Filthy Lucre

These two people have made different choices, because, well, they had the freedom to do so. Now the magical income leveler is voted in, and now everyone has the same income, same medical care, same everything. Mike’s income jumps dramatically. Steve’s is cut in half.

Is it fair because it balances out? Because one person benefitted and one did not? While Mike did not personally come to suburban northern Virginia, and put a gun to Steve’s head to get the extra money, his agent the government did. Mike could have chosen a different career path. A man of his clear ability and intelligence could have devoted himself to a career track that resulted in money. He did not. That is not a reason to steal money from someone who did.

Do not take this to mean that I believe their should be no government administered social safety net, for those who run into truly bad times. But freedom means you make your bed, and then you sleep in it.

Investors, on the other hand, are overwhelmingly middle and upper income middle and upper class people who, while they work, are involved in white-collar office, financial, business, and other professions. Workers are wage-workers. They don’t have salaries. They have no capital for investment, they are not investors, therefore, the workers, overall, do not kind of own the means of production.

There are and have been manufacturing plants, and some other businesses, that are employee owned, but they are few and far between. They also have a tendency to go under since the white-collar types would sooner buy cheaper goods made in other countries where operating costs are lower due to a lack of minimum wage, fewer, if any, environmental restrictions, etc. Hence, globalization rears its ugly head to defeat employee owned businesses in the United States.

But back to the aforementioned workers in the first paragraph, janitors do not own the businesses they clean. Busboys and waitstaff do not own the restaurant. Auto mechanics do not usually own the shop, but are rather employed by it. Therefore, it is not fair to say that the workers even kind of own the means of production. The vast majority of wealth and the means of production that exist, in whatever form, are largely concentrated at the top of the pyramid. Besides, Marx prophesied total worker ownership of the means of production, and society is very far away from that.

Anti-Irish-Americanism in the Ivory Tower

In case anyone is interested, I’ll explain the presence of anti-Irish-Americanism within American ethnic history. Since the 1960s, with the birth of new social history, American ethnic history became a heavily studied field. As such, Irish Americans have historically been the whipping boy of American ethnic history.

For example, Oscar Handlin in Boston’s Immigrants painted the Irish as racist, mean-spirited, and money-grubbing. Hasia Diner in Erin’s Daughters in America painted Irish immigrant women as insane, perpetually drunk, and morally bankrupt. Irish men were painted as drunken wife beaters who often abandoned their families. Noel Ignatiev in How the Irish Became White, argued that Irish-Americans, get this, entirely and consciously made an effort to become white by hating and mistreating African-Americans. The notion of an entire ethnic group consciously and totally making an effort to do anything is absurd. Did all the Irish in America get together at a caucus and unanimously vote to become white? I’d like to see the minutes of that meeting. The whole whiteness concept is equally absurd, but perhaps that’s a post for another time.

Other historians not even dealing with Irish-American topics nevertheless can’t resist taking a swipe at American ethnic history’s favorite target. Deborah Dash Moore, in To the Golden Cities, chronicling primarily Jewish migration from New York to Miami Beach and from Chicago to California, quoted several people who felt they just had to get out of Boston because of Father Coughlin. He lived in Detroit. How was he a threat in Boston? According to Moore, each and every Irish-American in Boston was a raging anti-Semite who worshipped Father Coughlin. Robert Orsi, in The Madonna of 115th Street, claimed that Irish Americans dominated the Catholic Church and virulently hated Italian Americans for being such bad Catholics. Hence, Irish Americans are evil. By the way, Irish Americans were always virulently conservative in their political views according to many ethnic historians, who argue that conservatism makes them evil. I’m sure Buckethead will enjoy that. But, these historians say, you’ll never find, say, a socialist or even an MADL Irish American. They’re like Santa Claus.

But, Mike, you might ask, why aren’t the WASPs hated and reviled by American ethnic historians? Simple. When the parents or grandparents of many historians arrived in the United States, they never saw any WASPs. The Irish, however, as previous arrivals, occupied many foreman and floor management positions in industry, and therefore created closer quarters and opportunities for conflict. Many Irish-Americans not of the middle class were also in very close quarters with the “new immigrants” of the late nineteenth and early twentieth centuries.

