Mark Thoma says:
by cactus
This post by Mark Thoma is just too good not to steal wholesale.
When Republicans complain about all the people who aren’t paying federal income taxes, and they’ve been doing this a lot lately, I get confused. And that confusion extends beyond the obvious fact that almost everyone who is employed pays payroll and other taxes so the charge that they don’t pay any taxes is misleading.
I thought Republicans liked tax cuts, and the more the merrier. If taxes were zero on, say, capital gains or dividend payments, would they be whining and complaining? I don’t think so. If inheritance taxes were cut to zero, would there be an uproar? We know there wouldn’t be, Republicans want these taxes to be zero. But when income taxes on the poorest among us are zero — and not all taxes, these workers pay plenty in payroll taxes, sales taxes, and the like, just federal income taxes — they get quite upset.
The only problem with the post is that I think it is a strawman. When he says Republicans complain about people not paying income taxes, I do not know who he is talking about. Generally, I hear the reference from people who I identify as Republican in the context of not increasing the rates on better off Americans. This in turn is supported by the notion that the better off already pay a disproportinate amount of the taxes. I really do not think that the GOP wants to increase income taxes on less well off people because that would eliminate one of their key arguments to keep rates low on wealthier people. It would also make their arguments that government has to cut spending–ie entitlement programs– weaker. It is one of the reasons that I have maintained for a long time on this blog and elsewhere that everyone should pay some income taxes so everyone has some skin in the game and so everyone has a spot at the table in terms of calling the piper’s tune. That certainly has drawn the ire of the more liberal commentators, but has never garnered support from the more conservative and while I do not necessarily vote for the Democrat, I never vote for the Republican.
Terry
well, it garners support from me. though whether i am “more liberal” or more conservative is a mystery.
the problem is that words have no meaning. the payroll tax is not really a tax. it’s really an insurance premium. unlike “taxes” you get your money back.
but nine new york economists claim the employers share of the tax is “really the employees money” meaning taken out of wages the employer would otherwise have to pay in a perfect job market. but then it turns into a jobs killing tax when that suits the political wind.
and of course for deficit purposes it doesn’t count as a tax at all. it’s only the benefits that count as a “government expense.”
in other words… don’t look at the words, look at “what is.”
people running around and feeling sorry for themselves because they have found a magic formula that proves they are “really” the victims of “unfair” government… either they are taxed too much. on accounta people with no money don’t have to pay their fair share… or they are taxed too much on accounta “the rich” should have to pay for everything so the poor poor don’t have to….
it’s bad enough the people have been taught to sing this tune. it’s scary as hell that our “leaders” dance to it.
cactus,
Thoma has built a nice straw man here. First becuase SS is not a tax (as AB as noted multiple times) but a forced insurance policy. Looks like Thoma is calling it just another revenue stream into the general fund, something that is not true, and not a place I feel the left wants to go. Yes, they pay sales taxes, state taxes, property taxes etc. Yes, the poor all pay those. Also pay fed taxes on gas and the Spanish-American War tax on telecomunications too. That’s not the point and I know you and I bet Thoma does also while building his straw man.
Terry gets to the point: Not paying any Fed taxes gives you no skin in the game. And that’s the complaint.
As I understand it the percentage of people paying no Fed Income tax is around 37% last year and expected to jump to around 49% next year (according to the NPR report I was listening too. No claim these numbers are correct, but the trend is). The complaint from the right is we are having less and less people with any reason to care how much the Fed spends – they just take money. And the vote in the bread and circuses….
But the argument still revolves about how big you feel the Fed Gov should be and how to pay for it. The Dems like big government, the Reps like big government that is almost imperceptably smaller than the Dem version, and there is a whole lot of people out there who want a much smaller government.
Islam will change
Islam will change
OK, I’ve made this point at Thoma’s place and I’ll make it here. Insisting that FICA cannot be a tax because it is a contribution to an insurance fund is an example of the logical fallacy known as a “false dichotomy”. In what bood does it say that if for a payment to the government to be a tax, it cannot go into an insurance program? It is convenient for the purposes of some arguments to make that claim, but there is no reason for it to be true.
