Opiniatrety

In response to Matt's very insightful points.

Anonymous giving is probably the most self-less way of giving (and I do much of that myself), but the value of such giving is that it is self-less and freely done, not forced by others. I've heard, because I haven't read much of the text myselt, that the Talmud sees the situation as I do -- it is the free and willing giving that is good, not being forced to give by taxation. The recipient of the aid doesn't see a difference, but God does. Or, as I put it -- there is a big difference as to the moral value self-initiated giving has for the giver as opposed to giving enforced by law. Not even tithing is legally enforced or monitored -- it is between the giver and his own concience.

The recipient of the aid doesn't see a difference, but God does.

Well, as I was basically saying before, I think that what's important is what the recipient sees. Or anyway, I think that in setting up society we should be concerned more with the aid that the recipient gets than with the opportunities for better-off people to give to the poorer.

Now, I am in agreement with something you said in the other thread, that other things being equal we should make it easier for people to give freely; but I think the greater reliability of an effective welfare system would outweigh any reductions in private charity that resulted.

Baugh: Sooner or later, you run into someone interpreting the criteria for eligibility in the most constrictive reading possible. And when you run into those people, you have a choice between being honest and losing the help you need, or lying. This is a damned hard choice. And even when outright lying isn’t needed, the whole system is set up to reward those prepared to downplay all of what would normally be strengths and play up all of what would normally be liabilities.

It seems identical comments apply to the people on the other end of the transfer payment, i.e. people fortunate enough to land in the upper tax brackets. Shed a tear for those who will be royally soaked by the taxman if they are maximally honest, but who will be rewarded for spinning and shading the financial truth, if not outright lying.

Matt, perhaps the flip side of your universal aid should be a flatter and less means-tested method of taxation (easier said than done, to be sure). You mentioned the relative popularity of the Social Security program, and that is funded by a flat (and capped) tax.

Shed a tear for those who will be royally soaked by the taxman if they are maximally honest, but who will be rewarded for spinning and shading the financial truth, if not outright lying.

I'll decline this offer, thanks. Even if they get royally soaked they're better off than the poor folks are if they lie and get help. Also they can hire people to prepare their tax returns etc. for them, which probably reduces the insult to their own personal dignity a bit. I might shed a tear for the accountants who get put under pressure to shade and spin for their rich clients, although it seems as though there's a lot they can do without outright dishonesty; at least that's what I told them in the accounting ethics class.

a flatter and less means-tested method of taxation

If you want to take away the incentive to minimize your income, a flat rate won't do anything. You need a flat amount -- a head tax. This is obviously unjust and unworkable. I'm all for stripping out deductions, which would take away some of the ability and thus incentive to spin and shade, but progressive rates are completely irrelevant here.

The flat (and capped) Social Security tax is the least just aspect of the system, especially the cap. The only thing that might redeem it is that the revenues are dedicated to Social Security itself, which helps the poorer people. But of course the people who want to reduce progressivity in the tax code are the same people who want to steal those revenues from the Social Security trust fund.

progressive rates are completely irrelevant here

I agree that the shape of the rate curve is not the most important thing-- deductibility of various expenses is more important-- but I do not think it is irrelevant.

I see three general ways to avoid tax on a transaction: (1) conceal the transaction entirely; (2) recharacterize the nature of the transaction, e.g. was it a deductible expense; (3) recharacterize who was involved, e.g. did Bob pay for this or did Bob's company pay for this.

To the extent that a flat rate makes the total tax burden independent of how income is shuffled around between entities, it removes the point behind the entire third class of accounting tricks and lies.

Anyway, my point about less means-testing is about improving the honesty of the process, not about the distribution of burden. A tax on yacht marina berths would fall on the rich, more or less, but would require less subjective assessment of the yacht owners' financial affairs and ability to pay.

a head tax ... is obviously unjust and unworkable

The justice of a head tax would appear to follow inevitably from the principles of "one man, one vote" and "no taxation without representation."

However, the reality is that governments, like airlines, find it more profitable to price discriminate among their customers.

The flat (and capped) Social Security tax is the least just aspect of the system

I don't understand why you like the payout structure but not the pay-in structure. The public, correctly or not, widely perceives the two to be parallel and this perceived justice is surely a major reason for the program's popularity.

The justice of a head tax would appear to follow inevitably from the principles of "one man, one vote" and "no taxation without representation."

