The Beginning - Taxation (to lower or to raise?)

A few weeks ago, Brian and I met for dinner (along with a our wives and and another couple who are close friends of ours. We got into a fairly robust discussion about taxes and politics in general. I tend to lean Democratic/liberal and Brian tends to lean Republican with respect to politics and Brian tends to lean Republican/conservative and the discussion took on a very familiar ring to it.

A few days ago, I came across an article in the New York Times (evil, liberal, rag according to many conservatives) by Ben Stein on the importance of raising taxes on the very wealthy. Becasuse Ben Stein is a well known conservative pundit, I thought it might be interesting to get Brian's take on the piece. I forwarded it to him and it generated the following email exchange.

After the third round, I thought that this would make great fodder for a blog. And so, here it is!

The following is the email exchange on this issue (my text is blue; Brian's text is red):

Thought you might be interested to read what Ben Stein (a conservative personality) had to say about raising taxes. I wanted to forward to Rob, but didn't know his email address. If you have it, perhaps you can forward to him. I was actually thinking that it might be fun to have these type of conversations over a blog (we could start one). It provides a nice forum to explore these different points of view with people coming at it from different perspectives - let me know what you think.

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"Put simply, the rich pay a lot of taxes as a total percentage of taxes collected, but they don’t pay a lot of taxes as a percentage of what they can afford to pay, or as a percentage of what the government needs to close the deficit gap"

I didn't need to go any further than that statement. Everyone can "afford" to pay whatever is in excess of their cost of living budget, but then why would anybody work harder to try and get ahead. It's really an assinine statement when you look at it. And he cites the fact that Bush cut taxes and three years later the economy is growing much better than before and we are already at the same ammount in receipts in 3 years. That cuts against his argument to me, not for it. Stein has always been a pro tax guy, and I'm not sure why. As i said, most economies in the world that have gone low flat tax have had the best growth. He says he's a conservative, but he is the only "conservative" I have ever read who thinks the tax rate needs to be more progressive. If they had indexed the AMT tax we would have a fairer taxation rate in the Northeast, but since Congress always screws these thing up, we don't. We can't write all our local and state taxes and our mortgage deductions because of it. A flat tax would make for much more efficiency in the country. Do you realize how many man hours are lost to income tax computing and auditing! I read recently it is some astronomical #, I'll have to look it up. Even a slight progressive tax tiering with no write offs would be improvement.

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I completely agree with your last statement. We pay way too much money and invest way too many man hours to income tax computing and it is really very silly. A progressive tax tiered system with no write-offs would be a big improvement. The problem is, of course, that the concept of “write-offs” is a complicated one and you as a business owner know that you don’t want to pay taxes on investments that you make to the infrastructure of your business (my Dad has no understanding of that concept). So, the concept of getting rid of “write-offs’ is, I would guess a complicated one. Nevertheless, I agree that the spirit of that system would be very beneficial to the country.

I am not familiar with the issues surrounding the AMT, but I have no doubt that if I knew more I would agree with you and that we in the middle class are probably somehow getting screwed by it.

I am curious about your comments that Stein is the only conservative that is a “pro tax guy.” I wonder how someone like George Will or William Krystal feels about raising taxes in the context of rising deficits. It seems like it is consistent with conservative values to want to raise taxes to balance the budget. I understand the alternate school of thought that if you lower taxes that you will stimulate the economy and pay off the debt that way. I think it is a nice idea and if it were proven to work, it seems like something that we should all be for. The problem is that the debt continued to escalate in times of tax cuts (e.g., under Reagan) and it is a giant leap of faith to just believe in this idea and hope for the best. Nevertheless, I am intrigued that Bush was able to increase collections in 2005, ostensibly based on his tax cuts. Just as conservatives don’t want to give Clinton credit for his deficit reduction years (they credit dot coms and Wall St. booms), I don’t know if I am willing to concede that the tax cuts deserve the credit.

