Reading Material: Wealth and Democracy

Spotted a book today that I definitely plan on reading and may be worth consideration for Boys' discussions: Kevin Phillips' Wealth and Democracy. The web site there is pretty informative.. Update: to go along with the other Bill Moyers inteview, heres an interview he did with Phillips.

Discussion: Arrival and taxation

I use mozilla (phoenix) almost exclusively and haven't had any problems with this site. BTW, you need to publish your posts as well. When you hit post it saves your text, but it doesn't put it on the web page. It will only show up on the page after you use the publish button..

I think there are a few issues with flat taxes. First and foremost is that they aren't progressive, as per the earlier discussion. In fact, with regards to wealth levels, a flat tax would be regressive. Going back to previous posts, if wealth is really what we're after, income is just an indicator of wealth. Income distributions, while very uneven, are not nearly as extreme as wealth distributions. Looking at our numbers, while the top 5% earned 22% of all income, the top 5% owned somewhere around 50% of all wealth. If income is important as an indicator of wealth, rather than being the focus in and of itself, then a "fair" tax would have to be flat across wealth levels rather than income levels. By this measure a flat income tax is regressive, with wealthier people paying a lower percentage relative to wealth than poorer people.

Second, the gains are, I think, not as great as is generally perceived. Much of what you do when you're filling out your taxes is documenting and calculating income. This wouldn't change. Income can come in many forms and from many sources. There is a limit to how simple the tax codes can be regarding specifying income. Software would likely still be used to prepare this data and consultants still employed to massage it. Additionally these things will probably continue to become more automated, efficient, and user-friendly as times goes on (for both the taxpayer and the IRS). Software tax tools are already pretty good..

Third, is that it takes a major tool away from the government. You mention yourself the value of taxing certain behaviors. These incentives are used for various purposes (educational credits, promoting home ownership, promoting charitable donations, promoting long term investing, etc). There was some talk during the last Presidential campaign of providing substantial tax credits for hybrid cars. These things are succeptible to backdoor legislation, but no more so than any other laws. That's more of a general problem with the legislative system.. If this ability to tinker with the tax system were lost these incentives would also be lost, or else would have to be legislated separately. And as far as bureaucratic overhead goes, I think we're better off wrapping them all into the tax system than to have a separate data collection and payment systems for each thing that congress wants to create incentives for.

Article: Media Regulation

Relating to our frequent discussions of media regulations, there's transcript available of an interview of media mogul Barry Diller by Bill Moyers on his show last week.

Discussion: Arrival and taxation

Damn... I just found out that Mozilla doesn't take well to Blogger, so I lost my text. I'll try to recap briefly.

First of all, my apologies for the late arrival! Thanks to Barry for the reminder to log my ass in. Joe, I think the Diamond article sounds quite interesting. I'll plan to give it a read before the Boyz Weekend.

Regarding taxation, why not simply use a flat percentage tax? This naturally takes a bigger bite out of the wealthy (amount wise) and seems likely to be perceived as fair by everyone. Furthermore, it is (in theory) much easier to implement and presumably lest costly to implement by the government. My concern with more complicated tax schemes is that they get bogged down in bureaucracy, especially when some jackass legislator slips in a few extra rules for his homies. Honestly, would there be this tremendous need for accountants, lawyers, tax software, etc, with a flat tax? I realize there are still issues in determining what is income, but this seems minor in comparison. I am no tax expert, so feel free to enlighten me on this.

Next, I am in favor of a consumption tax in certain circumstances. In particular, I think they need to be used in health care. Consumption taxes, eg. tobacco, can be very effective in reducing the use of harmful substances. As such, it can be an excellent preventive health measure. Furthermore, the income generated from such income can be used in the health care necessary due to the use of such substances. Unfortunately, such taxes are not directly tied to health care funding at the moment.

Peace out

Article: Why Smart Societies Do Stupid Things

Another article courtesy of /., this is an essay by UCLA professor and Pulitzer Prize winning author Jared Diamond, entitled Why Do Some Societies Make Disastrous Decisions?. It might make an interesting topic for our upcoming Boys' Weekend..

Discussion: US Political Scene Irredeemable?

There is an article on /. today regarding souped up DMCA laws being passed in various states (Illinois already has one, yay for us). In the attendant discussion, I noticed a user with the ID revscat who made a number of posts that hit me. They're along the same lines as the corruption essay I sent out some time back. Terribly cynical, but fairly accurate, I think. I thought I'd paste them in here for everyone's enjoyment (items to which he's responding in italics):

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For crying out loud people, leave you homes and SHOW them how many people care.