Poppycock. Those principles mean that everyone gets an equal say in the construction of the tax structure. If they choose to set up a tax structure other than a head tax, that doesn't mean anyone has been deprived of representation; at worst, outvoted. If you'd said "No representation without taxation" the argument might be doing better.

In saying that a head tax is just, I don't mean to imply that no other tax structure can be legitimate. Clearly the people can collectively decide on other arrangements, and routinely do so. I don't think there is a unique just tax code. However, there is a common-sense fairness to the idea of everyone contributing equally to the fund which they will have an equal say in spending. Why do you say a head tax is "obviously unjust"? Many organizations fund themselves by demanding a fixed fee from each member.

It is more profitable for the organization if each member can be induced to pay exactly as much as he thinks membership is worth, with the wealthier members generally willing to pay more. But I don't know that this more profitable outcome is necessarily more just.

Well, if you see governments as analogous to fee-charging organizations that we can choose to belong to or not, then any fee structure that people will agree to seems just. But not even Nozick sees governments that way, and I much prefer Rawls's idea of society as a cooperative venture to which everyone belongs -- you can't structure society on the assumption that some people might opt out.

As for why it's obviously unjust, in order to raise enough money for the government to be able to do anything, even the most basic enforcemnt of property rights, a flat head tax would have to be absolutely ruinous for the poorest citizens, unless wealth is distributed nearly evenly. The head tax only has a common-sense fairness in isolation from basically every fact about the world.

Universities often charge people for parking permits - as contrasted to many, but by no means all, large private employers that frequently provide free parking. At several of these institutions where I have worked, the parking permit fee (which is sometimes ruinously expensive) is on a sliding scale with salary. Of course, a grad student or a cleaning lady and a provost take up roughly the same amount of parking space, but nobody I know argues that it would be more just to charge them all the same amount.

(Society doesn't put parking meters or subway tokens on a sliding scale, but effectively it does by building streets and subways out of a general fund partly from progressive taxation.)

Now, of course this is slightly different from the income tax because there is no effective way of cheating (the university knows how much it pays you). Nevertheless, I do not shed a tear for people who face a choice of behaving ethically and paying money, or behaving un-ethically and paying less money. Am I supposed to be sorry for them because they have a choice about behaving ethically or not???

It's apparently well known in criminology that the way to increase compliance with a law is not stiffer sentences, but more effective enforcement - making the chance of getting caught higher. Another way of making taxation more efficient and honest would be better enforcement, but this is politically difficult.

BTW, I don't think people support Social Security because it is a flat tax or capped. It is popular because everybody can benefit from it, because at least some of the recipients are obviously needy, and because it is called something you "earn" (even if the funding system is something of a shell game). Back in 1990, I saw Theda Skocpol make the point that Social Security was unassailable due to its universality (as opposed to say AFDC) and that people who favored social programs should take heed, so it's a point that's been around for a while.

M: you can't structure society on the assumption that some people might opt out

Conversely, I think that's a pretty good, not to mention realistic assumption! You have done a good job of structuring society if few people are tempted (or forced) to opt out and become criminals, vagabonds, emigres, defectors, traitors or insurrectionists. On the other hand if many of your citizens keep jumping the Berlin Wall then, you know, add more razor wire or something.

M: As for why it's obviously unjust, in order to raise enough money for the government to be able to do anything, even the most basic enforcement of property rights, a flat head tax would have to be absolutely ruinous for the poorest citizens, unless wealth is distributed nearly evenly.

I think that goes to workability, not to fairness. But I don't mean to quibble.

You have done a good job of structuring society if few people are tempted (or forced) to opt out

Well, the whole point of Rawls's contractarian approach is that a fair society is one that people would want to opt into if they didn't know what role they would occupy (to avoid people saying "I want my role to be the exalted one"). But people are born into societies, they don't buy in, and I just don't see how a workable society could include an opt-out feature other than emigration; one in which people get the option to say, "We aren't going to pay taxes, and we'll forgo societal benefits."

I think that goes to workability, not to fairness.

Not really. Many societies have done a quite excellent job of ruining their poorest citizens (or slaves, or someone); their problem was fairness, not workability.

B: I don't think people support Social Security because it is a flat tax or capped. It is popular because everybody can benefit from it, because at least some of the recipients are obviously needy, and because it is called something you "earn"

That's right, but I think the first and last clauses together imply a flat (or fairly flat) tax. The benefits must be reasonably in proportion to the recipients' working income, or upper-income recipients will not appreciably benefit, violating "everybody can benefit." The tax must be reasonably proportional to the benefits, or it is hard to claim that the benefit is "earned." It follows by transitivity that the tax must be reasonably in proportion to the recipient's working income, i.e., a reasonably flat tax.

