Eat The Rich!

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Stephen Green (aka Vodkapundit):

We’re Number Two!

The US might have the highest corporate taxes in the developed world, but if you include all the world’s nations we drop all the way down to #2.

That’s right: The UAE has a higher corporate tax rate than the US. And only the UAE.

Although Illinois, California, and New York are all helping us to catch up!

But how bad is it, really? Take Apple. To date, Apple has no debt. Zero. And a whole lot of black: About $145 billion in the bank. The problem is, most of that is in foreign banks, because Apple makes lots of money overseas. And it has already paid taxes on those profits to the governments of China, Mexico, Germany, wherever. That money has been taxed already.

But Uncle Sam does things a little bit differently. Uncle Sam taxes the money you make overseas, just as soon as you repatriate it. Even though that money has already been taxed.

Maybe you’ll think I’m crazy for saying this, but I don’t even like to get taxed just one time, much less twice.

So Apple, the company with record profits and zero debt, is engineering the largest corporate bond sale in history. Apple is about to go $17,000,000,000 into debt, even though they have many times that sitting in foreign banks.

What they’re doing in essence is borrowing against their overseas holdings to finance its capital rewards program here in the United States.

Because it’s a helluva lot cheaper to pay investors 5%, give or take, than it is to pay Uncle Sam 35%.

Now any other country — certainly every sane country — would shake Tim Cook’s hand and say, “Nice job, selling all those phones in China. Now why don’t you bring that money back here where it belongs?” And then Cook would do just that. Instead, his company has to issue debt to pay for the profits he can’t afford to bring back home, where it could be financing all kinds of new jobs.

This is what Democrats call “tax shelters for millionaires and billionaires.”

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Some people have a lot of money. That’s because capitalism is kinda like a lottery, only with better odds of winning. In a lottery everybody pays in but only a few get anything back. In capitalism, everybody who participates in the workforce gets something back. The only people who lose are the ones who invest money and lose it. “Failing to win” is not the same as losing.

The “problem” is some people win a lot more than others.

Let’s say you’re unemployed and homeless. Then you meet this senior citizen named McDonald who has a farm. Old McDonald tells you that if you work for him for 10 months he will pay you $1,000 per month now and $20,000 at harvest time. Meanwhile he will let you live for free (if you want to) up in his loft, and his wife will feed you three meals a day.

You are broke, homeless and hungry so you take his offer. It’s just the two of you working as you help him plow, plant, weed and irrigate. Come the fall you help him harvest his crop and take it to the buyer. Each month he has given you $1,000 just like he promised.

It was a really good year and the buyer gives Old McDonald $1,000,000 for his crop. How much does Old McDonald owe you?

a) $20,000
b) $20,000 plus a nice fat bonus
c) $500,000
d) I am suing that cheap slavedriving bastard for exploiting me and making me live in sub-standard housing!

The correct answer is “a” – Old McDonald owes you the wages you contracted for, nothing more.

Capitalism isn’t perfect, but it works. For most of human history “prosperity” meant “not starving to death”. Even prosperous people often went hungry before winter was over.

We do need a safety net for children, the old, the disabled and the temporarily unemployed. Yes, I am worried about the undue influence caused by concentrations of wealth. But killing the golden goose is not the answer. Wealthy people need us to buy the products their factories make. They also need us to work in those factories to make those products they want us to buy.

When I was a kid I was told to eat my vegetables because there were starving kids in China and India. Now I’m supposed to worry about China and India stealing our jobs. I guess we’re supposed to let them starve.

Let me close with a favorite quote from Lazarus Long (Robert A. Heinlein):

Throughout history, poverty is the normal condition of man. Advances which permit this norm to be exceeded — here and there, now and then — are the work of an extremely small minority, frequently despised, often condemned, and almost always opposed by all right-thinking people. Whenever this tiny minority is kept from creating, or (as sometimes happens) is driven out of a society, the people then slip back into abject poverty. This is known as “bad luck.”

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Damn You Mitt Romney!