Lots of fancy lexical hashing goes on in efforts to make it true. One has to note that those who pay FICA have a reasonable anticipation of receiveing benefits, because the benefit is not guaranteed. The Social Security retirement benefit is insurance in the sense that it insures against living longer than one expected, if one has otherwise provided for one’s retirement. It is a public benefit for those who have not provided for their own retirement. It was constructed to look like a universal benefit so that the “I’ve got mine” crowd would be less prone to try to get rid of it. That seems not to be working so well.
As to whether the argument is being made, as Terry asks, at least one member of Obama’s deficit commission has made the argument. Lots of others have as well. The reason is apparently that it has become one of those “let’s all say this” right wing things. People who had not had this thought through their long lives are suddenly saying it, and they are the usual suspects.
OK, I’ve made this point at Thoma’s place and I’ll make it here. Insisting that FICA cannot be a tax because it is a contribution to an insurance fund is an example of the logical fallacy known as a “false dichotomy”. In what book does it say that for a payment to the government to be a tax, it cannot go into an insurance program? It is convenient for the purposes of some arguments to make that claim, but there is no reason for it to be true. This is similar to the “double taxation” argument. It sounds right, so people fall for it. There is no reason that the same stream of cash should not be taxed twice other than the tax payer not liking to pay taxes. There is no reason that a payment into an insurance-like program cannot be a tax. If it has characteristics of a tax – FICA is a compulsory payment to the government which funds (since 1983) general government activities – then why is it not a tax>
Lots of fancy lexical hashing goes on in efforts to make it true. One has to note that those who pay FICA have a reasonable anticipation of receiveing benefits, because the benefit is not guaranteed. The Social Security retirement benefit is insurance in the sense that it insures against living longer than one expected, if one has otherwise provided for one’s retirement. It is a public benefit for those who have not provided for their own retirement. It was constructed to look like a universal benefit so that the “I’ve got mine” crowd would be less prone to try to get rid of it. That seems not to be working so well.
As to whether the argument is being made, as Terry asks, at least one member of Obama’s deficit commission has made the argument. Lots of others have as well. The reason is apparently that it has become one of those “let’s all say this” right wing things. People who had not had this thought through their long lives are suddenly saying it, and they are the usual suspects.
As long as we are addressing fallacies, let’s look at the notion that those who don’t pay federal income tax don’t have an interest in how government works.
First, federal income tax is one of many taxes paid to governments at all levels. Not paying one of them does mean one does not help pay for government operations. It is one of those assertions that is either ignorant or dishonest – there are no alternative explanations. People who work on the books, drive, pay for goods delivered by trucks, make retail purchases, buy booze or smokes – they all pay taxes of various kinds.
As to whether those who pay no taxes have no interest in government, well that doesn’t make any sense either. I don’t want the borders defended because I don’t pay taxes? I don’t care whether we have police and fire protection if I don’t pay taxes? Sorry. That’s simply not true. So let’s be generous and assume the people peddling this notion mean something other than “no interest”. How about “no interest in good government, but only in what they get out of government.” The slightest thought shows that payment of taxes doesn’t change whether one sees government as a system to game for one’s own advantage. Only if one pays the majority of taxes does that logic work. Let’s try “only those who pay taxes care whether taxes are high.” Ah, now this has an element of sense to it, though it has its flaws. If we see the argument as “federal income taxes out to be universal because then more people would have an interest in keeping taxes low” then it becomes an anti-tax argument. That seems likely to be true, given who it is that makes this argument. The reality is that there are reasons to care about limiting government deficits other than one’s own tax burden, but we know that does not always translate into a wider argument for limiting government deficits. We have been through a long period when those opposed to taxes had no problem with deficits. That fact, too, tells us something about thie argument for making the poorest of workers pay income tax. It is the “let them pay” posisiton, dressed up in flimsy logic.
