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Monday, October 27, 2008

Diatribe, Addendum

Clarification: "spreading the wealth" does not equal "progressive income taxation"...

Just in case anyone has this straw man in mind. Here's why: spreading the wealth means, point blank, from the rich, to the poor. It's direct income redistribution. Wealth spreading is different than simply taking a greater share from those who have more, which is progressive taxation.

Progressive taxation seeks greater tax revenues by taking more money from those who have plenty. Flat taxers will argue the fairness of this as well (see my prior post), but as a strategy for tax revenue generation, it's been pretty roundly adopted by advanced economies, and it has shown itself to be fairly resilient to charges of obvious unfairness.

On the other hand, this business of wealth redistribution is much more contentious, particularly in America. It moves directly from tax revenues from the wealthy to more income to the poor: from those who have more, directly to those who have less. So, the "Marxist" or "Communist" charges we've heard blurted around the fringes of the McCain campaign, while clearly incendiary and political (in the pejorative sense), are not without a certain tout court plausibility.

All this said, politicians talking to scary looking dudes like "Joe the Plumber" might occasionally choose less-than-optimal phrases to convey their meaning; I'm happy to assume that Obama is not--in any real sense--some Trojan Horse Marxist. More likely, he'd like to help some of the middle class by using tax revenue from members of the upper class. We're already doing this, with varying degrees of success. We'll see, if Obama is elected, if he's got the right strategy to make it succeed with American voters. They'll be baaaack, in what may seem like a long or a very short four years. With a Democratic House and Senate alongside an Obama administration, if it's a long four we'll all know exactly who to blame. Right or wrong, the pendulum swingeth, and it surely will swingeth again.

4 comments:

mijopo said...

Obama made the comment in response to a question about an increase in the top level of the income tax. Progressive income tax is one way in which "spreading the wealth" might be achieved, and lots of people who aren't Marxists also buy it, e.g., Warren Buffett. In terms of the general comment, it's an economic truism, that even free market advocates believe. Their argument for trickle down is an argument about what they believe is a (the best?) way to "spread the wealth around", but nobody denies that spreading the wealth around isn't a laudable objective for a society to have. Gracious of you to acknowledge that Obama is not a Marxist, but since McCain has made a very similar comment about taxes when he was arguing against the tax cuts earlier, the more interesting question is how one could ever make the inference in the first place.

Erik said...

My point is that progressive taxation seeks to grow the tax base of an economy, for whatever purposes it might be needed. In America, for instance, much of the tax revenue from rich folk goes to the defense budget. (This just means, most of the taxes in America are paid by the wealthy, and those taxes go to budgets in the federal government, of which the defense one is of course big).

Wealth redistribution, OTOH, is commited to targeting income tax paid by one class (the upper) to be distributed to another (the lower). This a kind of Robin Hood notion, only without a renegade lone visionary, but a very large bureaucracy.

I'm not against progressive taxation, and I'm certainly not against using tax payer money to help people in need. The difference in ideology is that I think it's only licensed as far as opportunities are created, where, before, there weren't any. I'd never demean a subset of the population by suggestiong that they're entitled, directly, to rich people's money. That's crude. And I think the lesson of Marxism is: not effective either.

mijopo said...

Taxation in general has the effect of spreading the wealth around and progressive taxation even more so unless it somehow managed to make rich people wealthier. As perverse as the defense budget in the US is, it still doesn't manage to do that.

But as I said in my earlier comment, the claim that spreading the wealth around is useful or good for us, is just an economic truism, embraced by all sides of the political spectrum. So, so far it's fair to say that Barack Obama believes in progressive taxation, which fails to distinguish him from any mainstream Republicans (including John McCain) and that he accepts an economic truism. Still not seeing how we jump to "socialist threat" here unless you're willing to call progressive taxation socialism.

Erik said...

Maybe it's just a perception thing, but "spreading the wealth" evokes images (for me, apparently also for others) of taking from one, giving to another. It's the notion of income redistribution, which admittedly is a subset of spreading the wealth, that gets people thinking "Socialist!". The history of course of this is the famous Marx phrase about from each, to each. I don't know many Americans that are into that kind of spreading. To be absolutely clear: the slippage is between taking money from rich folks to fund the legitimate functions of government (building roads, fixing bridges, providing for a defense), and taking money from rich folks to directly increase the income of poor folks (say, by sending X a check in the mail, if X makes less than Y).

As far as the broader notion of "spreading the wealth"--taking a tax base generated mostly by the upper class--and using it for legitimate government purposes, who can argue with that? That's what we do.

As a final thought, you might think that "legitimate function of government" with regard to the tax base is, in fact, to give checks to members of the lower class, so that they can have specifically more income (as opposed to, say, better schools). I think this is socialism, and "socialism" in this specific sense to me is a pejorative term.