Friday, November 10, 2006

he asked me why... i'm just a hairy guy...

In the wake of the Democratic "wave" not deemed a "revolution" by the corporate media, emails have been flying back and forth between Brotherman the Younger, a financial analyst, and me. I won't clog the server here by posting all of it. Suffice it to say we agree on some things, but there is a yawning gap between our perceptions of what constitutes economic justice. Here, in his most recent missive on the subject, a tidbit left unanswered... until now:
"[I]t is Democratic rhetoric that reducing the tax percentage is a benefit only for the rich.… Why should I have to pay a greater percentage of my income than you? Further, if I spend money not taxed, or invest in the stock market that is capital created to generate more jobs that can be further taxed.… In economics that is called the "multiplier effect". Generating wealth creates more tax revenue."
Let me confess here to an overall ignorance of economics, market capital, taxes, etc., and I bow to his superior knowledge on the matter. I'm just a news junkie and political animal with an interest in a great many issues, though professing little expertise on any one other than my navel. But I'll give this a try.

First, I stipulate to the premise that spending money not taxed stimulates the economy. Bully! That's what greases the wheels of civilization, generates jobs, etc. That is the lifeblood of the free market, apple pie and Chevrolet. It's what makes things Go! It's what's made us great in the traditional sense of the word.

But that's money that's ultimately ending up in fewer and fewer hands. Taxes, on the other hand, is what a government Of The People uses to better the lives of those people. It pays for our military, our law enforcement, environmental cleanup, healthcare, public education, consumer protection, and on and on. Money not taxed is inevitibly earmarked up, not down, such that a corporate CEO earns 1,435 times that of his lowliest employee, say, a coal-miner, while the miner, when not working in dangerously under-regulated conditions, sees his promised retirement & health benefits rescinded by fiat and not out of necessity. Why do you think the first order of business in the 110th is to raise the minimum wage?

And what of jobs these days? You mean the ones being outsourced to India, Indonesia or to Mexico? Or the ones still to be had stateside: the ones in manufacturing-turned-hamburger-flipping? And let me squash the "generating wealth creates more tax revenue" myth: Maybe it did in a bygone era, but I think I'd very much like to hear what a Henry Waxman/Barney Frank/John Conyers-chaired committee can come up with regarding this thing called "off-shore accounts," or, say, the massive redistribution of wealth in this brave new world of Bush-brand tax cuts. I'm betting that jury will be out for some time.

Again, I don't pretend to know a whole lot about all this as I'm not paid handsomely to analyze finance, nor do I have to contend with the harsh reality of high-overhead personal finance, so I'm hoping you can educate me: The reduction of the tax percentage means, I think, what Steve Forbes has championed and what you're advocating: A flat tax, yes?

And why should you have to pay a greater percentage? Well, maybe you shouldn't. Maybe we all should pay 30 cents to the government for every dollar we earn. Why not eliminate the income tax altogether and go with a national sales tax?

For the sake of argument then, perhaps you should because you reap a greater reward, just as the upper class earns an even greater reward -- rewards not necessarily bestowed by the government but by life itself. You have a lovely, large home. You drive a snazzy car. You can afford to pay a monthly stipend to ensure your family's health coverage. You've travelled the world. You play golf and fart a lot!

I say this knowing you are one who does indeed count your blessings. You value your good fortune and your family and friends. So why, then, should you be made to pay a greater percentage when it may not be empirically justifiable? Bottom line? Because that's where the money is, the money to make life palatable for the rest of us. We who are without health insurance; we who live in the ramshackle, and/or drive same, while we toil and spin and can barely afford to go to the beach for a weekend and call it a vacation; we who aren't asking for welfare but do expect a decent subsidy and -- yes, Goddamit! -- health benefits for our hard work; we who hear "Let them eat cake!" and want only to respond with "Off with their heads!"

"Hey, life's a bitch!" you say? (Or as Naahm put it recently: "Too effin bad!"). Well mebbe so. Consider it protection money then. Peace of mind. The great unwashed can be made angry and they can be motivated to do things that also trickle up. If done in an orderly manner, we have an electoral "wave." When it's disorderly... well, you're enough of a historian to have heard of riots and revolution? But if that's too abstract, know this: without the workers' efforts -- their LABOR -- none of us owns squat! There y'go! Consider your taxes a gratuity!

And smile, my Brother! Render unto Caesar what is Caesar's, as will I (albeit at a significantly lower rate), and I will see you and the family at Thanksgiving, eh?

And U 2, Brotherman the Elder! Happy Birthday!

8 comments:

Naahm Deplume said...

Finally, you are talking some sense. Fact is, you are both right. What it comes down to is a disagreement over how we, in this macroeconomy, slice the pie. Further, you allude to a concept I have long since believed, which is that redistribution is, in essence, a form of protection--we pay poor people to not riot and loot.