Do you really think it will matter? Ok, so a bunch of people show up, and facing a modicum of public opposition they don't act on the bill.

...until 9 months from now when people lose interest in it, the lobbyists make their wishes known, and the bill gets tacked on as a rider to some unrelated (but much easier to pass) piece of legislation, signed by the governor, and becomes law. The end.

I don't think you realize how little control you have over your government. It's all money, all the time. In cases where public interest collides with money, the public interest will lose every single time. And if they can't get it the first time, they'll get it the second.

Your voice doesn't matter.

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Since the only thing our politicians will listen to is lobbyists, we need to form powerful lobbyists groups of our own to protect our interests.

More specifically, they listen to lobbyists with money. If you can help legislator X to get reelected by contributing to his campaign funds, you will have that legislator's ear. If you are merely operating from ideology but can do nothing to help that legislator win the next election, you may get lucky and be able to have lunch with him or her, but you will not have any long term effect.

The day of effective public advocacy groups is over. Nader is a laughing-stock, the ACLU is loathed by many members of the judiciary and much of the public, the EFF has been almost completely ineffective, and the American public is content with whatever legislative travesty the President advocates, so long as it is in the name of national security and supported by Republicans.

Corporate lobbyists control the legislative process. You, unfortunately, have no impact on this process. Your precious vote is worthless.

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Why not do away with entertainment purchases for a year to see how much of an impact we can make? Are we too addicted to their drug to do this?

Because for this to have any effect whatsoever it would have to be done by a significant percentage of the population. How will you be able to spread the word about this boycott? Do you think you could ever get more than a modicum of people to join in? Man, hell no! "Law & Order" is on tonight!

Think about this: There hasn't been an effective consumer boycotts since the 1980's. Even the religious right has given up on product boycotts. Why do you think that is? And do you think you could fight the backlash of propaganda from the media were this to ever even to show the smallest signs of gaining traction?

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Interesting commentary: The Christian Science Monitor has an interesting editorial on reforming class actions, for those interested (I found this on "How Appealing," a blog devoted to legal issues.)

Discussion: Wealth Tax v. Income Tax v. Consumption Tax v. ???

FYI, Pete, Dave, and Ryan haven't responded to their invites yet (update: Pete just signed in too). Worthless slackers. Henry has signed himself up, so maybe we'll hear from him.

I can't say as I've ever spent much time considering tax systems. After spending a little while thinking about it, I have to prefer a wealth tax most and consumption tax the least. I very much agree with Dave's assessment of progressive tax systems, and would go a couple steps farther.

In addition to the fact that wealthy people most benefit from stable society, they are, quite frankly, most able to pay. As a society we tend to value people having access to things that we regard as necessities; food, water, shelter, clothing, medical care, education. For people with little wealth, these things can require their entire income to cover. At the least they use up a substantial portion of it, leaving little for discretionary spending. For a wealthy person these necessities require a much less significant proportion of their wealth to provide for. A much higher proportion of their wealth is available for discretionary spending. Since part of the job of the government (at least in my twisted mind) is to ensure that all people have the necessities, it seems counter-productive to take money from people for whom that money is vital to their ability to provide themselves with necessities. Rather, take a greater proportion from those who have the ability to pay it out their discretionary spending.

Further, (and I'm sure this will get me into a great deal of trouble) I think there is a role for the government to regulate and redistribute wealth. It is unhealthy for any society to have too uneven a distribution of wealth. When wealth becomes too concentrated in too few places the social structure becomes inherently unstable. Additionally the presence of a strong middle class is vital to the healthy function of a democracy. Democracy can be corrupted all too easily by money, and as such allowing people to amass vast wealth subverts the democratic process and allows those people to exert a much greater influence over the political system than anyone else.

So, for these three reasons (fairness (as per the discussion with Dave), practicality, and wealth regulation), I favor taxation on wealth. On the other hand the practicality element of it is largely cancelled out by the practical issues of administering the tax. It is much easier to impose taxes on transactions (income/consumption) rather than wealth, as they are discrete and easily quantifiable. Income tax offers some compromise in that income is relatively easy to track across a period of time and the tax can still be implemented in a progressive manner. Clearly there is a correlation between income and wealth. So using a progressive income tax system is a simpler, but less accurate, method of trying to tax wealth. A consumption tax would be quite difficult to implement in a progressive manner, and as such I don't care much for it.