But there’s something deeper here. New social historians have glorified and lauded the actions of reformist WASPs, such as Jane Adams, while failing to recognize that those reformists were attempting to forcibly assimilate their grandparents. But the new social historians still just can’t get enough of those temperance/abstinence advocating, evangelizing, criticizing progressives. No, no. The progressives were great. Irish Americans, according to the aforementioned and other historians, were more evil than Satan himself.

Is all this criticism fair? No. Particularly because the strokes are so broad. Of course there are Irish Americans who are racist. But what American ethnic group is utterly devoid of racism right down to every member? Are other groups entirely devoid of anti-Semitism? My mother used to tell me there’s good and bad in all kinds. Apparently, other American ethnic historians weren’t paying attention when their mother told them that.

This kind of thinking is generally associated with the Chicago school - Hayek, Friedman, and that crowd. Historically, when taxes go down, revenue and the economy go up. Post WWII, post Kennedy, Reagan. When taxes went up in the sixties, by the seventies, the economy was a wreck. (Of course it is more complicated than that. But measures that limit the economy generally go hand in hand with higher taxes. So it evens out.)

And the real problem with deficit spending is not the military - which is a legitimate function of government constitutionally, but entitlement programs that inexorably spiral upwards in cost. There is no conceivable tax increase that would pay for what’s going to happen to Social Security and Medicare. If the economy grows fast enough, we’ll have more money for warm fuzzy programs, and for things that kill little brown people. Liberals and Conservatives will live together. Mass hysteria.

(Considering the vast expansion of the investor class, ironically one of Marx’ dearest hope - that the proletariat would own the means of production, has kind of happened.)

The current tax system runs to seventeen thousand pages of regulations. It is, literally, impossible for anyone to understand it. With even a moderately complex financial situation, there is no way to be assured that you are in compliance with the law. Every year, journalists will create a fictional family of four, with a reasonable spread of investments and assets, and earning something in the comfortable middle of the income spectrum. They will send this hypothetical tax picture to several IRS functionaries, tax accountants, and HR Block type tax preparers. No return will match any of the others. Better to spend your time figuring how many conflicted, compulsive centrists can agonize on the head of a pin.

On general principle, the current scheme should be completely scrapped. Vague and conflicting regulations make enforcement arbitrary and predatory. When you speak of fear of the government, most people don’t think Big Brother, they think the IRS. There is absolutely no need for a tax system this Byzantine, this elephantine, this cruel; especially in a republic with pretensions to liberty and justice. And beyond the costs of shoveling an average of a third of our income onto the IRS fire, there is the cost of preparing the tax returns themselves. Millions of man hours for the general public, billions spent by businesses and individuals to tax accountants and tax preparers that could be spent more profitably elsewhere. Further, there is the uncalculated effect of tax law on how businesses change practices to avoid punitive tax liabilities, like delaying replacement of aging capital equipment (a factor in the industrial decline in the Midwest), avoiding investment, delaying capitalization and a hundred other things to obscure for me to comprehend.

But what to replace it with? Conceivably, we could replace the current nightmare with something simpler that worked in largely the same way – tax brackets, deductions, credits – but easier to cope with. But if we are going to go to the effort to replace it, it ought to be something better.

I feel that the current tax system makes a mockery of our commitment to justice and equality before the law. If it is illegal to discriminate against someone for reasons of creed, color or gender, why is it kosher that a one set of tax laws applies to Mike, completely different set of laws applies to Mr. and Mrs. Two-Cents, and yet a third and even harsher set of laws applies to the Buckethead clan? If Mike were white, and Johnny Hispanic and me black, legions of the unwashed would rise up in protest. Yet, there is not a murmur of discontent when it is shown that these three have different incomes.

We should always be treated the same before the law. If I kill someone, the same law should apply to me as when Johno kills someone. Even if I did because they deserved it and Johno kills merely because they have bad taste in music. Similarly, the same tax laws should apply to everyone, even if one of us makes more money than the other. This is the primary moral argument for a flat tax.