If you capped benefits without capping contributions, you would again reduce the appeal of the program to high-income voters. You could cap neither benefits nor contributions, but it might seem odd to force millionaires to "save" a lot and then send them princely government checks in retirement. (That said, there is no longer any cap on the Medicare tax.)

M: I just don't see how a workable society could include an opt-out feature other than emigration; one in which people get the option to say, "We aren't going to pay taxes, and we'll forgo societal benefits."

What's wrong with emigration?

You could also go and hide in the wilderness (a de facto if not de jure form of emigration, perhaps). Or become a nomad of no fixed address. In practice, if you were to withdraw from society anywhere close to the extent implied by forgoing all societal benefits, I find it unlikely that anyone would come looking for you because you had stopped filing tax returns.

None of this lends any support to the idea that societies should be modelled on organizations that people have to buy into (or not). Rather, everyone who stays in town is going to be part of society, like it or not, and the problem is to figure out a just way for everyone to live together.

Richard - I don't think one can logically deduce that a tax ought to be constant or flat or capped or nearly so from the underlying principles of Social Security. There is nothing that determines what the slope of the sliding scale has to be. Take my example of the university parking fees. Everybody pays, but depending on the university, the slope can be steep, shallow or nonexistent.

I've never believed that a head tax or a flat tax rate is intrinsically more fair than a progressive tax. (Different people have different incomes, and in a capitalist society we don't call that unfair either, i.e. there is not a strong prior assumption about what the distribution of income ought to be. It only gets up people's noses when the distribution seems to be very far from the ideal, witness the current moderate criticism of CEO pay and the Home Depot CEO's buyout check.)

Skocpol's main point about the unassailability of Social Security came from its universality, I think. It is a middle-class entitlement program that actually, of course, has the strongest effect on the incomes of relatively poor people (their check may be a bit less, but it is a much larger portion of their retirement income). Of course quite rich people don't benefit appreciably from it, but they don't really need to care, nor does it rely on their relatively smaller number of votes. (I bet they kind of like getting the monthly check anyway.)

The other issue is that since the payouts go to people who are retired, it's pretty much always taking money from people with high income and giving it to people with lower income, even if over time they are the same group of people. Going to the universality issue, even quite well off upper middle class people usually know someone who gets an appreciable benefit from a Social Security payment, and this bolsters its support.

B: I don't think one can logically deduce that a tax ought to be constant or flat or capped or nearly so from the underlying principles of Social Security.

Which part of my syllogism above do you disagree with?

I think you underestimate the appeal of Social Security to the fairly wealthy (who are often elderly or at least past middle age). I believe that people at, say, the 95th percentile of wealth are still keenly interested in their Social Security checks. The popular perception is that Social Security is not highly redistributive (a.k.a. the "get back what you put in" myth). I don't think wealthy people regard Social Security as a conspiracy against them. (Young people do often regard it as a conspiracy against them, but young people don't vote a lot.) This is part and parcel of the perceived universality (especially among likely voters) which we agree makes Social Security unassailable.

If Social Security were highly redistributive (it actually is somewhat redistributive) then I doubt it would enjoy nearly the same level of support.

B: Take my example of the university parking fees. Everybody pays, but depending on the university, the slope can be steep, shallow or nonexistent.

I've already agreed that various social schemes can be just, so long as there is a degree of consent by the governed.

I don't know what Orwellian universities you may have experienced, but I would be very surprised if a professor or graduate student who considered the parking fee intolerable could not opt out of having a university parking space. This makes the system more of a consensual bargain (improving on the weak element of consent already implicit in remaining at the university).

I'd also bet heavily that at any university with scaled parking fees, the provost and the professors get better parking spaces than the graduate students, making the bargain more palatable for those asked to pay more.

These details would distinguish the parking system from a Marxist totalitarian scheme, and would help explain the high degree of acceptance which you report.

Richard, you didn't actually use a syllogism. If you're going to patronize my brother, do it right.

Also, what do you mean by a Marxist totalitarian scheme?

Richard, most university parking departments are in fact bureaucracies that would not be totally out of place in a totalitarian society, or at least a farce by Vaclav Havel.