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Google Reportedly Dodged $2 Billion in Taxes With Bermuda Tax Haven

Google managed to avoid paying about $2 billion in global income taxes last year by moving the vast majority of its pre-tax profit to a shell company in Bermuda, Bloomberg reported Monday.

The search giant shifted some $9.8 billion in revenues — about 80% of its total pre-tax profit — to a tax haven in Bermuda, roughly twice the amount Google placed in Bermuda three years earlier, according to the report, which is based on company filings.

By sheltering money in Bermuda, Google managed to cut its overall effective tax rate to 21% in 2011, down from 28% in 2008. Google’s tax rate on the profit it earned overseas was just 3.2%.

This strategy may be controversial, but it’s certainly not illegal. Under U.S. law, businesses are allowed to move payments from subsidiaries in countries like Ireland and the Netherlands to Bermuda, where it won’t be taxed. According to Bloomberg, these tactics are apparently known as the Double Irish and Dutch Sandwich.

Apple, another top tech company, is said to have pioneered this tax trick to shave billions of dollars off its tax bill each year. An investigation by the New York Times a few months ago found that one-third of Apple’s pre-tax revenue in 2004 was said to come from Ireland and the company has set up a tax haven in the British Virgin islands.

Microsoft, HP and other big tech companies have all reportedly avoided paying some portion of their taxes by shifting money to various offshore accounts as well.

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This is a clear cut case of tax avoidance. The difference between tax evasion and tax avoidance is that the former is a crime but the latter is perfectly legal. Rich people move their money around to where taxes are lowest. If you can legally save a billion or two on your taxes for yourself and your fellow shareholders, why not?

That is the problem with all the “tax the rich” arguments. When taxes get to high in one place rich people can afford to move somewhere else. That’s what the Laffer curve really shows.

Does that mean that rich people shouldn’t have to pay taxes? Hell no! Mitt Romney paid millions of dollars in taxes last year. But there is a limit to how much milk you can get by beating the cow.

BTW – Last time I checked, the guys who run Google are big time Obama supporters.

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Laffer Curve

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Nobody Wants A Haircut

A little off the top?

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INFLUENCE GAME: Tax Them, Not Us, Groups Say

A big coalition of business groups says there must be give-and-take in the negotiations to avoid the “fiscal cliff” of massive tax increases and spending cuts. But raising tax rates — a White House priority — is out of the question, the group adds.

The homebuilding industry says it won’t tolerate even a nick in the mortgage interest deduction. It doesn’t matter, industry leaders say, if it’s part of a broad, spread-the-pain package designed to tame the soaring debt.

And there’s no ambiguity in the views of the top lobbying arm for retirees.

“AARP to Washington: No cuts to Medicare and Social Security in last-minute budget deal” the group’s Web site declares. AARP nixes the notion of slowing the cost-of-living formula for Social Security recipients, even if it’s part of a big, bipartisan compromise package. And President Barack Obama should drop his idea of raising Medicare’s eligibility age, AARP adds.

So much for the notion of shared sacrifice as Congress and the White House face a Dec. 31 deadline to craft a far-reaching deficit-reduction plan. If they fail, the government tips over the so-called fiscal cliff, at least for a time. Nearly everyone’s taxes will rise, and federal programs will be whacked. Financial markets might quake, and a new recession could begin, economists say.

In Washington, meanwhile, it’s virtually every group for itself, scrambling to protect 100 percent of each tax break and government payout it now enjoys.

America is split down the middle politically, as the last half dozen presidential races have shown. Aside from a few think tanks and civic-minded groups, there’s almost no talk of splitting the pain among interest groups, populations and professions in a manner that seems inevitable if lawmakers are to achieve the trillions of dollars in deficit-reduction both parties call for.

The old adage, “Don’t tax thee, don’t tax me, tax the man behind the tree” was never more in vogue.

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The nation debt currently exceeds $16 TRILLION dollars. (Divide that by 300 million to figure out your share.) We could raise taxes to 90% on every millionaire and billionaire in the country and it wouldn’t even put a dent in the annual deficit.

The problem is bipartisan – neither party is willing to tell the truth to the voters and make the hard choices necessary to fix it. Every candidate for president since John Adams has promised to cut waste, fraud and abuse. Some have actually succeeded, but that’s not enough to fix the mess we’re in.

