Wednesday, November 12, 2008

I have questions

And I haven't seen them addressed anywhere, not during the campaign or after.  So I'm just going to lay them out here:

  1. Is it good public policy to have your entire electorate pay taxes?  If so, why?  If not, why not?  I'm trying to figure out how it is healthy to have 35-40% of the electorate outside of the income tax system.
  2. Why is home-ownership favored so heavily over renting?  Is there something intrinsically better about owning?  Or is it that the type of people who traditionally buy houses are "better" for a community?  And that leads to the question...why should the government incentivize any sort of living arrangement, renting or ownership?
  3. Let's assume that cheap-and-easy credit made the run-up in housing prices possible, at least in part. And, this run-up in value has been bad in the long run, because it turns out to be kind of bubbly.  (Okay, really bubbly.)  Now consider the price of a university education, where price increases have been running roughly double inflation.  Is cheap credit to blame for the price inflation there?  Does the availability of credit diminish the price sensitivity to any particular asset, because it defers the pain?  And does it also diminish the relative value of a college degree?  I'm thinking yes, but I want to know what other people think.
I'm serious about these questions.  If you don't normally comment, I wish you would here.  I'd really like to start a dialogue about these things.  Thanks!

UPDATE:  Instalanche!  My first.  Welcome, take a look around, and thanks for the comments!

59 comments:

Cyrus O'Rourke said...

I'm tired of hearing about the "right to vote", sorry, not in the constitution. Check out how the original presidents were elected. So that leads me to this,maybe only landowners or those who pay taxes or how about this... those who DON'T collect welfare are eligible to vote. My optimism is coming back.....always does when I get radical. The biggest scam in the history of taxes is payroll deductions. Can't believe how many people don't know how much they earn. All they look at is the "net" on the paycheck not the "gross". They also don't realize that the FICA figure is only 1/2, the employer pays the other half so that deduction is hidden. Take away the payroll deduction, give everyone 100% of the money that they earn and make them go to the post office every month and write out a check for all of those deductions......won't be long and you'll see tax reform (the next tea party).

I wish I were renting every time I have to fix something on my house.

College education, there's another scam. Run the price up so high that nobody can afford it then the government has to step in to save us. That's what those institutions of higher learning really want. Teach your children a work ethic that includes showin up every day, payin there own way, and being honest in all of their transactions and you won't have to worry about how much or how little "higher education" that they have they will do great.

Anonymous said...

Remember "No taxation without representation" ? We had a revolution based upon that concept. I think that "No representation without taxation" is also a good concept. I don't like people who are not personally obligated to pay for government expenses to have a say in what those expenses are. Perhaps someone with more time on their hands than I can take this concept and move it forward.

tim maguire said...

Congratulations on the Instalanche!

Owners are better than renters because renters are more transient, they don't have as much of a stake in their community, and they are less stable. Society is better off with more owners.

Yes, there is a direct connection between the availability of financial aid and college costs. As government makes money more available to students and their families, education costs go up. All that extra money is essentially siphoned off by the University with little or no benefit to the student or the student's family.

rateoforange said...

No representation without taxation? I can get behind that.

Synova said...

Everyone should pay some income tax... if you have an income you have income tax.

It doesn't have to be a lot. Just something. Not because it's patriotic, but because everyone ought to *participate*.

As for home ownership...

I think that home ownership could be a very good thing but the *incentive* shouldn't be home ownership so much as incentive to stay in the home you buy. This isn't always possible when people move for jobs, but the stabilizing and community building aspects of home ownership are destroyed if people don't live in the same house long enough to know the neighbor, the neighbor's kids, the neighbor's grandkids, etc.

The incentives *now* for home ownership is to always owe the bank the largest possible amount so that you always, no matter what, have a huge chunk of interest to deduct on your taxes. Homes aren't something to live in, they're investments... people are responding to incentives to get the largest house possible and to treat it as a temporary thing, that always belongs to the bank, never to you.

Anonymous said...

why work if someone else will, why worry about how much someone else pays in taxes if you don't pay. Why have a flat tax, because everyone pays something. Will it matter,I doubt it as the economy is tanking and printing money and giving it to big fat cats won't help. Pray for our Country and our kids as we did a terrible job leaving them this mess..

Anonymous said...

Being a veteran, personally prefer Heinlein's "have to serve the country before you get to vote" theory, in other words you have to earn your sovereign franchise. Nothing given is ever respected as much as something earned. I do like the idea that if you don't pay for the government to run, you should not have any say in what the government does.

Pete said...

Everybody should pay. Even if it's only a $100. We all have a stake in the size of fed.gov and letting some opt in, by voting, while contributing nothing is corrosive to the body politic.

buzz harsher said...

Taxation, tho', is not the only way that a citizen pays his "dues," and, thereby, becomes morally eligible to vote. Military service, police service, etc., seem like perfectly reasonable ways to be Citizens.

Anonymous said...

People who have representation even though they pay no taxes serve to dilute the representation of those who do pay taxes. If you have enough such people, the representation of the legitimate taxpayers is materially reduces, approaching the state of no effective representation at all. This would be tyranny, and is manifestly unjust.

Anonymous said...

Buzz,

In Heinlein's world, citizenship had to be earned. Non-citizens were still taxpayers. I don't think that this is the best answer, but I believe there are better solutions than what we currently experience.

