Skip to comments.End Crony Capitalism, Sell Federal Land, Limit Tax Breaks for the Rich
Posted on 05/23/2014 6:08:55 AM PDT by Kaslin
Gummit don't work good. That conclusion, often that inelegantly expressed, seems to be more and more common, not only in the United States but around the world.
It is certainly the verdict of John Micklethwait and Adrian Wooldridge in their new book "The Fourth Revolution: The Global Race to Reinvent the State," although expressed, as you might expect from the editor and business editor of the Economist, in far more urbane language.
Their thesis is that the state has been reinvented three times in the last 400 years, and needs reinvention once more. The first revolution they name after Thomas Hobbes, the 17th-century philosopher who called for a powerful dictatorial state to protect people from the horrors of all-out war.
It was superseded by the 19th century and named after John Stuart Mill, who wanted a small state run by competent civil servants to guarantee individual liberty under the rule of law. It was succeeded by the welfare state, championed a century ago by Sidney and Beatrice Webb, to protect the industrial masses from want and need.
Lately the Webb model hasn't been working so well. Democracy seemed to sweep all before it after the fall of the Berlin Wall. But in this century, democracy has receded in some countries and inspires discontent and even disrespect in most others.
Nowhere is that more apparent than in the United States, which pioneered electoral democracy, and where only 28 percent now say the country is moving in the right direction.
The major problems are that democracies in America and elsewhere have been making promises they cannot keep, and they are now running out of money. Social Security and Medicare threaten to squeeze defense and other domestic spending to the lowest shares of the economy in a half-century.
And government can't do things it used to. The Pentagon, still one of the world's largest buildings, was built in 18 months in the early 1940s. A small bridge nearby recently took four years to repair.
Public sector unions have insulated employees from accountability and imposed unsustainable pension and health care costs to the point that Detroit, once America's arsenal of democracy, has gone bankrupt. Half its streetlights don't work.
But, as Micklethwait and Wooldridge point out, some places are doing better. Sweden, the welfare state champion of the 20th century, has cut spending and tax rates sharply. The retirement age was raised and unemployment benefits limited.
More important, Sweden has improved services by providing for competition. Parents get vouchers for children to attend schools of choice. Private companies manage hospitals.
Singapore, under the firm leadership of Lee Kuan Yew, provides an Asian model. It provides health care and pensions comparable to America's at half the cost, with co-payments at every stage.
This Asian model is too authoritarian for Western tastes. In Singapore, Lee's party wins every election, and Lee's system is much admired and to some extent copied by obdurately undemocratic China.
But, as Micklethwait and Wooldridge argue, nations that are starting out can produce innovations impossible in nations where entrenched interests resist change, just as many countries leapfrogged landlines for cellphones.
Change is difficult, the authors argue -- but also inevitable. One reason is Herbert Stein's maxim that what can't go on won't. The other is technological change. The Webbs' welfare state is out of sync with the information revolution.
Evidence: healthcare.gov. The Obama administration had 42 months to prepare, as long as from Pearl Harbor to victory in Europe. It failed and promised to employ "private sector" methods instead.
Obamacare is an attempt to control health care on the assumption that centralized government can make better decisions than citizens can make for themselves.
That assumption, perhaps valid a century ago, is being discredited now. "The desire to control everything," the authors write, "is giving way to pluralism, uniformity to diversity, centralization to localism, opacity to transparency, and immobilisme, or resistance to change, to experimentalism."
"Trim the state and revitalize democracy," they recommend. Let a Simpson-Bowles-type commission revise entitlement law, just as the Federal Reserve handles the money supply.
End crony capitalism. Sell off federal land. Limit tax breaks -- mortgage and local tax deductions, the non-taxability of employer-provided health insurance -- for the affluent.
Here's another idea. Elect a president, unlike this one, able and willing to negotiate solutions on entitlements and taxes.
It all sounds pretty good except for the part about limiting tax breaks, which is pure hogwash since the rich pay nearly all federal taxes.
Not if they have a tax-exempt foundation with which to shelter the income.
well apparently not many do since:
The Top 50 Percent of All Taxpayers Paid 97 Percent of All Income Taxes; the Top 5 Percent Paid 57 Percent of All Income Taxes; and the Top 1 Percent Paid 35 Percent of All Income Taxes in 2011
The taxpayers with 6-figure incomes pay a ton-load of taxes. The ones wealthy enough to set up foundations and 501(c) "charities" are another story. Have the 501(c)'s pay corporate taxes on their investment income. Tax the income from Harvard's endowment.
I agree...except that these wealthy jerk-offs are the ones still buying candidates to protect their tax breaks and screwing us on important issues. Many of us are done protecting the super wealthy when we are getting little in return. I am for keeping rates low, but not at the expense of losing elections to class warfare tactics that are so effective.
I know this is boring but an across the board flat tax where EVERYBODY pays the same rate with no deductions is the only truly fair way to collect taxes. Taking a higher rate from those who are wealthier is simply the logic Willie Sutton used.
If you are paying federal income taxes then you aren't really rich. Sure you have more money than the great unwashed but the people at the top are laughing at you.
The super wealthy are Democrats, who want to impose socialism on the ‘little people’ to destroy their competition.
Gad I've been at FR for almost fourteen years and you think I've never seen those numbers before? Try thinking for a second before blathering with the knee-jerk response you would direct at a liberal.