Bill Clinton is the only president in recent history to run budget surpluses – we actually owed less when he left office than when he went in. Then Bush II and Bush III exploded the national debt.

Nobody wants to get their hair cut. They want somebody else to have to make sacrifices. Obama won reelection by promising to keep the gravy train rolling, so don’t expect fiscal sanity to sweep the nation any time soon.

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Is Riverdaughter A Closeted Tea Partier?

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No, seriously.

Check out her latest:

Then there was a new Poll Tax that was used to raise revenue for new wars. Ahhh, the military industrial complex of the middle ages. Some things never change. The tax was harsher on some peasants than others. Women were especially hard hit for some reason, regardless of their employment status or hardships. The King’s ministers probably just eliminated some deductions and futzed with the cost of living adjustments or something. They probably had their own Bowles-Simpson commission.

So, the peasants revolted.

[...]

Oh, look! Tim Geithner is telling us that we’re going to get nailed again. Isn’t it swell that those of us who have given up a good portion of our skins are now going to be completely flayed? Remind me to review how much in income taxes and social security taxes I’ve paid in the past 10 years. I think we all need to pull out our tax returns and report on this. Why should my kid be penalized by these spending cuts after the decades of taxes I have paid into my social insurance policies and all of the other things I expected from my hard earned money?

How come we paid so much money and have so little control over how it gets spent? Why can’t we decide to spend that money on *ourselves* and not some stupid war or a giant border fence or Alabama? Why am I, a New Jerseyan, spending so much money per year on states in the south who insist on electing selfish, aristocratic hardasses to Congress? Why am I forced to participate in my own oppression? Will someone answer me that?

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That sure sounds a lot like Tea Party rhetoric to me. She is also big on populism. Is there secretly a Tea Partier hidden inside of Riverdaughter, yearning to breathe free? That sure would explain her over-the-top hatred of that group. After all, the worst homophobes are gays in denial of their sexuality.

Go for it Kim, let your Gadsden Flag fly!

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The Twinkie Segue

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Hmmm, how can we possible use Twinkies as a segue for a post about 1950′s economic policy? Let’s ask the Shill One!

The Twinkie Manifesto

The Twinkie, it turns out, was introduced way back in 1930. In our memories, however, the iconic snack will forever be identified with the 1950s, when Hostess popularized the brand by sponsoring “The Howdy Doody Show.” And the demise of Hostess has unleashed a wave of baby boomer nostalgia for a seemingly more innocent time.

Needless to say, it wasn’t really innocent. But the ’50s — the Twinkie Era — do offer lessons that remain relevant in the 21st century. Above all, the success of the postwar American economy demonstrates that, contrary to today’s conservative orthodoxy, you can have prosperity without demeaning workers and coddling the rich.

Consider the question of tax rates on the wealthy. The modern American right, and much of the alleged center, is obsessed with the notion that low tax rates at the top are essential to growth. Remember that Erskine Bowles and Alan Simpson, charged with producing a plan to curb deficits, nonetheless somehow ended up listing “lower tax rates” as a “guiding principle.”

Yet in the 1950s incomes in the top bracket faced a marginal tax rate of 91, that’s right, 91 percent, while taxes on corporate profits were twice as large, relative to national income, as in recent years. The best estimates suggest that circa 1960 the top 0.01 percent of Americans paid an effective federal tax rate of more than 70 percent, twice what they pay today.

Nor were high taxes the only burden wealthy businessmen had to bear. They also faced a labor force with a degree of bargaining power hard to imagine today. In 1955 roughly a third of American workers were union members. In the biggest companies, management and labor bargained as equals, so much so that it was common to talk about corporations serving an array of “stakeholders” as opposed to merely serving stockholders.

[...]

The data confirm Fortune’s impressions. Between the 1920s and the 1950s real incomes for the richest Americans fell sharply, not just compared with the middle class but in absolute terms. According to estimates by the economists Thomas Piketty and Emmanuel Saez, in 1955 the real incomes of the top 0.01 percent of Americans were less than half what they had been in the late 1920s, and their share of total income was down by three-quarters.