Matthew said...

The bubble in homes and college education have many similarities related to cheap credit, consumer demand, and government support. And just as with homes, there are people with more student debt than they can ever hope to pay off.

Healthcare is another area which fits the bill. Although it lacks cheap credit, government subsidizes more than 50% of healthcare costs.

Bear said...

1. It is good public policy to have everyone pay some of any sort of tax there is. It need not be an enormous amount.

In the same way as sales tax is passed on transparently to the buyer by the seller 99% of the time -- retail receipts show the sales tax paid -- I'd advocate passing property taxes on to renters. Otherwise, we have situations where locales with high concentrations of transient occupants (e.g. college towns) have an easy time raising property taxes to pay for dubious "public services" that seem to involve council members' brothers-in-law's contracting companies...

2. Prudent home ownership is favored over renting because it saves society money in the long term. Traditionally, by the time someone retired, they owned a home. Voila, far fewer penniless seniors with no roofs over their heads. In the meantime, home equity loans (that we used to call 2nd Mortgages and frown on using in most cases) could be used to carry people through rough patches.

This does fall apart if people use their home equity as an ATM, take out time-bomb loans, and never plan to actually own their homes outright. However, prudent home ownership saves society from the costs of destitute retirees, and bankrupt families.

As a side-benefit, homeowners have a vested interest in the well-being of their homes, neighborhoods, and communities. It's no accident that communities of renters tend to be noisier, dirtier, with higher crime rates, etc. than communities of those boring suburban homeowners that some like to mock.

3. Cheap credit has definitely raised the price of a college education. The tuition bubble will burst if and when an alternative to the current 5-year party plan for an "education" becomes accepted.

As far as the cheapening of the value of a bachelor's degree, I'm not sure that credit is directly responsible. It may be indirectly responsible, though, because the customer is insulated from the pain of paying for the purchase. I have little doubt that students who saw a real connection between the money they're spending and the education they receive would put forth more effort, and demand a higher-quality education.

Anonymous said...

1. Absolutely everybody should pay some tax, because otherwise you're voting for politicians who make promises to you that only involve other people's money. Get that to 50.1% of the electorate and you have a serious problem. This was a MAJOR failure of the Bush tax structure.
2. Owning is better than renting IF you are going to stay for a while, because owners will care better for their own property than renters for somebody elses, and owners can typically accumulate some wealth in their home over time. Renters cannot.
3. College is a product and like every other product it has a price that people are willing to pay. Think about classic supply/demand curves from Econ 101. When the government steps in to subsidize the education to make it more "affordable" the universities raise their tuition to capture the subsidy, so that everybody pays the same amount that they did before. After all, they were willing to pay it before, and they're willing to pay it now. The subsidies just enrich the university while eliminating the possibility of affording college without them. Classic trap - by trying to munge the market for education, the government actually makes it less affordable and makes you depend on them to be able to get to it. Does this lower the value of the education? No - there's other reasons why college educations tend to be less valued, but there's not room here to enumerate.

AK said...

Everyone should pay some tax, even if it's tiny compared to the services they receive. That way there's some understanding that government services cost money. Once people are used to the idea of getting $5,000 in government services for free, what's to stop them from asking for $10,000 in free services? But even if they have to chip in at least something, they'll understand that government swag isn't really free.

Home ownership is desirable because it's a form of savings. People in this country don't save enough. If they rent, they're just going to spend the extra money on consumption. Ideally, couples will buy large homes when they have kids, build equity in the home as the children grow, and when the children are grown, the parents can move into a smaller home and pocket the savings.

Cheryl said...

To everyone who's commented...Thanks! Regarding my first question, I think everyone ought to pay taxes, something, ANYTHING. Why would it be okay NOT to pay taxes? And no one will take the discussion back to a basic level like this. Instead, it's all "cut this" and "rebate that" and "raise theirs." Doesn't the nature of the debate need to change?

Dan Hamilton said...

What we are seeing is the classic proble. The people have learned that they can vote themselves bread and circuses. Since they don't pay taxes they don't care about the price.

The democrats will see to it that this group grows larger. It gives the democrats lots of power. to bad it will destroy the country.

matt said...

Imagine if we had to pay our taxes with our time instead of cash. Would anyone argue that some of us should give less time and others more time to support the government?

1929redux said...

Interesting how many people have referred to Robert Heinlein's world view as expressed in Starship Troopers. If your only introduction to this story is from the cheesy movie (with Herr Doogie Howser as the bug interrogator) then you really need to check out the original novel. A lot to think about regarding service, voting and citizenship.

Cheryl said...

Also, my home ownership question...I need to clarify. What if the terms of the mortgage are such that the "owner" has virtually no chance of ever really owning the home, say in the case of a balloon or a 125% mortgage? Why is that better than renting? Is it only better in a sharply-increasing market?

Bear said...

What if the terms of the mortgage are such that the "owner" has virtually no chance of ever really owning the home, say in the case of a balloon or a 125% mortgage? Why is that better than renting?

I'm not sure it isn't renting.

I still think it's better, because we go back to the first question.

The home "owner" still pays property taxes directly.

Still, the strategy with this sort of mortgage is simple:

1. Home prices are rising.
2. I can't afford a home with traditional terms right now.
3. By the time I save up a 20% down payment, the house will cost twice as much.
4. I decide that the risk of not purchasing a home right now (due to increasing prices) is greater than the risk of purchasing a home right now with these terms.

