Monday, May 21, 2007

'I don't get 27 votes on Election Day'

Last night on TV I watched a repeat of one of my favourite shows, The West Wing, during which the character Sam Seaborn makes the following assertion:

"Henry, last fall, every time your boss got on the stump and said, "It’s time for the rich to pay their fair share," I hid under a couch and changed my name. I left Gage Whitney making $400,000 a year, which means I paid 27 times the national average in income tax. I paid my fair share, and the fair share of 26 other people. And I’m happy to, ‘cause that’s the only way it’s gonna work. And it’s in my best interest that everybody be able to go to schools and drive on roads. But I don’t get 27 votes on Election Day. The fire department doesn’t come to my house 27 times faster and the water doesn’t come out of my faucet 27 times hotter. The top one percent of wage earners in this country pay for 22 percent of this country. Let’s not call them names while they’re doing it, is all I’m saying."

Incredibly, neither 'Henry' nor any of the other characters in the room replied to Sam's argument. How about something like:

"Sam, you paid more than 20 times the national average in income tax because you were being paid more than 20 times the national average in income. You're not 20 times a better person than the average man. You're not 20 times smarter and you didn't work 20 times more hours. You paid a lot more tax than most people because you got a lot more money than most people."

18 comments:

Michael Ditto said...

Daniel,

Good response, but not quite accurate. We have a progressive taxation system in the US, where the tax rate goes up with income. So a person who makes 20 times more might pay 40 times more, or 60 times more depending on their tax bracket.

The main tax that we have that isn't progressive is Social Security. It's a flat 12.5% of income. But some would argue that it's actually a regressive tax, because it's capped above a certain level of income.

Daniel said...

Hi Michael,

We have a progressive taxation system here in the UK as well. It makes sense to me as, for example, £10,000 means a lot more to someone earning £30,000 per year (for whom the money would likely count towards a mortgage/rent or food etc.) than for someone earning £300,000 (for whom such an amount would instead merely represent more spending power).

Regardless of whether a person pays 20 or 40 or 60 times the average the point I made still applies - such individuals don't work 20/40/60 times the hours nor are they 20/40/60 times better people.

Patrice said...

I agree with you, Daniel. But I think that the person who makes 20 times more than the average worker, though he may not think of himself as 20 times better (just, perhaps, a little bit better) and demonstrably does NOT work 20 times as many hours -- he does, indeed, believe that he is 20 times smarter than the average person. Or, at least, smarter at doing that particular lucrative job. After all, he got it, and not the guy down the hall, right? I think that folks who are in the highest-paid brackets skew toward the more-egotistical-than-average, and they also have to rationalize their worthiness in light of the arbitrary nature of super lucrative positions. You hear a lot of people complaining about being underpaid, but I've never heard anyone complaining that she was paid too much.

Austin said...

Daniel,

That's awesome. I hate when claims like this are made, and it seems to make sense to a lot of people, so they jump on the bandwagon and cry about getting taxed more.

jPucci said...

Your comment fascinates me. At what point would you say that a person is paying their fare share? By what standard is fair measured?

Wages are set by suppply and demand (except when unions are involved). That is fair. What sets the tax rate?

Redistrubtion of wealth requires there be wealth in the first place. Wealth is generated through productivity.

The dirt poor in 1st world coutries have it better than the middle class in 3rd world countries because 1st world countries produce so much.

Now look at who produces the most http://en.wikipedia.org/wiki/List_of_countries_by_GDP_(nominal) and ask yourself if production and socialism are positively or negatively correlated.

Daniel said...

Hi Jpucci,

I didn't say anything about people paying their 'fair share' - that was a quote from the West Wing programme I was referring to in my original post. For the record, I think the progressive taxation system is a sensible one.

Also note that I wasn't advocating any particular economic system over another - only pointing out that rich people pay a lot more tax because they ought to, as they obtain a lot more money than most.

jPucci said...

Daniel, thank you for your kind reply to my post. While I agree that you never explicitly mention the words 'fair share' or 'socialism', please consider the following:

When you say " only pointing out that rich people pay a lot more tax because they ought to" aren't you making judgement call on what is fair?

And when you endorse a progressive tax system aren't you advocating government policy that leans more toward socialism than capitalism?

Daniel said...

Well I think it's fair that people pay tax, and that those with more money pay more tax than those with less money.