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See? That’s how you do it!

Of course Mr. Krugman leaves out a couple important data points, like WWII and the Great Depression. The United States was the only major industrial power to emerge relatively unscathed from World War II. Europe and Asia were physically and financially devastated, Great Britain’s colonial empire was falling apart, and the Soviet Union was stuck with an economic system that did not work.

Meanwhile our infrastructure was undamaged and we were operating at full industrial capacity. War time shortages of fuel, rubber and other materials had ended, and we were able to take advantage of new technologies developed during the war.

I have read a lot of articles about the Great Depression, and none of them blame the stock market crash and the world-wide economic collapse that followed on the incomes of the upper 0.01 percent. But it is easy to see why those incomes dropped between the 1920′s and the 1950′s.

Articles like this one bother me because they fail to show causality. Krugman presents some data that, while accurate, is nonetheless dishonest because of how it is presented. He gives the impression (without explicitly saying it) that if we simply raised the top marginal tax rates back up to 91% we could re-create the economic conditions of an earlier generation.

The world has changed dramatically since Dwight Eisenhower was president. In many ways we are more prosperous than we were back then. (Look around your home and start counting all the things that did not exist in 1955.) The problem is the inflation of our expectations hasn’t matched reality.

Twinkies are a relic of a bygone era. Let bygones be bygones.

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The Laffer Curve

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From American Thinker:

For those who are familiar with the “Laffer Curve,” the name generally brings on an immediate and politically charged opinion related to the inherent implications the curve has historically had on the topic of the government’s tax rate policies. However, the underlying points illustrated by the curve deserve serious and independent consideration. In fact, to evaluate the Laffer Curve without bias will undoubtedly yield a better understanding of one of the key political issues facing America today.

The name “Laffer Curve” originated in 1974 and was given by a writer for the Wall Street Journal in honor of Arthur Laffer, an economist who later served on President Ronald Reagan’s Economic Policy Advisory Board. It was originally used as part of the argument against the tax increases Gerald Ford was contemplating with an aim to reduce the federal deficit. But the concept was not at all new. The nonlinear relationship between tax rates and government revenues depicted in the curve is something that has been discussed and written about for at least several centuries. In fact, Laffer explains that he himself learned of the concept from reading works by other economists, including Keynes.

Simply stated, the “Laffer Curve” is a theoretical curve showing the relationship between an applied income tax rate and the resulting government revenue. Generally, the tax revenue is indicated on the vertical “y” axis and the tax rate on the horizontal “x” axis. The fundamental concepts are as follows:

1) A tax rate of zero results in zero government revenue.
2) A tax rate of 100% will also result in zero government revenue.
3) As the tax rate increases above zero, there is a resultant increase in government revenue.
4) As the tax rate continues to increase, the resultant increase in government revenue begins to slow.
5) There is a point at which the curve peaks and turns back toward the horizontal “x” axis.

[...]

The factors that go into determining where you are on the curve are many. And this is where politicians and pundits generally rely on the fact that the overwhelming majority of the citizenry do not have the knowledge, understanding, patience, or inclination to dig into the details. In truth, most of them don’t.

First, the curve is different for different types of taxation and is not the same for each income bracket. For example, the curve is not the same for the Personal Income Tax as it is for the Corporate Income Tax or for the Capital Gains Tax. The curve is not the same for the personal income tax applied to a person making $40,000 per year as it is for someone making $1,000,000 per year.

The curves for these different taxes and tax rates will begin and end at the same place. But the area between the slope and point of diminishing return is certainly not the same. Secondly, the economic climate at any given point in time introduces countless variables such as the general economic growth rate, banking practices, loan interest rates, employment rates, consumer confidence, inflation rates and many others, all of which contribute to the shape of the curve. The curve is not the same for the same tax at different points in time because economic conditions are constantly shifting. Thirdly, it is impossible to quantitatively “measure” the relationship with any exactness because of the inherent time lag involved between changes to the tax rate and the resulting impact on government revenue. Other factors always come into play during this lag period and to some degree contribute to the resulting government revenue.