So yes, it only makes sense in a rising market. The risk is that home prices will not rise, or will fall, which they usually don't, but occasionally do, and dramatically.

I knew a young couple who bought a small place on the beach in San Diego in 1998 for under $200K. I don't know what sort of mortgage they got, but it doesn't matter. They still came out ahead, even after the big crash. WAY ahead.

There is a time and place when and where it makes sense to buy on these terms. Many people benefited. This is why I don't necessarily want to see credit over-restricted -- not every borrower is out to abuse their ability to borrow!

Anonymous said...

Owners are better than renters because renters are more transient, they don't have as much of a stake in their community, and they are less stable.

Not always. Prior to moving this past March, I lived in the previous complex for seventeen years. And I only moved out because some outfit in southern CA bought the place and secured some sort of tax break to remodel the place, and in the process, imposed an income limit. As expected, I exceeded it by a fair amount.

Anonymous said...

Owning vs renting? Have you ever washed your rental car?

Anonymous said...

I don't think it is all that obvious that everyone should pay (income) taxes, however small an amount.

The reason is that if everyone pays an amount (no matter how small) everyone will feel entitled to something in return from the government.

It works the other way around. If every receives money/entitlements from the government, however small an amount, everyone will feel a lot better paying taxes (even though they pay much more than they receive).

Scandinavian Social Democrats understood this. That's why everyone pays taxes to the government, even on entitlements FROM the government, and 2/3rds of the population receives entitlements of some sort (more or less significant, though usually gravitating towards significant) or is employed by the government.

~ TerminalFrost

http://terminalfrost.wordpress.com/

Steve said...

Just to throw a monkey wrench into the equation - Consider involuntary servitude and taxes. The differing rates dictate how much service you owe the government. Assuming that there are 2000 hours to be worked each year, for a person that is in the 10% rate, they only have to work 200 hours to pay their taxes. For someone at the proposed 45% rate, that would mean they have to work 900 hours to pay their debt to the government.
Seems to me that the 13th Amendment prohibits this sort of thing.

Anonymous said...

I think you know the answers already.

Taxes
Flat tax is the only answer for income taxes. Every citizen must know that they pay their share and they must know how much it is. (google oil curse) Our system obfuscates all of that. Most poor saps don't realize that they already pay a share, thru the flat tax that is FICA. People should have a stake in fractional changes in the income tax rate and they should know what the rate is. What is your tax rate?

Homes
All economic studies show that the interest/tax deduction trade-off benefits renting over home ownership, adjusting for asset appreciation. The mortgage interest deduction only obfuscates the actual tax rate (see above) Homes are not the only asset that appreciates and perhaps government incentives to invest in one asset class over another are wrong. Middle class and realtor panic over elimination of the home mortgage deduction is the biggest barrier to enacting a flat tax.

College Education
The cost far surpasses the value and it has been buoyed up by credit and inconsistently applied tuition charges (e.g. out of state admissions preference and financial aid for the disadvantaged). Middle class parents will pay/borrow anything to make sure their kids attend college. Lack of credit would make institutions scale back their prices to meet reduced demand. A BA is barely equivalent to a high school diploma of yore...let's fix that problem first.

nuff said...you knew those were the answers...didn't you

sorry about the anonymous, i have no blogger accounts

1929redux said...

You should not be allowed to vote unless you pay income taxes or have reached retirement age. Your vote is, in effect, your input about the allocation of the nation's resources. If you have no contribution to those resources, you have no stake in their allocation. Universal health care? Sure why not, it doesn't matter what it costs. Let's have increased welfare benefits, daycare subsidies and what the heck more military spending too (to keep our republican friends happy)....

The key point is NOT that people should be denied the vote. Everyone should pay taxes. And sorry, but payroll taxes don't count.

Duncan said...

I can think of at least one group of over 500,000 citizens that should not pay any federal income taxes. They are the residents of Washington D.C., who have no representation in Congress(thus no say in how their taxes are spent) yet pay income taxes like the rest of the county.

Hucbald said...

1) Misses the point: Income taxes are immoral because they are theft - robbing Peter to pay Paul. Property taxes are also immoral, because if the government can seize your property for refusing to give in to their extortion demands, then you don't own the property, the government does, and they just allow you to use it (Which is false, as you own the property, and the government is stealing it). The only things governments can legitimately tax are transactions, nothing else (Deficit spending by governments is also immoral, as is non-real currency... the list is nigh endless now).

2) Home ownership should be the prerequisite for voter eligibility. Read Milton Friedman: "Nobody takes care of property better than the owner does."

3) Irrelevant. Universities are cesspools of leftism. A motivated person can educate themselves faster, better, and for free at a public library... and I have a masters degree. Entrepreneurship is the way to go. Jobs are for losers, even if they pay $500,000.00 per annum. There is no such thing as a "good job."

Our public school system is designed to teach losers what they need to know to get a job and pay income taxes, which is why there are no business classes in them anymore. The self-employed can make tons of money and write off much of it in expenses (Though, they shouldn't have to, of course).

The US has been FUBAR since FDR, and everybody just blindly buys into the immoralities as though they were givens. It is very far beyond merely ridiculous, it is sinful.

Figure it out, or, alternately, don't.

Joe said...