At least, that's how the governed talk about them.

My point is not that Social Security should be run like parking permits, but that the parking permit example shows that there is no real prior expectation that taxes should be head taxes, flat taxes, or progressive taxes to be considered intrinsically fair. I am questioning the idea that one slope of tax on income is more logically necessary or intrinsically fair than another. I think fairness in this case is not an intrinsic attribute but is measured by outcomes.

BTW, the people who choose not to buy a permit to save money are usually the people on the lower end of the income scale. That's because under almost all systems of progressive taxation (certainly all in the current US of A), wealthy people still have more money for discretionary spending than the less wealthy.

what do you mean by a Marxist totalitarian scheme?

By Marxist I mean a scheme in which participants pay according to their ability, but what they get back does not depend on what they put in. By totalitarian I mean that the organizers of the scheme will not let you escape from it, and would seek to invade every aspect of your life to ensure compliance... as when Orwell U. finds out about the consulting job you have on the side, and jacks up the fee on your parking space accordingly.

Ok, Richard, I think your last remarks are tendentious and silly enough that I'm going to ask you not to leave any more comments on this thread. We've reached the point of no return.

By Marxist I mean a scheme in which participants pay according to their ability, but what they get back does not depend on what they put in

This, which seems to include any result of progressive tax that is freely available to all, is by no means unique to Marx.

By totalitarian I mean that the organizers of the scheme will not let you escape from it

This seems to be an allusion to my previous remarks about society as something you don't opt into. Deal with it. Society is not optional, and if you don't like the society into which you're born your choices are to work to change it or to leave. A government that allowed people not to obey their laws -- aka an "anarchy" -- wouldn't last five seconds. Again, I recommend the beginning of Nozick's Anarchy State and Utopia.

and would seek to invade every aspect of your life to ensure compliance

Well that sounds bad.

as when Orwell U. finds out about the consulting job you have on the side, and jacks up the fee on your parking space accordingly.

Oh, you mean that it's an intolerable intrusion on our liberty to actually require some form of financial disclosure? Of a piece with the maundering about poor little rich people, who have to choose between lying and paying their legally mandated taxes, which they can well afford to do? (Unlike the lucky duckies, who really will suffer if they're denied social service help.) You're not exactly refuting point 3.

I'm going to ask you not to leave any more comments on this thread.

Umm, okay. In closing, I certainly didn't mean to be patronizing, and any silliness (I prefer "humor") was tangential to a serious point. I think you could have given me a much more charitable reading. But that's up to you.

Is it okay if I respond to your direct questions?

Oh, you mean that it's an intolerable intrusion on our liberty to actually require some form of financial disclosure?

Whether a given intrusion is intolerable depends on the situation, and perhaps the individual. In the example at hand, which was meant to be an example of something unacceptable, yes, I would consider it unjust if my university demanded a cut from my other job which had nothing to do with them.

Of a piece with the maundering about poor little rich people, who have to choose between lying and paying their legally mandated taxes, which they can well afford to do?

You added the bit about how they can well afford it. If you don't believe that there has ever been such a thing as an onerous tax, you don't.

I will remark that if a tax is based on income, but "affording it" is based on wealth, then those with a high wealth/income ratio can afford it better than those with a low wealth/income ratio, so your notion of affordability will at least not apply equally to everyone in the same bracket.

You're not exactly refuting point 3.

I'm not a libertarian. I consider libertarianism to be naive.

Bye now.

Is it okay if I respond to your direct questions?

OK, sure. And you should certainly continue commenting on other threads, it's just that I'm growing weary of this one. Also, since this is my blog, I get the last word (at least out of us two).

I would consider it unjust if my university demanded a cut from my other job which had nothing to do with them.

But they're not. They're charging you a certain amount for your parking space based on your income. If you don't like that, you don't have to rent a parking space from them. Now that's not the case for governments, but then it'll never be the case that your consulting job has nothing to do with the government; they provide the conditions that makes it possible for members of the society to work.

You added the bit about how they can well afford it.

Well, you started off talking about people in the upper tax brackets. They'll always make more money after taxes than those in the lower brackets, since the first $N of their income isn't taxed at the higher rate. So if they pay their taxes at least as well off as those in the lower brackets [except for high wealth/low income people, but that's not a big segment], which seems like a pretty good definition of being able to afford it.

I think there have been onerous taxes, but those paid by upper-income people in the U.S. aren't it. See also.