As I prepared to head out to the beach this morning, I got a couple of emails from TV shows that wanted a talking head (or presumably several) to address, in taped studio interviews, Hillary Clinton's (and Tim Kaine's) tax return release today, and/or the recent discussion in the NYT of Trump's refusal to release his tax returns. But luckily I don't agree with Gore Vidal, from the phrase of his that I believe I have quoted here before, re. how important it is to be on TV whenever possible. (Although I would have done the sessions had I been in NYC today.)
The main thing I gleaned from looking quickly at the Clintons' 2015 tax return, which I know others (such as folks at the Tax Policy Center) discerned as well, was that Trump's new tax "plan" would have enabled her and Bill to cut their effective tax rate by more than 50%, and thus to save more than $1 million in taxes. They made almost all their income via speeches and books, which they put (because that is where it goes) on Schedule C, business income. Since Trump plans a 15% rate for non-employee business income that apparently includes that from sole proprietorships, this would seem to mean that they would get a massive rate cut (and tax cut) from his proposal.
One could restate Trump's proposal, I suppose, as equivalent, for the most part, to a flat 15% income tax plus fines of up to 18% for the crime of being an employee rather than a business-owner.
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«equivalent, for the most part, to a flat 15% income tax plus fines of up to 18% for the crime of being an employee rather than a business-owner.»
More precisely, a property owner in general.
That logic is very popular, and it is directly derived and justified by Ayn Rand's version of social darwinism, which is actually "inverted marxism":
* All value/"surplus" is generated by "wealth creators".
* Then workers are predatory parasites ("moochers and looters") if they manage with violence or the threat of violence to steal from "wealth creators" anything more than subsistence level wages, that is if they own more than shirt and trousers and eat more than bread and water.
* Therefore taxing "wealth creators" destroys wealth because it punishes them for generating value, while taxing workers not only has no such effect, because workers generate no value, but it is also just because it takes back some of the wealth they have parasitically and predatorily extracted from "wealth creators".
The model is that of a dairy farm:
* The dairy farmer is the "wealth creator".
* The dairy farmer deservedly gets the whole income from the farm because the value generated by the farm is entirely because of the dairy farmer's activity: without the dairy farmer the herd would just amble around the prairie and merely mindlessly graze and reproduce themselves without generating any value.
* Therefore the cattle deserve no income, just enough for subsistence.
* Therefore quite properly farms are run for the benefit of the farmer, not of the cattle; the farmer should not share any of his income and wealth with the cattle.
* If the cattle by threatening the farmer with violence managed to parasitically and predatorily extract part of the farmer's income to get more than a stall and daily hay and water that would be unjust, and they would be justly taxed on their predatory earnings.
That point of view is of course very popular with the upper-middle classes, not just the upper classes.
BTW in the example one can replace "cattle" with "robots" to get a more modern feel. Regardless of whether it is "cattle", "robots", or "workers", the concept is the same.
PS Therefore in the "inverted marxism" view of many big and small business and property owners higher taxes on labour income are justified not by «the crime of being an employee» but the crime committed by predatory parasitical workers of coercing from "wealth creators" some of their justly earned income, crime that is proven when they have any income above subsistence level.
* [ ... ] without the dairy farmer the herd would just amble around the prairie and merely mindlessly graze and reproduce themselves without generating any value.
* Therefore the cattle deserve no income, just enough for subsistence.»
I forgot an important aspect of "inverted marxism" here: since the prairie is the property of the farmer, the cattle steal from the farmer when they «merely mindlessly graze and reproduce themselves without generating any value» without paying rent, and left to themselves they cannot pay rent as they generate no value.
Therefore in "inverted marxism" the cattle *must* work for the farmer to compensate the farmer for the use of the farmer's property, because they must pay for the subsistence they need.
I am just explaining "inverted marxism"/"Ayn Randianism", I don't agree with it.
«plus fines of up to 18% for the crime of being an employee rather than a business-owner»
Note that is an argument very commonly used by business and property owners against progressive taxation, and indeed against percentage taxation:
* If someone earning more than $240k is taxed at around (all-inclusive federal) 24% and someone earnings less than $65k is taxed at less than 12%% then the argument is that the higher earners are fined for the crime of generating more value.
* If both someone earning $37k and $91k are taxed at 25% marginal rate, with a marginal tax of $500 for someone earning $39k and $13k for someone earnings $89k, that $12k difference is a fine for the crime of generating an extra $50k of value (approx. values).
Put another way, "moralistic" arguments like «fines of up to 18% for the crime of being an employee rather than a business-owner», where it is implied that employees don't deserve to be punished by paying more tax, can hugely backfire, because stories about "deserve" and "punished" can be created in some surprising ways.
Taxes don't exist to punish crimes or reward good behaviour, they exist because they must exist, as yearly subscription fees to the giant "group purchase" schemes that are federal and local governments, and should be based like most subscription fees (for cellphone usage or whatever) on benefit received and capacity to pay, not moralizing narratives.
«Taxes [ ... ] they must exist, as yearly subscription fees to the giant "group purchase" schemes»
BTW I follow this blog because I think that things like tax policy (and accountancy and actuarial "science") are fascinating, racy topics :-), so I doubt that MMTers would follow this too.
But if MMTers were to read the above, they would argue that the «subscription fees to the giant "group purchase" schemes» should be paid by "seignorage" on (theoretically non-inflationary) money creation rather than taxes.
I strongly object to that, as that has two problems, one tactical, one fundamental:
* Tactical: if "seignorage" on *non-inflationary* money creation is not sufficient, then one needs taxes anyhow to cover the full cost in terms of real resources.
* Fundamental: if "seignorage" on *non-inflationary* money creation is actually sufficient, then the real-resources cost of the «subscription fees to the giant "group purchase" schemes» becomes obfuscated, and this reduces transparency and accountability for those managing and/or benefiting from the spending on the «giant "group purchase" schemes», because that spending is then perceived as spending "free money from the magic money tree", not spending "our hard earned income". Which is the logic of OASDI being funded by contributions for example.
It would be therefore far better to fund government spending entirely via taxes (a technically balanced budget at all times), and distribute part or all of the the "seignorage" on *non-inflationary* money creation as a "resident's dividend", as it is done for example in Alaska for oil extraction royalties.
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