Count me among those who believe everyone should pay some income tax; perhaps a minimum of 5%. At the very least, one shouldn't be able to get a bigger "refund" than they paid in.

Home ownership is way overrated. I long ago figured out that by renting, I can often save money at a much higher rate than anyone with a comparable income. Moreover, as my kids are now leaving, I'm not left with a massive, empty house that I have to heat and pay property taxes on.

One thing people forget is that historically house prices increase at the rate of inflation. Given all the overhead of owning a house, this is a lousy investment. (I live in a low property tax state, but my father bought a house in upstate New York in 1964 for $40,000. Sold it in the late 90s for $150,000. His property taxes the last year were $4000. Tell me how that was a good "investment.")

(A colleague just bought a very nice house; he pays more in things that have nothing to do with house appreciation and interest than I pay in my rent. I admittedly have very low rent, but still....)

Home ownership does reduce mobility, but I'm not sure that is a good thing. It handcuffs people to jobs and makes them more easily exploitable. It also closed off communities, which can be nice up to a point where it becomes like the Twilight Zone (the house I owned once turned out to be such a place.)

Cheryl said...

To anonymous above who thought I knew the answers already...You give me a lot of credit! I know what I think about them. The problem is, no one seems to be addressing these questions at all, so I figure there must be something I'm missing.

Apparently, on the taxes thing I really haven't missed anything. But then why won't anyone actually say this out loud?

Senator Smoot said...

Yes, everyone should pay something. But not through payroll tax; how about an itemized bill once a year, showing the proportion of government expenditures. Preferably a month or two before election time.

RiverRunners said...

I absolutely agree that everyone should pay income taxes. It is too easy for the liberal political elite to gain power by promising the bottom 50% of income earners "free" benefits that will be paid for by increasing taxes on the rich. If someone else is going to pay for these goodies, it isn't surprising that so many people vote for big government liberals. We need everyone to share responsibility for funding government. That's the only way to maintain the incentive to keep government spending under control. The largest consumers of government services are predominantly those who provide the least amount of support for those services.

As to college education and home ownership, one of the fundamental tenets of economics is that when you subsidize the consumption of a good or service, you will get increased consumption of that good or service. The mortgage interest tax deduction operates as a subsidy (which is the intent of the deduction) and leads to a greater number of people buying houses than would otherwise. There are also FHA low interest loans and CRA loans to people with bad credit. All of those programs lead to more people buying houses which is the same thing as saying that they increase demand. Pursuant to the law of demand, the price of homes goes up. Higher education is one of the most heavily subsidized services in our economy. Student loan programs, grant programs, financial aid etc. all serve to increase the demand for college education and, in turn, cause the price to go up. Believe me, if those subsidies were to disappear, the price of tuition would go down immediately. You wouldn't have tenured professors teaching only 6 hours of class a week and huge bureaucracies full of deans of multiculturalism and the like. The catch 22 is that we want people to have access to higher education but our subsidies cause the price of that education to go through the roof.

1929redux said...

Aren't we all kind of preaching to the choir here? We all seem to think everyone should pay some level of taxes. I would really like to see a well reasoned, thought out post as to why it is OK that 35-40% of the population does NOT pay income taxes. Is there such an argument to be made? If not, how do we explain the current state of affairs?

Anonymous said...

Back when I was in college I was in a group that charged $160 yearly dues, which is under $20/month of the academic year. At the end of the year the members were reimbursed whatever was not spent, less any seed money needed for the next year.

Everyone participated in events, worked hard to get their "pet" events approved, and knew that a dollar wasted on something silly was a dollar less they would see at the end of the year.

Cheryl said...

1929 redux...yes, we are, but it is interesting that the feeling is pretty strong on this. Only one person (terminal frost, above) thinks otherwise. And I'm interested in hearing more about that. Not to change my mind but maybe to get a bigger picture.

I'm trying to get out of my very comfortable echo chamber but it isn't easy...

Robert Arvanitis said...

Taxes: Most of the comments agree that everyone should pay taxes. One person wrongly claimed paying taxes created a feeling of "entitlement." The reverse is true, as insurers know. That's why they demand deductibles and coinsurance participations, to keep beneficiaries involved in the cost.

Cheap credit: Of course bank regulation and Fed rates affect liquidity and availability of credit. But a big cause of the easy money up until 2006 was the excess of investible funds and the dearth of good investments. That's why dear Wall St. fabricated so many BAD investments.

And to clarify - college costs are driven far more by government subsidy than by easy credit.

Anonymous said...

If you really want people to pay more attention to how much money is taken in taxes then we need to eliminate the automatic deduction from payroll checks and have people send in separate payments directly to the goverment.

File this under you don't miss what you never had. Once people get their hands on THEIR OWN MONEY they will pay a lot more attention to where it goes.

Dave said...

Are 30%-40% outside the income tax system? If you consider the payroll tax a tax then I think everyone pays. Does the gas tax count?

Is it good public policy to have no one pay taxes? Taxes assume that someone besides yourself is better equipped to spend your money. I pay for my own postage, why not for other services?

Hopefully the college degree becomes worthless ASAP. It is also an intermediary between the person and the results they are after. Someone else decides what you need to know besides you.

Blogs are good. They help people find out information for themselves without having to trust the newspaper.

I guess these positions are too extreme. Where's my bailout?