Unfortunately, as I indicated before, there are no easy solutions and the major parties are not going to give us any. Perhaps becoming th United States of Europe would result in a leveling of things, but there is much discontent and malaise and economic dislocation there as well. Indeed, it isn't americans making all those bahamian bankers wealthy.

Consumption taxes would be equally unpalatable (although I would certainly want them) because they are seen as "regressive." The wealthy and thrifty would benefit because they devote a smaller percentage of their income to consumption.

As for offshore accounts being attacked, there are already copious reporting requirements. To be more effective, the Congress would have to require foreign banks to turn over info. Like that's gonna happen. Domestic banks have reporting requirements, and the IRS "has vays to make you talk" when it comes to finding repatriated income. In fact, it isn't rich folks that the IRS focuses on, it is international commerce--that is where you can really do some income shifting.

Incidentally, you rail about CEO pay. You can always do what Ben and Jerry's did and cap it by law. But then they found that they could not attract managerial talent. How about replacing CEOs? Good luck running GM with a committee of employees. In order to do away with such excesses, the shareholders must act, which they won't do as long as the CEO is getting results for them (by, e.g., cutting benefits). You could always remove shareholders from control over US corporations, but you would not much like the ensuing market crash and depression. Finally, you can take the only obvious steps, which is to mandate better benefits, pay, etc. In two years, everyone will be driving japanese cars and GM and Ford will be shuttered.

No, there are no easy solutions.

Barking Up Trees said...

wow! praise from thee... !

you know, i think i've actually absorbed much of what you and the brother keep pounding in my noggin...

but, uhm, speaking of japan, i believe they've been capping CEO pay since... well, a while ago...

and how's that goin' for 'em, eh... ?

Barking Up Trees said...

one more point about capping CEOs: if it is mandated that ALL business cap CEO pay (as well as the rest of the corporate officers) what're they gonna do as alternative -- go play baseball... ?

nah, citing ben & jerry's and ben & jerry's only is an ineffective argument against a GREAT! idea...

but thanks for playing...

Naahm Deplume said...

First, you focus on pay, not on how execs are really compensated, through stock options. These are heavily regulated to force recipients to pay taxes on them, even when they haven't resulted in gains. As for the amount of comp., options and other pay are usually tied to performance. So, performance must have been good.

Yes, Japan caps pay, but what about stock options, other corporate perks and excesses that we don't permit here, and the pervasive keiretsu system? Fact is, Japanese CEOs are just as fat and happy as ours. How do we explain that? I don't know. In fact, it hasn't been that good for japanese companies for awhile now, so what do we make of that?

As for Ben and Jerry's, that is an example of unilateral change, and proof that unilateral change will not work. It has to be economywide. In fact, I am pretty sure that they discontinued it because no one with talent would do it for that wage. Hell, in my biz, I find that talent doesn't stay in the geographic area that I work in. Why stay in a shithole of a state when you can go to NYC, DC or Boston to work, get more money and better lifestyle?

But we theorize and disagree to death. My $0.02? Go ahead and implement caps, and then watch the results. They won't be pretty. Even if you get all Eliot Spitzer on CEOs and sue them for making too much money, like Grasso, you get only one bite at the apple. After Spitzer went on the warpath, CEO pay packages were rewritten wholesale. Now, you will see them start to move out of NY, something that had been threatened before, and will continue if Eliot signals his typical view of big business as a source of extorted funds through litigation. Could be good for NJ and PA though.

Barking Up Trees said...

in terms *i* can understand, NYC (boston) may lose pedro w/his $55M, but can promote papelbon for, what, $800K... ?

redistribute the elephant's income/stock options to a greater pool of talent, and four or five gems will rise to the surface for a lot less...

is why the dems got smart w/dean's 50-state plan (or the red sox under henry building a rich farm system vs. free agent bloat under the yawkey estate), irrespective of carville, rahm & the clintonistas bitching about dc elites not getting *their* cut...

standing by my GREAT idea...

Barking Up Trees said...

addendum: i think honda & toyata are doing JUST FINE these days w/their hybrid sales vs. ford & g.m., m'man...

Naahm Deplume said...

Re: Papelbon - that is the essence of capitalism: taking advantage of disparities and inefficiencies. If companies can mine talent from unlikely sources, they are well advised to do so. But, being risk adverse, directors go with names they know, and the names carry hefty price tags. Happens in my biz, and I don't like it, but until you indemnify directors, don't expect changes.

As for Honda/Toy and hybrids, good for them. Better product, better engineering, and the product of a culture that is better focused on competing. Again, don't like it but it doesn't explain how capping CEO pay is gonna change it.

Barking Up Trees said...

well, it'd make ME feel better... !!