The alternative to a progressive system of taxation would presumably be a 'flat tax' for everyone - say 10%. The problem I have with that is that 10% of, say, £10,000, represents a lot more to the payer than 10% of £100,000 or £1,000,000. For the former such an amount might pay for food, mortgage/rent etc. For the latter, it'd more likely go on 'luxury' or leisure spending.

We live in an unfair and unequal world. Some of that may be due to some people's laziness or indifference etc. But a lot of it is due to circumstances beyond most people's control. And some people put much less focus on making money than on raising a family or being a permanent carer to a sick/handicapped relative etc. I don't see why those who are more fortunate (ie, the rich, in the context of tax) shouldn't be expected to pay more than those who aren't so fortunate (though they may be just as smart, hardworking, law-abiding, well-educated if not more so).

jPucci said...

Yes, I see your point about the "luck" factor, although we may disagree on just how much of an impact luck has in general.

In my 38 years of living I've come to realize that while there may always be a best choice there is not always a pleasant one.

Suppose you are walking down the street and notice a homeless person pan-handling (and I mean a real down-and-out sad case not a professional pan-handler). This person is nearly starved. Next to him is a finely dressed man carring a bag of groceries. Would you say that you have the right to take the rich man's food and give it to the poor man?

I would argue that you do not. While I believe that the rich man has a moral obligation to help the poor man, we cannot allow him to be robbed. If you do, he will have no incentive to work.

Certainly there are people who inherit their wealth and do not work for it. But I believe that the majority of wealthy folks get that way by being productive. And the ONLY reason they are productive is to make money. If you take a way that incentive there will be less to go around for everyone because people will produce less. When there's plenty of "stuff" it's cheaper for everyone to afford , rich and poor alike. Does that make sense?

Michael Ditto said...

In the US when people talk about a "flat tax", they usually are talking about a flat sales tax. They want to do away with the income tax altogether and just impose a tax on all goods that are bought and sold.

This is neither "flat" nor a fair share. The multimillionaire eats about the same amount that I do. He or she might choose to eat food that is ten times more expensive and therefore pay ten times as much in sales tax, but as a percentage of their wealth it's still miniscule as compared to the percentage of my wealth that my taxes would represent under such a system. As, by necessity, I spend nearly 100% of what I make on tangible goods, a 30% flat sales tax would have me spending 30% of what I make on taxes. But a multimillionaire who lives modestly would only spend a few fractions of a percent. Totally regressive.

By the way Daniel, if you make it to Denver, Colorado, send me an e-mail!

Desmoid said...

Hello gentlemen,

May I add some more spice to your most intriguing chat?

Here is a link to a proposed bill in the U.S. Congress: http://en.wikipedia.org/wiki/Fair_tax

Now before you read this I would like to address daniel's comment re: "Well I think it's fair that people pay tax, and that those with more money pay more tax than those with less money. "

My question to you is what are you trying to achieve? If you want to suppress creativity, punish productive people and increase unemployment, then you are on the right track. Your main concern seems to be the ability of one said 'poor' person to pay tax relative to one said 'rich' person. But this is all a matter of opinion, is it not? One man's trash another man's treasure and what not? Second, in a purely flat tax system wealthy people pay more in tax by definition. Why is this not good enough? In my estimation it is far more 'fair'. Another argument in it's favor is that compliance would rise.

Consider the inverse of this, daniel. Suppose you pay less taxes the more money you make? What would happen? Could you envision how such a system might be crafted?

Lastly, the countries doing best economically are currently those with flat tax rates. The former Eastern block countries (including Russia) are booming after assessing
individual and corporate tax rates in the low teens. They have managed to see past pandering to the 'poor' and embraced a simple, commen sense approach to taxation resulting in record tax revenues, a greatly expanding tax base, a growing economy and increasingly happy populace.

The West, I dare say, will continue to languish under the crushingly heavy tax burden, never-ending entitlement programs and run-away regulations whose unseen costs to productivity might well rival the others put together.

Sincerely

Matthew Dingemans said...

Some very interesting conversation going on... A couple of the responders have actually echoed the very thing that I wrote in my first comment (which apparently did not get published).

