Sunday, September 14, 2008

Arguing with Conservatives Part I: Income Tax

Now that I've posted a basic summary of McCain and Obama's tax plans below, it's worth taking a look at the arguments that typically support higher versus lower taxes. I once had a camp counselor tell me that if you ever want to win an argument all you have to do is say "Frankly, that sounds like something [insert name of your favorite Fascist leader] would say." Now, while this may be fun, it's not necessarily the most effective way to beat Republicans in arguments.

What about income tax? You often hear Republicans make several arguments about why taxes should be lower. The main arguments they make come in several forms and I'll address two of them: 1) It's better for the economy/trickle down economics, 2) It's a waste of money because the government is inefficient, and 3) it's not fair.

1) Lower taxes are not better for the economy
The best argument I've ever heard for higher income tax comes from my friend Josh. He simply asks people to name a country with a lower income tax in which they'd rather live. It's short, sweet, and to the point -- I recommend you try it. After Europe and Canada are knocked off there aren't too many countries you'd find American's willing to live in. What this clearly illustrates is that there is no evidence for linking low income tax with a wealthier country or high income tax with a poor country. In fact, it appears that with the exception of the United States, the wealthiest countries in the world all have exceptionally high income tax levels and lower levels of income inequality. Even in our own country we can see the correllation. During Clinton's presidency, when income tax was higher, the economy was stronger and income inequality was lower. Under Bush, with lower income tax (primarily on the wealthy), the economy was weaker and income inequality was greater. This makes sense if we think about it. People with lower incomes are likely to spend the extra money they have, whereas for the wealthy the money isn't as likely to go back into the domestic economy. The other argument that's never made sense to me is the argument that people will stop working as the income tax gets higher. Even at 70%, a wealthy person would still take home more money for every dollar they own. The incentive doesn't disappear.

2) The government is not inefficient.
Okay, well, maybe it is -- but this is really just a smokescreen. The bottom line is: if you care about progressive goals (public education, healthcare, the environment) you are willing to accept some inefficiency. The government is a giant bureaucracy, there's no denying that it mayb be inefficient at times. But do we get rid of the DMV because it has long lines? No, of course not -- we value having our driving regulated. Thus, when a conservative says they don't want higher taxes because the government is inefficient, what they are really saying is that they don't value social welfare. Sure, maybe they do in an abstract sense -- with the exception of extreme libertarians most conservatives would be for public education and universal healthcare if it didn't cost them anything. But the fact is, social welfare costs and I'm willing to pay a little so that children in this country can have healthcare. Conservaties are not willing to make these payments -- not because government is "inefficient" -- but because they don't value social welfare.


Anonymous said...

This is a fantastic argument against trickle down economics (although not explicitly):
The more I've thought about it, the more income inequality seems to be a big deal. If you think about it, those at the top already tend to spend a large amount of their effort investing, it would not be easy even if they had twice as much money to effectively invest twice as much whereas those that are pushing middle class or upper middle class with small businesses are more likely to be able to invest and have the time to do so effectively with less income inequality.

Anonymous said...

"...asks people to name a country with a lower income tax in which they'd rather live."

Along the same lines, it would be interesting to see a chart showing a breakdown of income tax percentages of the top "quality of life" countries (Norway, Iceland, etc).

Anonymous said...

Another worthwhile argument, although doesn't work for everybody is the claim: "The United States has a system under which those with the most have clearly benefited the most, it makes sense that they should have to pay their fair share to maintain that system for the future."