If we assume that the current level of revenue is adequate for government needs (sharp internal wrenching pain) we could structure a new tax system that would generate that much money. One of the reasons that our tax system is so complicated is that all the many special interests, over decades, slowly weaved a web of exemptions, shelters, credits and what-have-you into the tax code. Most of these complications have no positive effect on the economy as a whole, and many are probably very negative. One way to eliminate unfairness is to completely eliminate all the complications. If every person, and every corporation, paid 10% of income to the government everyone would be on the same level. No industry would have special sanctions, or considerations. It would limit the government’s meddling in the economy. (Tax law is a great sub rosa way to meddle, because it is less obvious.)

The thing is, if I pay 10%, and Mike pays 10%, that’s fair – even though I will pay more in absolute terms. If it’s that simple, I can compute my tax return in seconds. Even corporations would have a simpler time of it. In the wake of the fall of the Soviet Union, the Russian Federation had high taxes. But almost no revenue, because the government was largely incapable of collecting it. When they switched to a flat tax, their revenue skyrocketed. One, because the lower tax rate was fair enough that many who had not paid taxes now paid them, and two, because it stimulated the economy. And if I know every corporation and rich person is paying ten percent, I’m much less likely to think that the fat cats are getting away with murder, because there would be no loopholes or tax shelters.

While I said earlier that the government shouldn’t use the tax system to meddle with the economy, or use it for social engineering, that is only generally true. While staying within the flat tax format – so that the same laws apply to everyone, we can fudge it a bit to have beneficent effects. For example, a certain standard set of deductions would apply to everyone’s income. A personal deduction, child deductions, mortgage interest, marriage deduction are all good candidates. These deductions would be set amounts, so the effect on someone with a low income would be proportionally much larger than for someone with a large income. You could finagle these deductions so that someone or a family at the poverty level would pay no tax. Then, as income increases, taxes would increase. By the time income got to a couple hundred thousand, it would look more and more like 10% as the deductions became a smaller and smaller proportion of the total income. This would help the poor, encourage marriage and children – but the same law would still apply to everyone. A similar situation could be imagined for businesses.

A flat tax of 15 to 17 percent would probably generate about the same revenue as the current system. And the rich would pay more taxes than they do now (though Democrats would still claim that it’s a tax cut for the rich.) But everyone would have the same, understandable law.

While even full production from the Iraqi oil fields would remain a relatively small part of the total oil production (even the Saudi’s immense reserves are only a quarter of total proven reserves) the effect of that production would be to drive down oil prices. And oil prices are one of the key factors in the world economy, because in some way or other, almost every business and industry is affected by oil prices. Shipping, energy, heating, plastics - the costs of all of these are all directly dependent on oil. Every other industry uses these services. When oil prices went up by 50%, it had the effect of a tax increase, because it increased the cost of doing business, or the cost of living. When they go down, it will act like a tax cut. And it won’t effect the government’s budget.

As the effects of this percolate through the economy, eventually the job market will catch up with the growing economy. Jobless rates are always a trailing indicator. If the economy is already recovering, great. The lowered oil prices will be a shot in the arm, revving up the recovery.

Am I speaking partially autobiographically? Um… perhaps. I can definitely tell you that in Massachusetts, the worst-hit state in the recent recession, times are still bad for everyone. Although the economy as a whole may still be healthy, budgets at the places my friends work-- libraries, higher ed, museums, nonprofits, entertainment-- are still cut beyond tolerance, and professional jobs are just not appearing in any field except nursing. When they do appear, a scrum develops as two hundred people compete for the same one opening. I could go tomorrow and get a gig at Dunkin Donuts, but I know some seasoned professionals who have been out of steady work for more than a year while still looking, all in an economy which the signs say is recovering.

What I’m getting at is, even if Iraqi oil surges into the world market in two weeks, that won’t have much of an effect on the job market as long as corporations don’t feel like they should expand their payrolls. Also, Iraq has just one slice of the world oil-producing capacity, and unlike you I’m not confident it will come anywhere near full capacity soon.

And the tax cut? While I’m overjoyed to have an extra three damn dollars in my paycheck each pay period, I’d rather see the money go toward the unfunded education mandates the President has handed down. Or the insultingly underfunded AIDS initative he heralded back in January. Or perhaps to train and retain the airport security screeners who are being laid off. This is the SECOND time this President has written checks to Americans, and it’s starting to come across like a parent who doesn’t know any way besides money to keep the kids quiet.

*Source: Wall Street Journal, May 29, 2003. A1, A14