Let us recall that we have a negative federal income tax for some workers, zero for others, positive for still others. That is what Milton Freidman and Ronald Reagan(‘s advisors) argued for, but we now hear arguments against. The arguments against only make sense as a way for those offering the argument to shift the tax burden to somebody else. It’s what the 1983 Social Security deal did, and now that FICA seems unlikely to fund tax cuts for the wealthy, they are looking for another way to shift the burden to the working poor – the same group who suffered most under the 1983 deal and who now face limits on their recompense.
By the way, arguing that “fiscal reality” means that those who paid more FICA after 1983 means putting expedience ahead of honoring commitments. Seems a bit odd those same people seem to be arguing for higher taxes on the working poor because that is fair and right. Seems a lot like an effort to just keep them paying.
As long as we are addressing fallacies, let’s look at the notion that those who don’t pay federal income tax don’t have an interest in how government works.
First, federal income tax is one of many taxes paid to governments at all levels. Not paying one of them does not mean one does not help pay for government operations. It is one of those assertions that is either ignorant or dishonest – there are no alternative explanations. People who work on the books, drive, pay for goods delivered by trucks, make retail purchases, buy booze or smokes – they all pay taxes of various kinds.
As to whether those who pay no taxes have no interest in government, well that doesn’t make any sense either. I don’t want the borders defended because I don’t pay taxes? I don’t care whether we have police and fire protection if I don’t pay taxes? Sorry. That’s simply not true. So let’s be generous and assume the people peddling this notion mean something other than “no interest”. How about “no interest in good government, but only in what they get out of government.” The slightest thought shows that payment of taxes doesn’t change whether one sees government as a system to game for one’s own advantage. Only if one pays the majority of taxes does that logic work. Let’s try “only those who pay taxes care whether taxes are high.” Ah, now this has an element of sense to it, though it has its flaws. If we see the argument as “federal income taxes out to be universal because then more people would have an interest in keeping taxes low” then it becomes an anti-tax argument. That seems likely to be true, given who it is that makes this argument. The reality is that there are reasons to care about limiting government deficits other than one’s own tax burden, but we know that does not always translate into a wider argument for limiting government deficits. We have been through a long period when those opposed to taxes had no problem with deficits. That fact, too, tells us something about thie argument for making the poorest of workers pay income tax. It is the “let them pay” posisiton, dressed up in flimsy logic.
Let us recall that we have a negative federal income tax for some workers, zero for others, positive for still others. That is what Milton Freidman and Ronald Reagan(‘s advisors) argued for, but we now hear arguments against. The arguments against only make sense as a way for those offering the argument to shift the tax burden to somebody else. It’s what the 1983 Social Security deal did, and now that FICA seems unlikely to fund tax cuts for the wealthy, they are looking for another way to shift the burden to the working poor – the same group who suffered most under the 1983 deal and who now face limits on their recompense.
By the way, arguing that “fiscal reality” means that those who paid more FICA after 1983 means putting expedience ahead of honoring commitments. Seems a bit odd those same people seem to be arguing for higher taxes on the working poor because that is fair and right. Seems a lot like an effort to just keep them paying.
As long as we are addressing fallacies, let’s look at the notion that those who don’t pay federal income tax don’t have an interest in how government works.
First, federal income tax is one of many taxes paid to governments at all levels. Not paying one of them does not mean one does not help pay for government operations. It is one of those assertions that is either ignorant or dishonest – there are no alternative explanations. People who work on the books, drive, pay for goods delivered by trucks, make retail purchases, buy booze or smokes – they all pay taxes of various kinds.