Anonymous said...

one little parry for "1929 redux"

"Everyone should pay taxes." "And sorry, but payroll taxes don't count."

Sorry???... why don't payroll taxes count? They go into the general fund. Withholding has always exceeded payouts and the rest goes to BS and hides the real impact of our income tax/spending system. There is no "lockbox". Why does Obama want to increase FICA collections? Because it's just part of an overall income tax hike. Don't sell the "pay no tax" working poor guys short. They pay a share, it's just "hidden".

anon...again

A Jacksonian said...

The concept at the founding was an equal amount per person, handed out to the States to collect so as to provide a check upon the federal government by the States holding purse strings. North Carolina would test that as a States Rights issue, and was informed that it did, indeed, have to pay up as they had representatives in the federal government. Interesting to think that the US would come close to breaking up over the issue. Still, that most basic of ideas, that each owes a directly equal amount and that State government moderated collection, was one that restricted the power of he federal government to raise funds. That was an intentional design limitation in the Constitution and took the Progressives to convince the populace to give the federal government more power so that it could directly and 'progressively' tax people... with the promise that such would never go beyond the top 5%.

The design flaws in the Constitution were also pointed out during its ratification process, and too many discount the Anti-Federalists without examining their arguments. Not all, indeed most, were against a stronger central government, but had problems with the design and layout of powers and some notable lack of checks and balances. Cato No.6 warns about the ability of government to create excuses for taxation which, it must be remembered, were in times when only property owners could vote:

In what manner then will you be eased, if the expences of government are to be raised solely out of the commerce of this country; do you not readily apprehend the fallacy of this argument. But government will find, that to press so heavily on commerce will not do, and therefore must have recourse to other objects; these will be a capitation or poll-tax, window lights, &c. &c. And a long train of impositions which their ingenuity will suggest; but will you submit to be numbered like the slaves of an arbitrary despot; and what will be your reflections when the tax-master thunders at your door for the duty on that light which is the bounty of heaven. It will be the policy of the great landholders who will chiefly compose this senate, and perhaps a majority of this house of representatives, to keep their lands free from taxes; and this is confirmed by the failure of every attempt to lay a land-tax in this state; hence recourse must and will be had to the sources I mentioned before. The burdens on you will be insupportable—your complaints will be inefficacious—this will beget public disturbances, and I will venture to predict, without the spirit of prophecy, that you and the government, if it is adopted, will one day be at issue on this point. The force of government will be exerted, this will call for an increase of revenue, and will add fuel to the fire. The result will be, that either you will revolve to some other form, or that government will give peace to the country, by destroying the opposition. If government therefore can, notwithstanding every opposition, raise a revenue on such things as are odious and burdensome to you, they can do any thing.

The more general point is well taken - that the powers handed to government were vast in comparison to the checks upon it. Federal Farmer No.3 would also point this out in a well reasoned criticism of the Constitution of not exhibiting enough federalism to protect the people:

Should the general government think it politic, as some administrations (if not all) probably will, to look for a support in a system of influence, the government will take every occasion to multiply laws, and officers to execute them, considering these as so many necessary props for its own support. Should this system of policy be adopted, taxes more productive than the impost duties will, probably, be wanted to support the government, and to discharge foreign demands, without leaving any thing for the domestic creditors. The internal sources of taxation then must be called into operation, and internal tax laws and federal assessors and collectors spread over this immense country. All these circumstances considered, is it wise, prudent, or safe, to vest the powers of laying and collecting internal taxes in the general government, while imperfectly organized and inadequate; and to trust to amending it hereafter, and making it adequate to this purpose? It is not only unsafe but absurd to lodge power in a government before it is fitted to receive it? It is confessed that this power and representation ought to go together. Why give the power first? Why give the power to the few, who, when possessed of it, may have address enough to prevent the increase of representation? Why not keep the power, and, when necessary, amend the constitution, and add to its other parts this power, and a proper increase of representation at the same time? Then men who may want the power will be under strong inducements to let in the people, by their representatives, into the government, to hold their due proportion of this power. If a proper representation be impracticable, then we shall see this power resting in the states, where it at present ought to be, and not inconsiderately given up.

Again taken for its time, the concept of the amount of power given to the federal side to do such things as the government would wish to do beyond necessity was one that left the people at the peril of it. Centinal No.8, while being a bit on the bombastic side and somewhat into conspiracy theories, did have a salient point or two to make:

But as it is by comparison only that men estimate the value of any good, they are not sensible of the worth of those blessings they enjoy, until they are deprived of them; hence from ignorance of the horrors of slavery, nations, that have been in possession of that rarest of blessings, liberty, have so easily parted with it: when groaning under the yoke of tyranny what perils would they not encounter, what consideration would they not give to regain the inestimable jewel they had lost; but the jealousy of despotism guards every avenue to freedom, and confirms its empire at the expence of the devoted people, whose property is made instrumental to their misery, for the rapacious hand of power seizes upon every thing; dispair presently succeeds, and every noble faculty of the mind being depressed, and all motive to industry and exertion being removed, the people are adapted to the nature of government, and drag out a listless existence.

If ever America should be enslaved it will be from this cause, that they are not sensible of their peculiar felicity, that they are not aware of the value of the heavenly boon, committed to their care and protection, and if the present conspiracy fails, as I have no doubt will be the case, it will be the triumph of reason and philosophy, as these United States have never felt the iron hand of power, or experienced the wretchedness of slavery.