The bottom line is that the socialist treatment of higher income earners has the direct opposite effect from what socialists expect - it decreases economic productivity, and hurts lower wage earners even worse. The simple truth is that taking a rich person's money away from them decreases the amount of wealth they have to invest and to spend. The money is instead lost in a multichannel beaurocracy (the tax system of a socialist economy) instead of actually going into businesses that provide a livelihood for the poor.

-Matthew

Anonymous said...

I think we should all just forget about the numbers for a second and remember the true issue at hand. Bartlet is the man in charge. Not dry commedy relief go-to guy Sam. That being said, Bartlet is a great man who thinks with his gut. He doesn't need equations or super abilities like our friend Daniel to know that America is about a vision - the Great Democratic Experiment. This shining beacon shouldn't be compromised or hindered by being hung up on the details. The important thing is to just keep yours eyes on that golden eagle of freedom soaring high and wave the Stars and Stripes until you can't even count...or read.

Vince said...

Hi Daniel,
I know this is a late comment, but I just discovered this blog and wanted to get something on the record, since West Wing is also my favorite show. So, in case you check this out, let me just say this:
I think you misunderstood what Sam was saying. His problem was not with taxation or with paying his "fair share." He, in fact, was defending the progressive income tax. What he was against was the party operative using class warfare - us vs. them. Trying to rally the lower and middle class taxpayer by saying that the rich just don't pay taxes, or don't pay their "fair share."
So really there was no reason to have a rejoinder to that point. He was saying the rich do pay, and that the tax is progressive, and that's how it should be, so stop pretending that the first two of those three points isn't true just to gain votes by making certain voters resentful of others.

Thanks for letting me post on that.
Vince

Anonymous said...

hello Daniel,
Having read your blog and all the comments, please let me encourage you to hold your own. Any issue can be complicated to death (as I see being attempted here by some) and any side made to appear correct or "fair" - that's what "spin" is all about.

In my opinion many problems would be approached more constructively if people would start with what they CAN agree on.

You are absolutely correct that a 10% tax (for example) is a much larger amount for someone with a low income. Anyone who can't see that is just not living in the real world.
Kathy

Francis said...

Could we not say that "it's money, not people that pays taxes": the income tax is not a poll tax. If that particular rich man wants to lighten his tax burden, there is one simple thing for him to do: share his wealth with 26 other people and join the average level of tax liability as an individual. I see no "moral consideration" or even complexities in this issue: wealth is taxed in proportion to its level (whether the tax system is progressive or not), not in line with any individual's personal needs, value or volume of ego when that particular individual happens to possess it whole.

Anonymous said...

Hi there,

I totally disagree when someone says that if he/she gets paid more, has a better job, it is because he/she is a smarter person and deserved it. The only true thing is: this person was lucky to be able to reach his/her position. Lucky that he/she was born in an environment (family) that allowed him/her to go to school and become what he/she is (what a difference between being born in a nice wealthy white family, and being born in a poor black family where you need to do your part of the housework and earn money to help your mom dealing every day with the low household income). In both the UK and the US, doing studies is NOT something everybody can do. And once you have your diploma, how are people judging you? Only on your diploma? Your intelectual capabilites? Nah! And this is without even talking about salaries depending on the work you do. Could you say that, because they don't get paid that well, teachers are more stupid than bankers???

The point is: if you get a nice salary, you got it on the depends on other people that were as smart as you but just unluky to be born at the wrong place, in the wrong layer of the population. You're probably not smarter that lots of low-income people. You got lucky, that's all. So I do believe that it is normal that higher salaries pay more taxes to help the unlucky ones and give them a chance to become as wealthy as you are.

Unless you want them to remain poor so that you want to exploit them, pay them peanuts and get all the money from their hard labor.

I don't know well for the UK, but the US is not a lad of equal opportunities, where everybody has a chance. Yes, everybody has, but the probabilities of picking the golden ticket are not the same for everyone.

Anonymous said...

Hello Daniel,
People whose incomes pay for the essentials of living tend not to use as many government services as their wealthier cousins. Those with disposable incomes will travel on airplanes guided by federal air traffic controllers working in federal control towers, take trips on federal highways, have police investigate the theft of their stuff, take cases to federal court, let the Coast Guard direct their yachts. Their tax forms are far more complicated than the one page EZ form many use. So I think a higher tax percentage for higher incomes is justified by a heavier reliance on government functions by those with the extra money to spend.
Paul N.