As to whether those who pay no taxes have no interest in government, well that doesn’t make any sense either. I don’t want the borders defended because I don’t pay taxes? I don’t care whether we have police and fire protection if I don’t pay taxes? Sorry. That’s simply not true. So let’s be generous and assume the people peddling this notion mean something other than “no interest”. How about “no interest in good government, but only in what they get out of government.” The slightest thought shows that payment of taxes doesn’t change whether one sees government as a system to game for one’s own advantage. Only if one pays the majority of taxes does that logic work. Let’s try “only those who pay taxes care whether taxes are high.” Ah, now this has an element of sense to it, though it has its flaws. If we see the argument as “federal income taxes ought to be universal because then more people would have an interest in keeping taxes low” then it becomes an anti-tax argument. That seems likely to be true, given who it is that makes this argument. The reality is that there are reasons to care about limiting government deficits other than one’s own tax burden, but we know that does not always translate into a wider argument for limiting government deficits. We have been through a long period when those opposed to taxes had no problem with deficits. That fact, too, tells us something about thie argument for making the poorest of workers pay income tax. It is the “let them pay” posisiton, dressed up in flimsy logic.
Let us recall that we have a negative federal income tax for some workers, zero for others, positive for still others. That is what Milton Freidman and Ronald Reagan(‘s advisors) argued for, but we now hear arguments against. The arguments against only make sense as a way for those offering the argument to shift the tax burden to somebody else. It’s what the 1983 Social Security deal did, and now that FICA seems unlikely to fund tax cuts for the wealthy, they are looking for another way to shift the burden to the working poor – the same group who suffered most under the 1983 deal and who now face limits on their recompense.
By the way, arguing that “fiscal reality” means that those who paid more FICA after 1983 means putting expedience ahead of honoring commitments. Seems a bit odd those same people seem to be arguing for higher taxes on the working poor because that is fair and right. Seems a lot like an effort to just keep them paying.
K Harris, Well I was right about drawing the ire of those on the left although as noted I am no Republican. I also would point out that I am a staunch defender of social secuity as it is and am fearful of the Deficit Commission and Obama generally on that topic. As to your counter to my argument about both having an interest in the government and a seat at the table, I take it that you agree with me on the seat at the table point. as to the interest in government, certainly everyone who consumes anything that has a sales tax on it pays those taxes and they tend to be regressive. I would note that many of them are related to choices–I can choose not to drink, make phone calls, buy gasoline, smoke cigarettes etc. If I recieve wages, I can not choose not to pay income taxes. But more to the point, why do you think that Dumbya kept the Iraq and Afgahnistan wars off budget? Do you think that support for those conflicts would have ebbed quicker than they did if everybody had their federal income tax bill—whether that is $100 per year or $100,000 per year-increase by 10%? Do you think non smokers cared about the Federal government putting an additional $1 tax on a pack of cigarettes to fund health care for poor children? Do you think they cared that the government defined poor children as those living with parents making $80,000 a year? What was the turnout in the 2008 presidential election–73% What will it be this November, 45%? I am not prposing that we step away from a progressive income tax–I would like to see it become more progressive, but I do think that everyone who makes money in this country should pay some income tax. And yes my wife and I pay at nearly the top marginal rate and I do not like paying taxes, but would be willing to pay more if it would help the country deal with it debt problem so my children can have a better life–regardless of whether they have to pay any income taxes or not.
Terry & buff,
Look at the other side of what Thoma said – the whole bit about most Reps having no problem with zero cap gains tax or zero inheritance tax. Anyone who is OK with zeor cap gains tax or zero inheritance tax is quite OK with wealthy people having no skin in the game, so to speak.
For those who were thinking that there has been no increase in income taxes as a result of this financial episode of the past several years, think again. State and local governments all over the country are raising the income taxes of their empoyees with little regard for the consequences. California has been furloughing state employees for months already. Gov. Patterson of NY has just announced his intention to do the same as a part of an emergency budget. How is that a tax hike you ask? Well let’s look at the end result. Patterson plans to mandate one day weekly for unpaid leave for all employees. One out of five sounds like a 20% reduction in gross income, and it’s withheld immediately. State and local workers are certainly not the moneyed class, but they are the ones who will bear the financial sacrifice in order that others don’t see their taxes go up.
