Monday, March 09, 2009

Tax Increases

Just posting a comment I made to a post by Matt Yglesias here. Matt's post was a response to the conservative meme that the tax increase on folks making over $250k is unfair because these folks are so hardworking and necessary for society. My comment is in response to a bunch of other comments there where folks were comparing the difficulty of work done by lawyers and financiers on the one hand and roofers and movers on the other.

I agree that it is pointless to argue who actually works “harder”. Both because it is not really possible to assess who works “harder” and because it is hardly the government’s job to figure out who is worthy and unworthy and reward the former and punish the later. But given that, the anti-Obama argument takes the bigger hit. Conservatives are arguing that the folks making more than $250k are too worthy to be taxed. If we can’t really assess that, how do they make the argument?

But the free market argument against Obama’s policies is also problematic. First, in my opinion, because the government already seriously distorts the price of things by providing extensive services to the wealthy at absurdly low prices. How valuable is copyright protection to Disney, Microsoft television networks and the like? Do we really charge full market value for that service? I doubt it. How about the value of sharing risk with the community via incorporation or having guaranteed sole use of a frequency of the radio spectrum for broadcasting? I would argue that these are only a small portion of the services provided by the federal government for which we charge very low rates. How much then of the high income of the finance and legal folks here complaining of Obama’s tax policies in turn depends upon the government providing these services at the extremely low rates it does?

But the higher rates on the salaries of folks making over $250k can, I think, be defended even more directly. If the mover roofer had to rely solely on cash for his pay and transactions, he would still be able to do his job and earn the salary he does. But how many of the folks in law or finance depend upon the trustworthiness of many other people to handle large sums of money. A trustworthiness that can no doubt be accounted for to a great extent by peoples natural sense of morals, but which ultimately relies heavily too on the existence of the FBI, the Justice Department and the Federal Penal System, to keep everyone focused on right and wrong? Indeed, if given the choice how many of you in finance would forgo paying the taxes you do now, plus those proposed by Obama, at the mere cost of giving up any such federal protection to your assets? If no one would actually take that deal, then you are not being overcharged.

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