There is no single “Laffer Curve”; there is no set-in-stone point at which increased tax rates cease to generate government returns. But we can be reasonably certain that during the last century we in America have at different times found ourselves on both sides of the curve. There have been occasions where increased tax rates clearly resulted in increased government revenue. There have been occasions where decreased tax rates clearly resulted in increased government revenue. When it comes to the argument of whether tax rates should be raised or lowered, at different points in time and in different economic circumstances, each side of the political aisle has been correct. At different points in time and in different economic circumstances, each side has been wrong.

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I first heard of the Laffer curve way back in 1980, but it wasn’t until recently that I understood what it really meant.

Let’s take the tobacco tax. If there is no tax on tobacco, there is no revenue. On the other hand if you raise the tax to $100 for each pack of cigarettes, people will either quit smoking or they’ll buy bootleg cigarettes, either way producing no revenue. The question is what tax rate would produce maximum revenue?

That’s really all the Laffer curve means. It doesn’t tell you what tax rates should be or whether current rates are too high or too low.

And they say economics is boring.

Oh wait! It is boring.

Nevermind.

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Where do jobs come from?

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From Working people are the Job Creators by Riverdaughter:

Anyway, leaving aside the philosophical aspect, there is a straightforward reason why the real job creators are average working people. And when I say working people, I mean anyone not living on their investments. That means drop outs to professionals. I’m not an economist and I’ve only taken a couple of econ courses but none of this is over your head. It’s all common sense. Here’s how it works: you get money from work or a benefit that you worked for. With that money, you can buy things. And the more things you can buy, the more things need to be created for you to buy. And the more need for things to be created, in either goods or services, the more people need to be hired to create those goods and services.

Note that all this depends on there being money priming the pump. There must be a release of money into the system that gets the whole ball rolling. That money can come from either the private or public sector. There is no good or bad money. Public sector money is just as virtuous as private sector money in priming the pump. The money goes into the hands of working people and those working people pass that money into the hands of other working people.

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Well that’s simple enough. Government spends money and jobs magically appear. But where does all that money come from if nobody has a job? If there are no jobs there are no working people. If there are no working people how can they create jobs? We have a “chicken or the egg” dilemma here.

Artificial respiration will keep you alive but it’s not the same as breathing. It’s one thing for the government to maintain our social safety nets and another thing entirely to let it try to manage our economy.

Public sector money IS NOT just as virtuous as private sector money because it’s OPM – “Other People’s Money.” It puts politicians in a position to reward campaign contributors and cronies with windfalls. Take a look at Solyndra – half a billion dollars gone and the relatively few jobs it created are gone too.

The government spent $800 billion on the failed stimulus and it barely made a ripple. And nobody went to jail.

But wait! There’s more:

Let me stop here and say a few words about the Government. Wealthy people make The Government sound like some big, unresponsive, evil thing. But the government is whoever you elected to office. They’re supposed to spend money in the way that YOU direct them to. So, if you elect a lot of people who want to spend money in Iraq and Afghanistan, that’s what they’ll do. If you elect people who want to give all our disposable tax money to bankers who wrecked the economy, that’s what they’ll do. If you don’t want the treasury to run out of money to fund highways, schools, high speed internet infrastructure and all of the other stuff that makes this country a potentially nice place to live, stop voting for the people who are giving away your tax money to other wealthy people. It’s YOUR government and you have a right to say what things are important to you to fund. If Government is not working for you, get rid of the people who aren’t listening to what you want. We don’t have to live in a banana republic.

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If government doesn’t have my tax money, they can’t spend it. They can’t give it to bankers or spend it on wars. Don’t get me wrong – I believe in government, social safety nets and the need for infrastructure. But the idea that I should give them my money and hope they spend it wisely or I’ll vote them out is bassackwards.

Money is power. The more money we give government, the more power we give them. And as Lord Acton said, “Power corrupts.” I always find it amusing that lefties are the ones most concerned with “Big Brother” while at the same time they are the ones who want to create and empower him.

