxes, but that would be far more than offset by the fact that they wouldn't be paying eye-popping health insurance premiums.  If Ken and his employees have kids, and Bernie gets the funding he wants for higher education, the parents won't be struggling to pay for college, and their kids won't be graduating with educational debt the size of a mortgage on the house that they might then actually be able to buy.

So is that enough money?  Savings on a bloated defense budget and taxes a little higher on average folks but way more than offset by what they'll get back?

Nope.  It's not.  It will also take higher taxes on what Al Gore called - in his sing-song, whiney drone that made me want to find the mute button as quickly as possible - the wealthiest one percent.

Who are they?  Well, the bottom half of that top one percent includes some high-income-earning professionals.  Not emergency physicians, but probably some surgical specialists - who get paid a lot because of the high value of their work.  But the top half of that one percent is where the real money is.  The folks up there make most of their money in capital gains: interest, dividends, proceeds from investments.  And that money is taxed at a lower rate!  Does that make sense to you?  The rationale for taxing capital gains at a lower rate, as it might be explained to the working class, is to encourage savings and investment.  But tell me, does someone making over a million dollars a year really need an incentive to save and invest?  For Pete's sake, many of these folks don't even want to pay the capital gains tax as it is, and move their assets overseas to try to avoid it.

This is the kind of outrage that must stop.  The wealthiest people in this country, the ones who can most afford to pay higher taxes, are paying a lower percentage of their income in taxes than anybody else.  And large corporations are getting all manner of subsidies, from the oil industry to agribusiness, and we - the regular folks - are paying for all that.

So before we have a conversation about whether it makes sense to give the single mom more money if she has yet another child out of wedlock to a father who will take no responsibility, let's have a conversation about how Walmart has $75 billion in assets overseas, in countries where the company doesn't even operate any stores, just to avoid US taxes.  I'm pretty sure the taxes that we should be collecting on that would pay for daycare, K-12, and college for every one of those children of deadbeat dads in the entire country, with plenty of money left over.

So, Ken, the answer is no.  Bernie doesn't want your money to give to people who work less.  He wants the wealthy and powerful to start participating the way they should be, in the American society that has been so good to them, by paying taxes instead of using every imaginable dodge to avoid them.  Oh, and one more thing.  Yeah, those tax dodges (loopholes) are legal.  How did they get there?  They were enacted into law by politicians bought and paid for by the wealthy.

Look at Bernie's campaign financing.  His money comes from folks like you and me.  No big corporations.  No fat cats.  No super-PACS.  He wants to give the government of this nation back to you and me.  I don't know about you, but I think that's a great idea, and it's high time.

No comments:

Post a Comment