When we hear the 'good' that government 'should do', we forget the basic things given to it which it must do to protect our liberty and freedom. Owning property, of any sorty, is an exercise of liberty and prerequisite for that is equal administration of the laws for all people, favoring none. The citizenry is thus protected against the power of government by being able to see if it is, indeed, managing equality of administration. The ability to have property without the threat of government taking it is a prime right, stated in the Constitution, yet also put in peril by those wishing to expand government. The ability *to own* anything is an exercise of liberty and a prime exercise in leading one's own life to seek the minimal amount of government say-so in your own, private affairs. Ownership requires responsibilty and stewardship, and those two things were considered prime movers as to citizenship and the franchise right - if you owned property you had to care for it, administer it and ensure that it was not ill used. Additionally ownership was not only an investment in yourself and your family, but a positive support of society that would continue to ensure the benefit of liberty so that others could likewise own property. Defense of property gains the right to protect it via arms from those who would take it unjustly, and is a contingent right to being free. All people have the right to self-defense in the law of nature and no law of man may remove that as to do so is enslaving the individual.

One of our prime understandings before the Declaration comes in the year of it from another writer, who would hand us this:

Some writers have so confounded society with government,
as to leave little or no distinction between them;
whereas they are not only different, but have different origins.
Society is produced by our wants, and government by our wickedness;
the former promotes our POSITIVELY by uniting our affections,
the latter NEGATIVELY by restraining our vices. The one
encourages intercourse, the other creates distinctions.
The first a patron, the last a punisher.


That, of course, is Tom Paine in the aptly named Common Sense which had a far reading for that era. It is this basic understanding that has become clouded in the modern age - we now think government should be given some of the people's positive rights and liberties, so as to diminish the people and empower government, although it is usually cast in just the opposite terms. Every time one hears of the 'good things' that government 'should do', one must ask: is this something you really want to hand to a punisher and holder of our negative liberties?

Hamilton in Federalist No. 26 would try to offer assurances, but there are some problems with them as the time required to erode basic protections can go beyond a lifetime if a political ideology is set to do so, and here talking specifically about subverting military forces but the larger point is well taken:

Schemes to subvert the liberties of a great community require time to mature them for execution. An army, so large as seriously to menace those liberties, could only be formed by progressive augmentations; which would suppose not merely a temporary combination between the legislature and executive, but a continued conspiracy for a series of time. Is it probable that such a combination would exist at all? Is it probable that it would be persevered in, and transmitted along through all the successive variations in a representative body, which biennial elections would naturally produce in both houses? Is it presumable that every man the instant he took his seat in the national Senate or House of Representatives would commence a traitor to his constituents and to his country? Can it be supposed that there would not be found one man discerning enough to detect so atrocious a conspiracy, or bold or honest enough to apprise his constituents of their danger? If such presumptions can fairly be made, there ought at once to be an end of all delegated authority. The people should resolve to recall all the powers they have heretofore parted with out of their own hands, and to divide themselves into as many States as there are counties in order that they may be able to manage their own concerns in person.

His solution is radical, but then it was a time of radical thought - if you see government being subverted to the wishes of the few, the powerful, then the solution is to break it up and start from the smallest possible level and rebuild representative democracy. For the only protector of your liberty, in the end, is you.

Not government.

Government is a necessary evil to have, but it need not be evil in its enaction. When it does what it is given to do and stringently kept to its tasks, it is a benefit to all. Only when you give it more in the way of power and liberty does it become a threat to all of us.

Anonymous said...

One solution would be to end payroll taxes altogether (i.e., get rid of the social security and medicare taxes) and replace them with a simplified flat rate tax. If you want to keep the same distribution of the tax burden we have today, you could have two rates (I'm just guessing at the percentages here): say 15% of all income up to $XXX and 25% of all income over XXX. Maybe you'd need higher percentages to generate the same overall revenues, I don't know.

But the result would be that everyone would be in the same soup. Everyone would pay income taxes, everyone would bear the burden of government.

Another benefit would be to stimulate employment. Taxing labor surely depresses employment rates.

Anonymous said...

1. Yes. Every person should feel the bite of taxation within the system we have today. I would favor a system of flat taxation; say 12% with no deductions whatsoever. Start the tax ticker after the first $15,000 or so. Everyone is in the same boat and all who make more than $15,000 pay a fair share.

A better system, however, would be to simply levy a tax on the states according to its proportional share of the population. So, Oregon with approximately 1% of the US population would pay 1% of the levied taxes. Let the states figure out how to levy its citizens that amount. This would lessen the desire for the states to beg the federal government for largess. And it shows exactly how ridiculous it is for the states to do so.

2. Homeownership is not favored over renting. Economically, the renter receives
the benefit of the deduction through lower rent, at least where there is competition for renters.

Second, your assumption is wrong. The deduction you are evaluating does not favor homeownership. It favors borrowing money against real property. Buying a home outright garners no deduction. You must pay interest on a home loan to obtain the right to the deduction. This creates odd situations like the older couple who pay off their home loan but who decide that they can make more money by investing, even after inflation, so they take out a new loan, obtain a new deduction and invest the money. Intended consequences.

3, It appears that cheap, easy, and irresponsible credit, local building restrictions, like urban growth boundaries, and urban service boundaries and other like restrictions, coupled with asset inflation, loose monetary policy, and congresses myriad failures created the housing collapse.