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Matt Yglesias commits prog heresy

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MattY:

Why Mitt Romney’s Effective Tax Rate Is So Low And Why It Probably Should Be

The news is out that Mitt Romney paid a 14.1% effective tax rate on an income of over $13.7 million in 2011, a number that will strike many people as high but that is actually artificially inflated. He didn’t fully deduct all his charitable contributions in order to make sure his effective rate stayed above 13 percent.

The main reason Romney’s effective rate is so low is that the American tax code contains a lot of preferences for investment income over labor income. That’s something that strikes many people as unfair on its face, and particularly unfair since it often means very low rates for extremely rich people like Rommey. And Rommey himself as a rich guy who’s also a member of the political party seen as favoring the rich, and who’s been recorded as whining that the working poor are undertaxed is perhaps not an ideal messenger for a defense of this policy.

But this is definitely an issue where the conservative position is in line with what most experts think is the right course, and Democrats are outside the mainstream.

The reasoning is basically this. You imagine two prosperous but not outrageously so working people living somewhere—two doctors, say, living in nearby small towns. They’re both pulling in incomes in the low six figures. One doctor chooses to spend basically 100 percent of his income on expensive non-durables. He goes on annual vacations to expensive cities and eats in a lot of fancy restaurants. The other doctor is much more frugal, not traveling much and eating modestly. Instead, he spends a lot of his money on hiring people to build buildings around town. Those buildings become houses, offices, retail stores, factories, etc. In other words, they’re capital. And capital earns a return, so over time the second doctor comes to have a much higher income than the first doctor.

So then there are too different scenarios:

— In the world where investment income isn’t taxed, the second doctor says to the first doctor “all those fancy vacations may be fun, but I’m being much more prudent. By saving for the future, I’ll be comfortable when it comes time to retire and will have plenty left over to give to my kids.”

— In the world where investment income is taxed like labor income, the first doctor says to the second “man you’re a sucker—not only are you deferring enjoyment of the fruits of your labor (boring) but when the money you’ve saved comes back to you, it gets taxed all over again. Live in the now.”

And the thinking is that world number one where people with valuable skills take a large share of their labor income and transform it into capital goods is ultimately a richer world than the world in which such people just go out to a lot of fancy dinners.

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We want to encourage thrift, and we do this by incentivizing saving and investment. That’s one of the basic pillars of capitalism. We even teach it to our kids in fables like The Ant and the Grasshopper.

What is the point of delaying gratification if, after inflation and taxes, you end up with the same amount you started with or less? Let’s not forget that in most cases the gratification is delayed for years and that there is an element of risk involved as well. And the money being invested has already been taxed once.

Yes, there is a certain amount of luck involved. It’s not all hard work. A lucky few are like lottery winners who receive disproportionate rewards. But what is the rationale for hitting lottery winners with tax rates as high as 90%?

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Do as we say and not as we do

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Most members of Congress keep their tax returns secret

Rep. Nancy Pelosi was emphatic. Mitt Romney’s refusal to release more than two years of his personal tax returns, she said, makes him unfit to win confirmation as a member of the president’s Cabinet, let alone to hold the high office himself.

Sen. Harry Reid went farther: Romney’s refusal to make public more of his tax records makes him unfit to be a dogcatcher.

They do not, however, think that standard of transparency should apply to them. The two Democratic leaders of the Senate and the House of Representatives are among hundreds of senators and representatives from both parties who refused to release their tax records. Just 17 out of the 535 members of Congress released their most recent tax forms or provided some similar documentation of their tax liabilities in response to requests from McClatchy over the last three months. Another 19 replied that they wouldn’t release the information, and the remainder never responded to the query.

The widespread secrecy in one branch of the government suggests a self-imposed double standard. Yet while American politics has come to expect candidates for the presidency to release their tax returns, the president isn’t alone in having a say over the nation’s tax laws. Congress also stands to gain or lose by the very tax policies it enacts, and tax records – more than any broad financial disclosure rules now in place – offer the chance to see whether the leaders of the government stand to benefit from their own actions.

[...]

