taxes, socialism, and Joe the "Plumber"

Some posts of mine from a discussion over at Slashdot.

That wasn't the point of Joe's question. Joe stated he wanted to buy a business and hoped that his hard work would bring in more than 250K. Obama stated that he wanted to take that success and spread it to people that made less than Joe hoped to make with his business acquisition and hard work.

One very, very rarely makes an income of more than a quarter of a million dollars in a year solely through one's own hard work. One usually makes it by leaching, to some degree, off the hard work of others. (The exceptions are mostly matters of dumb luck - a superstar performer getting "discovered", for example.)

And the answer to the GP's question is, yes, Joe (who is not really a plumber, under city of Toledo regulations) would get a tax break even if he owned the business, as will the vast majority of small businesses, assuming an Obama victory and that his plan goes ahead pretty much as stated.

It's one thing to say you want to "tax the rich" to fund the government, it's another when you want to do it to give other people the money, i.e., "Spread the Wealth".

In our capitalist system, the government does a tremendous amount to help those who have wealth, get more. It's so basic to the system we rarely think about it, but how much concentration of wealth would there be without government-issued corporate charters, land and resource deeds, copyrights, and patents? Not to mention a reserve banking system that lets privately owned banks make money out of thin air, and an economic policy that uses the DJIA as a measure of economic success.

These government actions and policies are so successful at concentrating wealth that the top 20 percent own 90% of all financial wealth. And it stays in the family; the U.S. has lower intergenerational mobility than France, Germany, Sweden, Canada, Finland, Norway or Denmark

The small effects of progressive taxation and social spending - spreading around the wealth that other government policies helped concentrate - act as a (small and inadequate) governor on the machinery of state capitalism.

Now, I would rather get rid of that machinery entirely, but I think that unlikely, at least in the near term. If we're going to have it, I'm all for decreasing the power of the government to help the wealthy become wealthier by adding some negative feedback to the system.

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Tom Swiss | the infamous tms | my blog
You cannot wash away blood with blood

She does all the work of raising her crop of tomatoes and getting it to market. No leeching there, she doesn't get government farm subsidies, she just works. But, whatever she makes for selling her crop, it depends in large part on having roads to transport it. It's not that she's a leech, nor lazy...

Using public goods, or other common resources, is not leaching off of others. I'm speaking of the parasitic nature of the "investment class", the absentee owners of capital, who do no productive work yet reap dividends.

Consider a worker on an assembly line. She assembles parts into a product worth (as valued by a free market) $10. Lets say that the parts that she starts with, plus the support services (the power and maintenance costs of the factory, the back office costs, and so on, again at a fair market value) come out to $7. Does she make $3 on the deal? No. Because the investors, who are not doing any work here, have to get their cut.

Let's look at some numbers. These are back-of-the-envelope calculations, but the U.S. GDP is about $14 trillion. With a workforce of about 150,000,000, that's about $93,000 per capita - $93,000 worth of value, created by the average American worker per year.

Does the average American worker make anything like $93,000 a year? Not even close. The average (which seems to be mean, here) annual wage is about $39,000; the median, about $26,000.

So where does the rest - the lion's share, indeed - of that value created by workers go? GDP is rents + interests + profits + wages + some statistical fudge factors; basically, about $50,000 of the value created by the average worker goes to the investing class in the form of
profits, interest, and rents.

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Tom Swiss | the infamous tms | my blog
You cannot wash away blood with blood

Joe really IS a plumber. He does not have a license to be a plumber, but he doesn't need one because the company he works for has the license.

In fact, according to Ohio building regulations, he must maintain his own license to do plumbing work. He has not completed any sort of training program. If Joe is a plumber, heck, so am I - I don't have a license and my training is minimal and informal, but I can sweat copper pipe or unclog a drain line or replace a valve washer.

The question was if Joe would get boned if he made more than $250K.

A slight marginal tax increase on high incomes - a return to a top marginal rate that prevailed during the go-go 80's - is not "getting boned."

Obama said he would take Joe's money and "spread it around". Can you tell me the difference between that and stealing?

First, who issued that money? If we play with the government's counters, we don't have much room to complain when it wants a cut. "Render on to Caesar, what is Caesar's," as one philosopher put it.

Second, as I have already explained, that money was made and the rewards reaped by relying on a number of government services and policies. All claims of property ultimately rest of government action. You want the government to enforce your "property rights", you pay for it.

Making you pay for services rendered is not stealing.

WRONG. You assume that the purpose of the government is to keep rich people rich.

That is, under capitalism, exactly one of the purposes of government: to create and protect "property rights". As the rich are the ones with property, that means keeping rich people rich.

Let's say, for example, that the purpose is to bring jobs to a community that needs it. That community may give tax breaks to a company to try to entice it to move to a factory or whatever to this particular community

Why are there big companies at all? Why isn't the community growing small businesses to create jobs and create local wealth, instead of competing in a race to the bottom to whore itself out to one megacorporation or another?

These large companies exist because of government actions and government policies that funnel wealth and power to where it's already concentrated, and which screw over small and independent business. A company doesn't become "too big to fail" without some state action along the way.

Next, if you believe that life is better in those countries, you are free to move there. I live here because I like it here. I like knowing that I stand a chance of getting rich one day without having the government steal it from me. That's why I'm here. If I wanted something different, I'd move. Which makes me wonder, assuming you are in the US, WHY? If Denmark or Norway is so much better, MOVE THERE!

First, the point was that - assuming you don't come from a rich family - you stand bugger-all chance of getting rich one day. That's what a lack of intergenerational class mobility means. The "American Dream" that if you just work hard, you can get ahead, is right now better represented in those other nations I mentioned.