With respect to taxes, I always think it is silly to be for “higher” or “lower” taxes (it does make sense, on the other hand to be for higher or lower spending). Taxes are just the way that we pay for our spending. It seems to me that it is a matter of what tax rates on which individuals will pay for what we decide to spend. I tend to agree that the government should spend less and try to reduce taxes for everyone (including the wealthy). But when the government decides that it is in everybody’s best interest to spend on programs (whether those programs are social or wars) they have to use tax revenues to pay for those programs. If the current tax revenues are too low, they must raise someone’s taxes, right? It is now a separate debate as to who should bear the burden of those taxes. I think all Stein (and Buffet) was saying is that one can make the argument that the excessively wealthy are getting off better than the common guy when it comes to paying for these programs.

Finally, I am very intrigued about your comments (in your subsequent email) about the “paper of record” only printing viewpoints like Stein’s (i.e., ones that cut against the conservative viewpoint). It follows from the comment that you and Rob made about the New York Times at dinner. I am deeply disturbed by the prevailing view that the Times is so slanted liberal (I do concede that it is probably slightly biased liberal) that it is unreliable. It seems to me that the Times is one of the few papers left that one can truly rely upon to give us the real news. I agree with you (and Rob) that the Wall Street Journal is a reliable paper that can be trusted and I almost always agree with their news (not their editorial page). (Incidentally, I believe that in general, the reporting on the War has been very similar between the Times and the Journal.) I am very curious to test your theory that the Times would never print conservative viewpoints that are against the liberal perspective. Can you give me some conservative commentators that you respect and we can do a test?

Brian, I enjoy this kind of debate because I believe that we all benefit when we consider many different points of view and stretch to accommodate points of view that are different and in conflict with our own. I try my best to maintain an open mind and truly address the facts and avoid the emotional baggage that goes along with the issues. Most of all, I am refreshed when people foster opinions that belong to multiple ideologies (e.g., pro-gun and pro-choice; pro-gay marriage and tough on immigration; pro-war and pro-choice) rather than subscribing to the “whole enchilada” of a particular ideology. I find it much more authentic (Howard Stern is an example).

In any case, it is an interesting discussion and we can see if we can keep it alive. I wasn’t trying to get you riled up or anything when I forwarded the Stein piece. I truly wanted to know your thoughts. I would welcome reacting to opinion pieces that come your way that you think I might have thoughts about.

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I know you aren't trying to rile me up. I enjoy the exchange. Conservatives believe that governments grow in size and scope over time, unless every effort is made to prune them back. it is human nature to write more and more laws, think up more and more social programs to help those "less unfortunate". Also, money is power, and visa versa.

In the long run,the cradle to grave mentality so popular in Europe leaves these countries unable to compete on the global stage as their populations age. Businesses avoid France and Germany to open new businesses or higher more workers because of the exorbitant cost associated per worker and inability to fire them. We need to avoid this trap in America. Our influx of immigrants is one of the reasons we may be able to avoid this trap. You might be surprised to know that The Wall Street Journal editorial page is actually very pro immigration and against the whole fence idea because they think it a fool's game to control labor in a global economy. I guess cheap labor trumps all for the businessmen. I fall somewhere in the middle on this. I think we can do better at controlling the border while still affording those who need work to get it.

I believe S\social safety nets should be sparse enough to be somewhat unpalatable to all but those who truly need it. Work should be required in return for all who can, like the road crews of the original Big Deal of FDR. It was a great idea in a time of national crisis that grew into entitlements, as social programs always do over time.

Clinton's greatest legacy was taking the overgrown free lunch payouts of Welfare and forcing many back to work. It had wreaked havoc on the work ethic in urban communities. Many people (some of whom were patients of mine in Irvington) would only work "off the books" in order to keep the checks coming. That also produced a double whammy on the rest of us, who paid their taxes and then had it given away to people who received checks.

My point being that conservatives believe in small government, avoidance of most social programs as they always grow over time, and low simplified tax rates.

Tax cuts like Bush's have always been followed by bullish economies. But economies are cyclical by nature, so it is hard to prove cause and effect.

The deficit grew while Reagan was president because he had to allow the large social programs to stand to win approval from the Democratic Congress while funding the arms build up at the same time. The economy grew tremendously as a result of his tax cuts and lead to higher revenue in succeeding years after his presidency.

I don't know if we can do any "tests", but I'll definitely send you intriguing articles as we go along, and keep doing the same for me.