To Pelosi and some other top Democrats, the focus is on Romney, the Republican presidential candidate, who’s released his 2010 return and 2011 estimates and plans to release his 2011 return when it’s completed, but refuses to release any more. They say the very refusal to release more suggests that he’s hiding something.

“He could not even become a Cabinet member for that lack of disclosure, and now with that lack of disclosure he wants to be president of the United States,” said Pelosi, the House minority leader, who’s from California.

“We’d like to know what’s in those tax returns that he refuses to show to the American public. Did he pay any taxes?” Reid asked in an impassioned speech to the Senate on July 11. Days later, Reid, who’s from Nevada, suggested that Romney’s refusal to release more than two years of tax returns would make him ineligible to serve even as dogcatcher.

Rep. Debbie Wasserman Schultz of Florida, the chairwoman of the Democratic National Committee, also has harangued Romney for refusing to release more tax returns, calling it a “penchant for secrecy.”

All three refused repeated requests from McClatchy to release their own returns, requests that started before the flap over Romney’s records.

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What are they hiding???

Seriously, that would be some useful information. Imagine if you could review a congressman’s taxes from before they took office until now. Congressional spouses should be fair game too. I wonder how many congressional spouses got high-paying new jobs or promotions when their significant other got elected?

Like Michelle Obama, for example.

(h/t angienc)

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How much do we owe each other?

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“If you were successful, somebody along the line gave you some help. There was a great teacher somewhere in your life. Somebody helped to create this unbelievable American system that we have that allowed you to thrive. Somebody invested in roads and bridges. If you’ve got a business — you didn’t build that. Somebody else made that happen. The Internet didn’t get invented on its own. Government research created the Internet so that all the companies could make money off the Internet.”

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Those words Obama was speaking actually belong to Elizabeth Warren:

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“You built a factory out there? Good for you. But I want to be clear: you moved your goods to market on the roads the rest of us paid for; you hired workers the rest of us paid to educate; you were safe in your factory because of police forces and fire forces that the rest of us paid for. You didn’t have to worry that marauding bands would come and seize everything at your factory, and hire someone to protect against this, because of the work the rest of us did.

“Now look, you built a factory and it turned into something terrific, or a great idea? God bless. Keep a big hunk of it. But part of the underlying social contract is you take a hunk of that and pay forward for the next kid who comes along.”

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Both Obama and Warren are correct but what they are making is a strawman argument. With the exception of a few Rand-y libertarians nobody is arguing that we have no mutual obligations to each other. Without an implied social contract we would live in a Hobbesian state of nature where life would be “solitary, poor, nasty, brutish and short”

At the other extreme would be pure communism, where there would be no concept of “private property” and everything would belong to everyone equally. “From each according to his ability, to each according to his needs.” That utopian vision hasn’t worked out so well either.

The dispute isn’t whether we need government:

“We hold these truths to be self-evident, that all men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty and the pursuit of Happiness. — That to secure these rights, Governments are instituted among Men, deriving their just powers from the consent of the governed . . .”

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The dispute is how much government we need, how much it should cost and who should have to pay for it. Most people would agree that we need infrastructure, police, firefighters, teachers and a military. But agreeing that we need those things doesn’t mean we agree how much we should pay for them. It also doesn’t mean we agree where control of those things should lie – i.e. at the local, state or federal level.

There is somewhat less agreement when it comes to social welfare spending. There is still a consensus on the need to help children, the elderly and the disabled, as well as temporary aid to the unemployed. Many people balk, however, at the idea of providing support for the able-bodied who will not work.

Like it or not, capitalism is the driving force in our economy. It depends on concepts like free enterprise, free markets, profits and private property. It provides the wealth that makes taxation possible. But too much taxation will kill the golden goose.

How much is too much?

As for who should have to pay for government that is a question open to endless debate. The poor have no money to tax. There are not enough rich people to pay for everything, even if we found a way to make them do it. That leaves the middle class.

It’s fairly easy to demagogue and convince people they are paying too much while someone else is getting off to easily because nobody wants to pay more than their fair share. But wanting to pay less in taxes does not automatically make you greedy, selfish or racist. Nor is there anything wrong with taking advantage of “loopholes” to reduce your tax burden.