Discussion: Wealth Tax v. Income Tax v. Consumption Tax v. ???

Well, Joe, I think you've begged the next question. What is the most effective method of taxation? I suppose that hinges on what the goals of taxation are. If anyone else has tuned into this page, I encourage your comments. I'm all for a consumption tax coupled with a forfeiture of all funds upon death exceeding some high threshold ($50 million, maybe). I will elaborate later, but in the meantime, what are all your thoughts?

Discussion: Progressive Taxes

I've spent about a half-hour trying to track down the document I based that on, without much luck. I will vouch that it was an authentic doc downloaded from the census.gov site. Looking at what I can find, however, I'm starting to think I was looking at the wealth numbers rather than income.

Update: I still haven't found the exact doc that I remember working from. But I have determined which numbers are being referenced. It is the a measure of wealth, and not the census either. It was the Federal Reserve Survey of Consumer Finance. You can find some relevant analysis here and here. Both cite numbers stating approx 1/3 of all wealth in the US is held by the wealthiest 1%, more than 1/3 is held by the next 9%, and the remaining ~1/3 is held by the remaining 90% of the people. It looks pretty much like the numbers I was using. How much that changes my conclusions, I'm not entirely certain, probably not much. But it does make the story that goes along with it a bit incongruous.

Discussion: Progressive Taxes

Joe, I think your numbers are suspect. Here you can find the most recent Census data on income, with a summary briefing here . Best I can tell, the chart detailing the "Share of Aggregate Income Received by Each Fifth and Top Five Percent of Households," at A-2 would capture the data needed to get your numbers. The lowest fifth (or two of ten) received 3.5% of the total income, the top fifth got 50.1%, and the top five percent received 22.4% of the total income. Two of the ten in our scenario, then, would each receive $245 in their paycheck (3.5% of $14,000, split two ways), the top two would take in $3507 each (50.1% of $14,000, split two ways)--the CEO, if he is in the top one of twenty, would at most take in $6272 (22.4% of $14,000, multiplied by two). I don't trust my own numbers, either, but I think MoJoJoJo's trying to pull something shady.

All the same, I think it's a fair argument that the progressive tax system may discourage the right people and encourage the wrong ones (I concede that there is probably a ceiling to the incentive argument. Does a billionaire really think about marginal value on that next buck he might make?). But I also think it's fair to urge that those with the most too lose by a regime change should pay the most to see that it doesn't happen.

Discussion: Progressive Taxes

Your discussion brings me back to an oft posted description of "how taxes work", which you can find here at snopes:

How Taxes Work

Once you've read that, here is a response I wrote to it a few months ago:

I think you left off the part of the story that describes why they pay the amounts they do at the restaurant.

It just so happens that these 10 men also work at the same business and live on the same street. And that (for the sake of simplicity) the $100/day for dinner is equal to 1/10 their total pay (ie as a group they get $14g in their bi-weekly paychecks). Now it so happens (according to 1998 US Census data) that the 4 guys who work menial jobs (janitorial, maintenance, delivery, etc) for the company have to split $70 between them for their paycheck. Meanwhile the 5th, who holds an administrative/secretarial position gets $238 every two weeks. The 6th who is a junior engineer has a paycheck of $392. The senior engineer, man #7 gets about $560. The 8th man is a middle-manager who has a pay check of $980. The 9th man, VP of the company is paid $1820. And the 10th, the CEO? He takes $9940 home every two weeks.

Now when they show up at the restaurant, they know that the four menial laborers have already spent their paycheck just to try to cover their rent. So now even if they want to make those 4 pay, they simply can't do it and the lot of them would get tossed out of the restaurant. So they can either make them starve, or everybody else can chip in. Being that they're neighbors and co-workers and the others would prefer they not starve (not to mention worrying about them starting labor unions or rioting or resorting to criminal activities or anything like that) so they decide that they will after all pitch in.

Now, the secretary is having some difficulty making ends meet too, while he is better off than the laborers it is very difficult for him to provide for his family, and the group figures that it wouldn't be fair to charge him the same amount as those who are better off, and that if they did it might cause him to go bankrupt which would then cause harm to their bank and community (did I mention they all bank together too?). So they come up with a scheme where each pays in according to their income.