"The top 1%" is not the cohort of which I am speaking, which was very clear by how I defined it. In fact, it is THE LEFT that calls "the top 1%" "rich" because it includes a fraction of the upper middle class still fighting to get above the line. By "the rich" (as the article says and not by how you define it for the purposes of bandying the numbers, namely those who own "charitable" foundations as I made perfectly clear and you ignored), I'm speaking of incomes of roughly $1 million per year and up. With foundations to shelter expenses covering everything from yachts to vacations to hirelings, these people do not pay at the rates that those lacking sufficient cash flow to set up and maintain the sheltering infrastructure. Think back to Warren Buffett explaining how he pays lower tax rates than his secretary, or Theresa Heinz laughing about paying only a relative pittance in taxes on her massive income. That is what I am talking about here.
And don't believe for a second that those foundations exist only for charitable purposes. The funds for the vast bulk of regulatory racketeering in the Federal courts of this country by green groups, "safety" hustlers, and others, bringing cases designed to put their competitors out of business, are first laundered through secondary bundlers (such as Tides) but derive from the foundations of major stockholders. THAT is why the rich are so often limousine liberals, because big government makes buying influence is a very good investment.
I've written two books and several articles discussing this topic. Consider this one about the Natural Resources Defense Council. FReepers have been borrowing that data and posting it here for a decade. In fact, that work changed somewhat the way that these creeps launder their money (Drummond Pike should be sending me Christmas cards). Don't be a chump for that "1%" meme as the MSM set you up to be.
It all sounds pretty good except you can find a President and legislature that will do it.
The orthodontist just thinks he's rich.
That hasn't been true since the Reagan administration. It used to be that you could put all of your assets and all of your income in a non-profit foundation, borrow any funds you needed from the foundation, then just never pay it back. Totally tax exempt! It only cost you a law firm to manage the foundation and hand over the money whenever you wanted it.
During the Johnson administration a law was enacted requiring all non-profit organizations to practice fund accounting, which is an accounting method that traces every dollar from income to expenditure without any common accounts to obscure where funds come from or where they go.
During the Reagan administration a law was enacted to make unpaid debts taxable. That pretty much ended the party for tax exempt foundations. Only the Kennedy's escaped. They got a special rider added to the bill to exempt their foundation.
You are not really rich until you can afford your own army. --Crassus
Crony capitalism AND welfare for non-producers. Both ends of the economic spectrum feed off the middle class. And it needs to stop.
I do not hate the rich. I do not hate the poor. They do not need my money. They need to earn their own.
Read post 11.
All too true. Read any of the "Arsenal" books on our industries ramping up for WWII and be astounded - not too strong a word for those brought up under today's regulations.
The one that sticks in my mind was the Kaiser shipyards built in San Francisco bay. The story starts out with Kaiser and engineers overlooking the mud flats as the pilings were being driven in. SIX MONTHS LATER they had a shipyard ready to produce.
If you are richer than 99% of the people... you are rich.
Apparently you would rather define your way to "right" than understand the issue. Unfortunately for that lame tactical dodge, neither the article nor I implied such a definition. So if you choose to identify by the "1%" definition of "rich" offered by the left, you are welcome to your baseless opinion. It is operationally and politically inaccurate.
I personally am in the top 3% and feel far wealthier than nearly anyone I know. Are their those so much richer than me that they earn more than my entire net worth in a year? sure, but that doesn't negate that fact that I am wealthier than 97% of the people, and since many of that remaining 3% probably live in high cost of living states like New York and California, the reality is that I am probably richer than 99% of the people in my state, and 99.9% of the people in my small town.
- I live in a 9,000 square foot dream home sitting on the priciest real estate in my town, with every conceivable luxury, which I nearly own outright.
- I have three different servants that I employ regularly to help me clean and maintain the house, and in addition to those, I have several other people who work for me indirectly that perform various needed tasks.
- I drive a $60,000 car (paid off) and own a $60,000 speedboat, have no credit card debt and over a million tucked away in retirement funds of various sorts.
- My four kids also attend the top private school in my area
If you don't call that the life of a rich person, then I don't know what is.
I agree. Flat rate, no exemptions is the best way to go in my opinion.
If you have to keep working to maintain your lifestyle, you are not rich in my view. I do not care what the numbers are, some working people/middle class just have bigger bills than others. BTW, I am not rich.
that’s an interesting definition since the same person could be considered rich or not totally depending on how they choose to live their life.
By your definition for instance, I would not be considered rich. Because I live a relatively lavish lifestyle. But should I decide to scale down how I live I could easily live off of what I have already earned for the rest of my life.
I think that part of commie type class warfare is calling upper middle and middle class people rich and making the masses believe it. The Russians did that with the Kulaks.
DH and I probably climb just over the top 1% mark. We are not rich. We pay > 100k/yr in state and federal tax. Sending 2 kids to private college with no breaks as we are wealthy - we pay out of pocket. Now raising a granddaughter as well. Trying to save for retirement as we expect no social security or other subsidy, nor do we want it.
There are plenty of months where things are tight. I drive a honda not a mercedes. I do not play in the same league as the super rich by any means. I dont say we are not blessed, but super rich? I dont think so. And I can’t afford any more tax burden. If I want to work extra to pay for a larger purchase, the > 50% marginal tax rate discourages that in a big hurry. I don’t know what the circumstances are of those that are higher in the tax bracket than myself, but I wouldn’t judge unless I walked a mile in their shoes.