A Detour on Taxes - Why I Don't Feel Represented

This debate on taxes is so frustrating for me (as evidenced by the volume of posts on the subject) because I do not feel represented. The debate does not purport to address any of my concerns, yet somehow risks making them more grave.

Inequality of Wealth
I don't really care that some people make more than I do. That's to be expected and applauded. Similarly, I make more than some others. That too is to be expected and applauded. However, like most things, when taken to an extreme, inequality is bad for our society. Taken to extremes, extreme wealth inequality generally leads to a police state (see Saudi Arabia) or a violent revolution (see the French Revolution). I don't much like the idea of either one.

We are at a time in American history where the inequality of wealth between a tiny sliver of the population and, almost literally, everyone else is at historical levels. The wealthiest 1% own more wealth than the bottom 90%.

As the graph shows, we have not had wealth inequality like the present in nearly a century, and I think we all know how well that worked out. Note also that this graph stops four years ago, in 2013. Who thinks that this 40-year trend in wealth inequality has reversed in the past four years?

Given these facts, why is it that the entirety of the debate is on lowering the top bracket, lowering the corporate rate, and eliminating the inheritance tax? As discussed previously, the inheritance tax doesn't even kick in until one person has $5.5m to devise; it seems to me, based on the graph above, that someone who stands to inherit the first $5.5m is doing pretty well and does not need an extra helping hand from the government; there are plenty of other causes that could use the extra money, and a trust fund baby doesn't top my list.

"Pro-Growth" Tax Reform

Mike Pence, Paul Ryan, and Co. like to label their tax cuts for the wealthy as "pro-growth." Taking them at their word (a dubious assertion, given that there is precisely zero evidence that cutting taxes at the margins spurs long-term growth in any way . . . more on that below), I am still skeptical of their plans.

Since the Great Recession, 85% of this nation's economic growth has accrued to 1% of the population. If the vast majority of this growth is going to go to the very wealthy, the vast majority of the benefits of this tax plan are going to go to the very wealthy, and the middle class (i.e. $50,000 - $150,000/year/family) is going to pick up the tab, someone please explain why I would support this plan.

Further, these claims of "unleashing" the economy are highly dubious. The Reagan wannabes (looking at you VP Pence and Speaker Ryan) assure us that if they only get to cut taxes for the wealthy, those wealthy people will invest in the economy, thereby juicing the economy and leading to increased rewards for everyone. While we're at it, I've got a great piece of beach-front property in Nevada I'd like to sell you.

If cutting taxes worked so well to boost the economy, why doesn't Mike Pence talk about the economic boom we had following W's tax cuts in the early '00s? Why do they have to resort to the early 1980s to find an example that supposedly "worked"?  The simple answer to this is:

Thus, there is little evidence to support that the Bush tax cuts had a significant effect on growth. In addition, contrary to the argument that the tax cuts would pay for themselves being made at the time the tax cuts were enacted, the deficit ballooned as a result of the tax cuts.

Pressing Needs

This country has them. Lots of them.

Let's start with education.

Public education is chronically underfunded, notwithstanding some people's insistence that school teachers are some kind of "Lucky Ducky" getting over on taxpayers, with a cushy job, short hours, and long vacations. I can speak of my own teaching experience and point out that this characterization is wholly inaccurate. Most teachers I know work no fewer than 10-12 hours/day (in line with most professionals). Further, that they only have 185 "work" (contract) days per year probably understates the number of weekends they work and certainly overlooks the fact that they are laid off every summer. Incidentally, I would note that construction workers are able to collect unemployment when they get laid off in the winter; teachers are not able to collect it when they are laid off in the summer. Interpret that as you will. Nonetheless, public education is chronically underfunded.

Next, lets talk about higher education. The UNCF was spot on when they said that a mind is a terrible thing to waste. Well, we are now in a situation where plenty of capable young people are unable to get the education that will enable them to thrive economically later in their lives. This is classic "penny wise and pound foolish" behavior. How much possible economic growth are we foregoing? Further, how much social solidarity are we destroying by increasingly making college the purview of the born-wealthy few? Do we really want a society where the only people who can ever afford to become doctors and lawyers are those born into wealthy families? Also, what about the social solidarity, economic opportunities, and societal opportunities that are lost when we saddle our young people with mortgage-sized student loans? All of the anecdotal evidence in the world doesn't change the fact that college could be paid for with a summer job for my parents' generation; a summer job, school year job, and modest loan for my generation; and now requires a veritable mortgage, regardless of how much you work.

When we discuss the issues with education, I think it is a fair question to ask whether giving a tax break to the wealthy, who (as illustrated above) are doing better than ever in America, is a good priority. I think it isn't. I'm not an elected official.

Readers of this blog also know my feelings about healthcare. It is unbelievably expensive and out of reach for more and more people. I understand that hospitals don't turn people away if they need emergency care. What is often left out of that discussion is what is done for people with chronic symptoms, not acute problems. Also, what are the financial consequences of that "willingness" of hospitals to provide emergency care to the acutely in need?

Bankruptcy.

Here is an interesting graphic:

Two things stand out on this chart for me. The first is the sharp drop in bankruptcies in 2005. I believe the Bankruptcy Abuse and Consumer Protection Law of 2005 is responsible for that. An abjectly terrible law, in my opinion, but not relevant to today's discussion. Notice also the change in roughly 2010. Certainly the downward graph reflects our tepid recovery from the Great Recession, but I also think that it reflects the effects of Obamacare.

I could go on and on, but I believe my point has been made. This talk of cutting taxes on the high-end of the socioeconomic scale is simply indefensible, for reasons both practical and moral. That is why I do not feel as though I am well represented in this debate.