But the CEO, sly fellow he is, slips a few bucks to the waitress and gets her to fudge the individualized bills in his favor. So in the end we have the 4 laborers who are paid only 00.5% of the company's income get a free ride by not having to pay anything for dinner. Meanwhile the secretary who earns 1.7% of the money gets a bit of a boost by only having to pay 1% of the bill. And the wily CEO who earns 71% of the money only has to pay 59%. While all of these folks are getting a good deal, who is it that gets screwed? Our 4 middle class workers. The junior engineer who earns 2.8% of the money but pays 3%, the sr engineer who makes 4% but pays 7%, the mid-manager who earns 7% but foots 13% of the bill, and even the VP who makes 13% yet has to pay 18%.

When the restaurant offers a discount and calls attention to the pay structure everyone notices the discrepancy, that the CEO isn't paying his fair share. "Hey!" they say, we can use this opportunity to get that back in line by giving this discount to our middle class workers. But unfortunately for them, the CEO has the restaurant owner in his back pocket and so the restaurant owner sees to it that most of that discount goes to the CEO.

And that boys, and girls is WHY the systems works the way it does.

Oh, there was a bit of an inaccuracy regarding the end of the scenario as well. Generally when the 4 guys who combine for 1/2 of 1% of the wealth decide they've had it with the 1 who controls 70% of the wealth, they don't beat him up and keep him from dinner, they guillotine the fucker and divide up his money. Which would make it all that much easier to pay the next day's bill (and all the more incentive for the CEO character to not cheat out of the system).

Discussion: Progressive Taxes

Dave and I had a great discussion at lunch today regarding progressive taxation (amongst other topics), and he had a fantastic argument that I had never heard before. Just to be sure, progressive taxation (in comparison to proprotional taxation) is where the rate of taxation, not just the amount of the tax, increases with wealth or salary. (For a broad overview, see here). Anywho, Dave's argument for progressive taxation is that there is value in maintaining the existing structure and stability of a society, and the wealthy value that stability more than the poor or middle-class, so they should pay more to ensure that stability and structure. If chaos or revolution erupted, the wealthy might lose their relative status through a redistribution of wealth, so they have a vested interest in making sure that doesn't happen, whereas the poor would love to see a revolution (I'm sure some poor Iraqis made out quite well from all the looting).

Response to: Hating Us For Our Freedom

In partial response to and partial support of Joe's entry, the Bush administration knew full well what it was getting us into. And I suspect they think it is going very well, given all the scenarios envisioned pre-war. It's just the price to pay to make the 21st the "New American Century." And this won't stop at Baghdad. Now, it's on to Syria.

Editorial: Hating Us For Our Freedom

Now as the dust settles in Iraq, and the occupation plans are being drawn up, the US finds itself with a perplexing problem. The task of rebuilding Iraq and installing a stable democratic government is not a small one. This is not a nation that is ready for democracy. The political environment has been decimated by decades of brutal one-party rule. The economy has been ravaged by 12 years of severe sanctions. The bureaucracy has just been purged by the US. To rebuild properly will require a significant deployment of manpower and material resources over a period of years. And it will require the US to provide strong leadership and guidance to the fledgling Iraqi government. If the US abandons Iraq and the nation collapses into chaos and civil war, the US will take the blame for this.

On the other hand, as a force that unilaterally occupied a sovereign nation without legal justification and at the protest of most of the international community, the US will be expected to quit the country as soon as possible. Already the US is regarded as a colonial occupier by many in the region. Various European nations are requesting that the US turn complete control of the situation over to the UN. The US presence in Iraq is considered illegitimate and the longer they remain, the more strongly the occupation will be condemned. And so Ari Fleischer will whine endlessly to reporters, "You see! We're damned if we do, we're damned if we don't. We can't stay and we can't leave."

The problem is, this situation was easily foreseeable. It did not arrive out of thin air. When the US decided it did not need it multilateral support for this action, it decided that legitimacy was not important to them. And in doing so put at risk the ability of the US to effectively rebuild Iraq. It was the administration that put itself in this position. But the White House will no doubt spin this situation into just one more demonstration of the rampant anti-Americanism that has taken over the rest of the world. One can only wonder whether this will be an act of clever manipulation or one of paranoid delusion...

Site Update: Welcome to TBW Journal

Obligatory introductory post... Hello, and welcome to the new Boys Weekend blog. This journal will serve as home to discussions, news updates, book reviews, editorials, essays, and any other Boys Weekend related ruminations. Hopefully to feature occasional guest columns as well. Put your thinking cap on and make yourself comfortable.