As for college tuition inflation, cheap credit likely did have some role but not the major contributing role (there may be no majority culprit). The real culprit here is a perfect confluence of things. The federal government provides so much assistance directly to students, and universities, as well as indirect payments and subsidies. This combined with easy credit to students, parents, and etc. diminishes the pricing sensitivity. Another problem is that most students are young and inexperienced and simply assume they will be able to quickly pay back the loans with their first job. Parents feel pressure to ensure their child attends and graduates from university since they are constantly barraged by studies showing how much more the university education is worth. Also the third party payor issue has a significant role since the state, the federal government, parents or relatives pay for so many students tuition.

I do not think that easy credit is the culprit but when combined with the other things listed it creates a perfect storm for education tuition and cost inflation.


Since I don’t think the above was worth .02 cents I will give it to you today for the fantastic price of free. And, you know, free is a very good price.

Mark Sherman

Anonymous said...

1) First globalization affected manufacturing. Then, services. Next, governments.

Pretty soon, governments will have to compete with each other on taxes, in order to attract the best workforce. That will be good.

2) I HATE the home-ownership cultists. Residential Real Estate is just an asset class, just like stocks, wine, art, land, or gold are. Yet, no one bugs you about how you 'must own stocks' or 'must invest in art'. It is downright annoying. Furthermore, now that the global economy will require people to move a lot if they want to advance, owning a home is incompatible with that.

3) YES. A college education is far more expensive than the market return that it gives in the workforce. Salaries have not risen in 8 years, but tuition has. How long before enrollment falls? Note how academic rigor has also been dropping, and the market has responded by not raising entry-level salaries.

Here, to, globalization is correcting the bloated cost of US universities. Students in China and India can do the same jobs, via an education that cost a lot less.

ZipperTPartee said...

Ahhh I love the smell of luzianne in the morning. Cheryl I do believe you have plugged into a base of potential partiers (T). My new cause thus, my new handle. Thank you comrade (just prepping for the obama days to come).

ZipperTPartee said...

I love the word verification words. I would like to make up meanings for a lot of them just so I can say them. Sorry for the confusion on the names, just didn't think cyrus was conveying enough meaning.

Mike from Seattle said...

1. All citizens should be required to pay taxes, even if just a small amount. The more the federal government spends, the more each citizen should pay, though the increase need not be proportional.

2. All tax deductions should be eliminated. The U.S. tax code should be an easy-to-understand document no more than 10 pages long.

3. Student loans should be no cheaper or easier to obtain than other loans, and no easier to escape from. It's reasonable to think that easy-to-obtain loans keep many people in college, especially grad school, for longer than makes economic sense, and encourage people to attend colleges that charge fees out of proportion to the value of the education they deliver.

Zanzibar Buck-Buck McFate said...

Wow! It’s like my three favorite contrarian policies in one convenient blog post!

1) A democracy begins to stop working when the percentage of voters paying taxes drops near 50%. One of the biggest mistakes of the Bush tax cuts was to remove even more taxpayers from the roles as a trade off in order to lower total tax burden. A flat tax or a consumption-based sales tax would both be superior.

< 50% tax payers = bread and circuses.

2) The _cost_ of a college education is its value plus the subsidies (in terms of loans and grants). The current system has no break in the subsidy feedback loop, as higher cost begets high subsidy begets high cost. The value of the education is probably over-rated as well, at least in monetary terms, and an unnecessary diversion from reality for many, if not the majority. I can see why young adults would WANT to go to college, but I can't see why taxpayers should want to PAY for their college.

3) Home ownership correlates with many desirable traits (low crime, paying taxes, earning income, marriage, kids, etc.). However, the mistake has been to think that home ownership _causes_ these traits, rather than that persons with these traits are more likely to be able to afford and own homes. It's like the self-esteem movement, and it is working just as well. Home ownership after working, saving, and creating some stability in your life is a great thing. Home ownership prior to developing those skills is just asking for foreclosure.

Anonymous said...

People who make little or no money already pay no income taxes, and we could eliminate all income taxes on people who make less than about 40k/year without really affecting tax revenues. That's what we should do, because while the notion that "everyone should pay, because it's fair" is a quaint one, it also belies reality, because people who contribute nothing or next to nothing should not be encouraged to feel as though their taxes are a big part of government funding.

It's like the problem with Social Security: oldsters say "it's my money; I paid the system for years, so I'm entitled to it". Quaint, but unfair, because actually they're collecting not on what they paid but on what young workers are paying in, and those youngsters have precious little chance of a similar-sized payout.

No taxes from people who don't make enough to pay 'em. Let 'em know they aren't paying so that they know who really pays the bills around here. Then we can tell 'em to shut up when they whine about getting their "fair share".

Anonymous said...

Absolutely - everyone with an income should pay some level of taxes on that income. Conversely, one who does NOT pay taxes should NOT recieve a tax rebate or refund.

As for homeownership...it has historically been one of the best ways for Americans to build wealth. By incenting homeownership, the goal would be to move more people to self-sufficiency and off government welfare programs, etc. That is why Freddie and Fannie were created. But this all obviously ignore the concept that some people just should not be homeowners...or can't make good homebuying decisions.