And how about the NY tax on soft drinks? I’m no lover of the soft drink industry, but this is another form of tax that weighs most heavily on the lower paid workers. The financial situation is costing the middle class wage earner a great deal more than the wealthiest people in the states. How come no one wants to raise taxes on high incomes, and why are some forms of income treated more favorably than simple wages?
kharris
and you fall for the fallacy of mistaking the word for the thing.
i guess you’d have to ask “what is a tax?” and if you remember that a tax is a burden it might help you see the point that I try to make when I say Social Security is “not a tax.” you see, it “is” a tax under the law. in fact that’s how it passed constitutional muster. but it’s not a tax, because it doesn’t “go to the government”… it goes to you.
it only “funds general government activities” when the government BORROWS it. that is a crucial point. do you own any Savings Bonds? do you count those as a tax?
Social Security insures against death disability and reaching retirement age without enough to live on. it does not only “insure against living longer that one expected” though it does that too.
and lots of people who “provided for their own retirement” had something happen to their provisions on the way. that’s why they need the insurance.
the commission people say lots of things they don’t understand.
well, jack,
it’s like this. raising taxes on the wealthy will cause them to sulk and they will stop creating jobs.
that’s why we cut their taxes and the economy is doing so well.
and if you object to a ten cent tax on soft drinks, you are not serious about taxes.
It’s sort of like arguing that the gas tax isn’t a tax because the money goes into the highway fund, so it’s a user fee.
I was just reading my October 1935 issue of Fortune – I’m a bit behind on my reading – and they had a survey on this very issue, “Should everyon who earns money be required to pay some income tax, no matter how small?” Needless to say, then as now, the richer you are, the more you think everyone should pay something. (The Senate was debating decreasing the personal exemption.) The percentages “yes” were 33.8% for the rich, 26.1% for the upper middle, 17.6% for the lower middle and 17.3% for the poor. Interestingly 29.4% of the Negroes polled – they had Negroes back then – felt that some tax should be paid putting them somewhere between the upper middle and the rich in attitude. The editors felt this might have to do with so many Negroes being sharecroppers and having nothing to tax.
Why is anyone surprised about Republican attitudes. It is just class warfare, and it has been since way when.
Kaleberg
No. you quite miss the point. You don’t get your highway taxes back. They go into a part of the general welfare. You no doubt get your fair share of “defense” etc out of income taxes, but you don’t get the money back.
Kaleberg
maybe. but it’s also stupidity. the poor simply don’t have enough money to pay enough taxes to support the country at anything like a “flat” tax, especially since the flat tax proposers are all hot to eliminate taxes on capital gains.
me and those negroes believe that a man ought to pay his way. that’s why we like social security. but i can’t work up real tears when i think of the poor rich paying all those taxes to buy the submarines that protect them from terrorists.
i guess you’d have to ask “what is a tax?” and if you remember that a tax is a burden it might help you see the point that I try to make when I say Social Security is “not a tax.” you see, it “is” a tax under the law. in fact that’s how it passed constitutional muster. but it’s not a tax, because it doesn’t “go to the government”… it goes to you.
sunidesigns.com
Since we’re discussing taxes I’d like to ask, why is it that capital gains income, dividend income and inherited income are not taxed in the same way as is worked for income? Do people who work for their income have a larger stake in the operations of government and, therefore, are expected to pay a greater share of its operational expenses? That seems odd, so I suspect that there is some other reason that some income is taxed differently than some other forms of income. So who knows the answer to the question?
What I object to are taxes that fall primarily on the poor and working classes. How about raising the tax on wines selling for more than $25 per bottle? Better yet, tax cigars that sell for $5 each and bring back the luxury tax. They’re all bad ideas, but no worse than a tax on popular purchases. Tax policy should focus on raising revenue first rather than manipulating economic behavior.