So if that's really your goal, and you don't want anything to change here, then YOU should MOVE THERE!

Second, are you really unable to comprehend that I can love the U.S. and yet see imperfections that I want to remedy?

You know, I hail from the great state of Maryland. It is my home, and I love it. I grew up here and so I love it; my friends and family are here, and so I love it. I love its geography, from the beaches to the mountains; its history, the Free State, the Battle of Baltimore; its culture, its crazy mix of South and North, that kitch plus that offbeat artistic sensibility thrown it - John Waters couldn't have come from anywhere else. I love that the STScI and Goddard SFC are here, our connection to the space program.

And though I mostly grew out of sports fandom, deep in my heart I still hold the irrational belief that the Baltimore Orioles are morally superior to any other baseball team.

When I point out that some other states have some programs or policies that we might to well to emulate, no one suggests that I move. No one feels the need to walk around with a Maryland flag pin on their lapel to demonstrate their love. No one thinks that the life of a Marylander is worth more than the life of a Virginian. If I mention that Maryland has some dark history (a slave state, the state that gave the nation Spiro Agnew and John Wilkes Booth) or that we have some serious on-going problems (like Baltimore's status as the heroin addiction capital of the nation), no one take that as evidence that I hate Maryland.

Would that people were as sane in their attitudes about love for the nation.

Why must you try to change my country to something else when you can simply go to that someplace else and leave my country the hell alone!

This is MY COUNTRY TOO, jerkwad. And I happen to love it too much to let fools run it into the ground without at least speaking up.

I grew tired of this "love it or leave it!" bullshit a long time ago, and it sickens me to see it being thrown up again by the desperate and dying (in its current incarnation) GOP.

So take it and shove it.

--
Tom Swiss | the infamous tms | my blog
You cannot wash away blood with blood

I guess if you artificially define "hard work" to be "using your muscles" this is true enough.

No. That was one of Marx's greatest bloopers, to disregard intellectual labor.

Define "one's own" and define "hard work". And define them meaningfully.

"One's own hard work" in this context means physical or intellectual labor performed by one in support of the production of goods or services. Even the IRS recognizes the distinction between "material involvement" in a business and "passive activity".

If your only involvement with a business is to put money in and get a dividend statement every so often, you're not engaged in "hard work", you're an absentee owner. If your only involvement with a business is to buy and sell its stock, you're not engaged in hard work, you're engaged in speculation, in gambling. If your only involvement with a business is that you have a piece of paper from the state, a land deed, that forces that business to pay you for occupying that piece of the Earth's surface, you're not engaged in hard work. In each case, you're skimming off the value created by labor of others.

What is your alternative?

My alternative is policies that favor earned income over passive investments, rents, and inheritances, resulting in a flatter distribution of wealth.

Do you think there exists a system where the top 10% of the population only owns 10% of the wealth?

Neither necessary nor desirable. We don't need a completely flat distribution to have something much, much better than the L curve we have now.

The fact is that poor people breed like vermin, then they don't take care of their kids, then those kids go on to do the same.

Ah, I see. Poor people are "vermin".

Your own words indite you more than anything I could say.

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Tom Swiss | the infamous tms | my blog
You cannot wash away blood with blood

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Comments

I agree with your comments...

...entirely. Very well put even in the concise brief form that you have written in. I have a blog which addresses a similar issue here http://deimundus.blogspot.com/2008/10/trickle-down-economics.html
I am writing another essay on the same topic you have written and it has some of the very same ideas you have expressed in yours here. Your words are crisp and may be I will quote some of your phrases, with acknowledgment of course, and a link to your page here if you don't mind.

quoting and linking

Anyone is welcome to quote anything I post (with attribution and within fair use limit, of course), and to link to any of my pages. Thanks.

Tom Swiss - proprietor, unreasonable.org

Not a plumber?

And the answer to the GP's question is, yes, Joe (who is not really a plumber, under city of Toledo regulations) would get a tax break even if he owned the business, as will the vast majority of small businesses, assuming an Obama victory and that his plan goes ahead pretty much as stated.

You call yourself a libertarian, yet you assert that someone is "not really a plumber" unless he has explicit government approve to practice plumbing? Not only is that non-libertarian, it's hard-core statist. One's profession is not defined government regulations, but based on what one actually does for a living. Anyone who does plumbing, especially someone like Joe who does it to make a living, is a plumber.

As for the delusion that Obama will actually cut taxes, well... maybe you're already beginning to see the folly in that.

no, not a plumber

Whether or not I think one ought to need a permission slip from the state to do plumbing (or any other sort of work), doesn't change the current state of the law.

Nor does it change the fact that a person with no significant training in a trade or profession cannot meaningfully be said to be practicing it.

I'm a licensed massage therapist. I think it's everyone's right to choose whatever sort of health care they want. However, under the current system which requires licensing, someone who claims to be a massage therapist but does not have a license is misrepresenting themselves, committing fraud.

And even if that licensing requirement were done away with (which, again, I would favor), someone who had no significant training but claimed to be a massage therapist would at the very least be engaging in unethically misleading behavior.

Since a plumber who screws up can be a threat to the health and property of others - think of raw sewage running into your house from a neighbor's botched job - I think some sort of regulation, perhaps a bonding requirement, is much more justified for plumbers than for health care providers. But I haven't considered the matter in depth.

As for Obama's tax cuts, it's low on my list of priorities. After all, Americans are under-taxed compared to other industrialized nations. (If you really want a low-tax nation, try North Korea, which abolished taxes in 1974.)

Tom Swiss - proprietor, unreasonable.org

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