Yes, cheap credit devalues college degrees...as does the huge number of colleges with low or no admittance criteria other than an ability to pay (or borrow). I am seeing college graduates out there that are less ready for the workplace, have less background knowledge and ability, than some high school graduates.

The fact that these people have college degrees significantly lowers the value of the degree when it comes to hiring. You can not assume any level of ability or knowledge just based on the fact they have a degree.

Anonymous said...

"Then we can tell 'em to shut up when they whine about getting their "fair share"."

er...how will you do that? Their vote carries as much weight as yours, you know.

You need to propose solutions that have a basis in reality.

Anonymous said...

Goodness knows, with the economic situation now (in perpituity, quite possibly), I'll never see the tens of thousands of dollars I have personally contributed, to date, to the social security system. Talk about taxation without representation. I won't be surprised when that bundle of cash is raided to bail out the bone-head company of the day. I'm trying to open a new small business in NJ, no less (visualize the salmon swimming upstream). I am paying the way for people who aren't contributing, and I feel like I'm being penalized every step of the way.

Anonymous said...

One of our unseen threats is the idea of withheld taxes". People are aware of how much they get BACK, but have no idea how much they actually PAY. When it comes to people's tax bills, "out of sight, out of mind" truly applies.
All income taxes should be paid in one lump sum on April 15...and then hold the election on April 16.

Nelson said...

per zanzibar buck-buck mcfate:
Home ownership correlates with many desirable traits (low crime, paying taxes, earning income, marriage, kids, etc.). However, the mistake has been to think that home ownership _causes_ these traits, rather than that persons with these traits are more likely to be able to afford and own homes. It's like the self-esteem movement, and it is working just as well. Home ownership after working, saving, and creating some stability in your life is a great thing. Home ownership prior to developing those skills is just asking for foreclosure.

Right on! That's what I wanted to say. Isn't that something that should be evident to anyone looking at the situation?

John D said...

I would prefer the Fairtax.

There's some room for tweaking there. But basically it is a consumption tax. No exemptions for anything with a "prebate" check to everyone in the amount of the average amount that a family would pay for groceries etc.

That way everybody pays, everybody has an interest in keeping the politicians from arbitrarily raising the rate, and those who spend more pay more.

Of course there is a lot of resistance to it mostly by those who would lose their exemptions or want to use the tax system to benefit their friends and punish their enemies. (Just about everyone in politics)

But it would get government back to where they are working on important things and not spending their time on figuring out a way to help their donors keep from paying taxes.

Jack said...

Yes, everyone should pay taxes so they are aware of the cost of government, but why should these taxes be on income? Since taxes are a negative incentive that tends to reduce the taxed activity, why tax productive behavior?

Why not tax transactions as proposed by our founders? The FairTax is a proposal pending in Congress, H-25/S-1025, that eliminates the income taxes, payroll taxes, inheritance and gift taxes and replaces them all with a single consumption tax on all goods and services. Under the FairTax, if you choose, you may file to receive a "Household Consumption Allowance" that will prepay the amount of taxes due on necessities up to the poverty level based on the number of lawful residents in each household. The tax would still be collected when goods are purchased at retail.

This tax system was developed and research on the effects of implementation were funded by business leaders, not politicians, using private funding. Check it out at fairtax.org.

As to home ownership, I hate to be cynical, but research the lobbying organizations of the National Association of Realtors and the National Homebuilder's Association. Combine these forces with mortgage lenders and real estate lawyers, and you will clearly see why home ownership has been heavily subsidized by tax and spending policies. As proposed, the FairTax eliminates Congress's ability to favor various groups by manipulating the tax code.

Honest Republican said...

1 We all pay taxes. True, 40% may not pay Federal Income Tax, but sales tax, property tax (especially on rentals) and SS & Mcare are regressive taxes that pundits conviently forget. Overall during the Bush years, I'd guesstimate that we all paid the same level of taxes.
2 Renting is liberating to up and coming folks and allows an ecomomy to better respond to changing job demands. Ownership stifles personal development, but it does improve the immediate neighborhood.
3 College education inflation closely tracks raises in a professional's pay (compare professor to dentist or CPA over time). It's just that compared to CPI inflation, we forget that your upper middle class Joe can afford a much better car, boat, vacation, food than he could in the past

Anonymous said...

Everyone who is of legal voting age should pay the same amount in taxes. Period. Divide the federal budget by the number of adults. Everyone pays that amount.

Been saying this for years.

If you can't pay, then congratulations. You get to spend your free time for the year doing work for the government. Roads need paved. Crap needs shoveled. You get the idea.

Can't pay AND can't work? No problem. You can be put into a home, at the expense of the others. But don't try to cheat, or you will be in work camps the rest of your life.

Worried about retirement? No problem. I propose a simple incentive plan: pay double what you owe each year for twenty years (not necessarily consecutive) and then you are exempt from further taxation. All the extra you pay now will go towards paying down debts and/or saving for the future, instead of current new spending. If you work for 40 years, you can pay double every other year (or, more to the point, budget so that you pay 50% more every year) and retire tax free before you turn 60. It's better than most company pension plans!

This is the best way. The only way. The fair way. No one should pay more than anyone else, because we are all equal in the eyes of government.

Anonymous said...

How about an income tax (or, "increase" tax) of 10% across the board? What could be more fair than that? And it would have the added benefit of putting pressure on the government to shrink.