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An honest politician stays bought

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Obama to propose lowering corporate tax rate to 28 percent

President Obama on Wednesday plans to propose a major overhaul of the nation’s corporate tax code, an election-year gambit that is likely to draw a contrast over a key policy issue with the Republicans vying to replace him.

Obama will propose lowering the nation’s corporate tax rate to 28 percent. At the same time, however, he will seek to increase the amount of revenues raised overall through corporate taxation by eliminating numerous deductions and loopholes that save companies tens of billions of dollars a year on their tax bills, according to a senior administration official.

Today, the U.S. corporate tax rate of 35 percent is one of the highest in the world, but an abundance of loopholes and deductions means that many companies pay far less than that — or nothing at all. Companies in the United States pay almost half the taxes than companies do in other rich countries, compared to the size of the economy, according to the Organization for Economic Cooperation and Development.

In his proposed rewrite, Obama will target oil and gas companies for tax hikes while promising special breaks for manufacturing companies, according to a senior administration official.

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You watch – when the smoke clears the rate will come down but most of the loopholes and deductions will stay. Worst of all, the Republicans won’t have to take the blame for it.

Skunks don’t change their stripes. Obama is the number one beneficiary of corporate campaign donations. Pay to play is the Chicago way.

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Where the money is

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J.E. Dyer at Hot Air:

No, taxes shouldn’t be a “fairness” issue

What are we, six years old? Taxes should pay for the costs of government. That’s what we have taxes for.

The proper purpose of taxes is not to establish a condition of “fairness.” It’s to pay for government: a legislature, executive, military, police, firefighting, courts, schools. But for 100 years now, the percentage-based income tax has been shifting public dialogue on taxes steadily away from their proper purpose, and toward increasingly juvenile arguments over “fairness,” as if the tax code is like Mom, telling Makayla to share the toys and be patient because Brendan is little.

If we let taxation be about “fairness,” rather than paying for the cost of government, the two big problems we have are defining “fairness,” and defining the role of government in promoting it. Those questions will never be settled to the satisfaction of all.

It might seem that the first question – “what is fair?” – is the more contentious one. We discuss it incessantly, after all. But the more fundamental question is actually what government should be doing about fairness. The freighted nature of our discussions about fairness is largely relieved if we assign a limited, utilitarian role to government. It doesn’t much matter what other people think is “fair,” in a lengthy list of situations, if they can’t harness the power of the armed state to enforce it on their fellow men.

Thus, I reject the whole idea that government needs to keep an eye on the citizens’ incomes, and worry about “fairness” as if the numbers are a meaningful indicator of it. For much of American history, no government at any level actually knew how much income individual citizens had. That was not a problem. It didn’t need correction. We could do away with virtually our entire tax code, if we did away with the modern idea that government needs to know what our incomes are.

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The article starts out okay but you can see where this is going – an argument against the progressive income tax and in favor of a flat tax and/or national sales tax, two chimeras of modern right-wing politics.

Nobody likes paying taxes. It’s easy to convince people they are taxed too much, and fairness will always be an issue because nobody wants to pay more than their fair share (or see someone else pay less.) There will always be plenty of people on both sides of the political spectrum who object to paying taxes for things they don’t thing government ought to be doing.

Dyer conflates the issue of how taxes should be spent with how they should be raised.

There is an urban legend about the infamous bank robber Willie Sutton. When asked why he robbed banks Sutton allegedly answered “Because that’s where the money is.”

If we look only at the question of who should pay taxes, the answer is simple – the people who can afford to pay them.

We could pass a law that says every man, woman and child in the nation has to pay a flat $5,000 per year in taxes, but how many would be able to pay? People living below the poverty line cannot afford to pay taxes. Neither can most children or the disabled. The elderly may have income but most of them are living off retirement savings, investments and pensions.

There are lots of working poor that can afford to pay a little bit in taxes, but less than their “equal” share. Then there are the people in the middle class who can carry their own weight. Last but not least there are the rich and the super-rich.

That’s where the money is.

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