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EDITORIAL - A Nobel laureate pulls for tax cuts
Milton Friedman, Nobel laureate and free-market thinker, is concerned about taxes taken from some members of the middle class to pay for programs of other members of the middle class; taxes and regulations that control up to 50 percent of U.S. output; taxes that don't necessarily reduce wealth, but that do diminish personal liberty.
Professor Friedman gave the keynote address recently at a conference at the Hoover Institution at California's Stanford University. The subject of taxes was much on everyone's mind, given the presidential debates currently under way. Texas Gov. George W. Bush has proposed an across-the-board tax cut for all taxpayers; Democratic candidate Al Gore has countered with a portfolio of targeted tax cuts and charges that Gov. Bush's plan favors the top 1 percent of taxpayers.
"It only makes sense," Professor Friedman told reporters after his speech, "that the benefits of a tax cut go to those who pay the most taxes. The wealthiest 1 percent of American earners now pay a disproportionate share of federal income taxes (25 percent to 35 percent, depending on definitions and calculation methods), so they will get a disproportionate share of reductions. There's no way to cut taxes without this happening.
"Insofar as lower-income people who pay no federal income taxes - and most don't - the Democrats offer credits for various expenses. But those are transfer payments, not tax cuts."
Interestingly, the professor offered a mild criticism of one feature of the Bush plan that the Republicans like to brag about: the fact that it eliminates federal income taxes entirely for some 6 million lower-income people.
"If we're to have an income tax, it's a good thing for everyone to pay at least a nominal amount," he said. "If non-taxpayers become a majority in society, what would restrain them from voting for ever higher taxes on others?"
Professor Friedman pointed out that the payroll tax - he insists on referring to it as the employ-ment tax rather than the Social Security tax, since Social Security is not an insurance program with a real trust fund or a "lockbox" - has more impact on lower-income workers than the income tax does. If he were designing a program for raising most of the government's money from an income tax from scratch, he said, he would reduce or even eliminate employment taxes, while seeing to it that everyone paid at least a little in income taxes.
"The real vice of what's happening today," he said, "is the extent of the open and almost unlimited use by politicians of the taxpayers' money to buy the taxpayers' votes. The 'gifts' candidates promise the middle class come from taxes paid by the middle class, but the handling fees are inordinately high."
"The real virtue of tax cuts," the professor explained, is not their impact on economic growth or health, but their impact on personal freedom. "Government at all levels (federal, state, local) takes more than 40 percent of national income directly. Through regulations, mandates and the like, it controls how another 10 percent of national income is spent. Objectively and economically speaking, then, the United States is 50 percent socialist.
"Because the private-sector half is so much more efficient, it continues to grow, but I don't know how much longer it can be sustained. Meanwhile, government now controls half of our lives. Without tax cuts, the government share will grow faster than the economy grows because higher incomes are taxed at higher rates. So we need to cut taxes just to maintain the status quo."
Professor Friedman attributed the federal budget surplus, which gives politicians the luxury of promising the moon and still sounding fiscally responsible, to gridlock in government. If either the Democrats or the Republicans had controlled both the presidency and Congress in recent years, he believes, the surplus would never have developed or would have been spent long ago.
The bottom line? On the whole, Professor Friedman prefers the Bush proposal to the Gore plan, but wishes the tax cuts were bigger.
"Taxes and the government's share of the economy should be
seen more as a freedom issue than an economic issue," he said.
"Until people understand that high taxes reduce freedom more
drastically and more significantly than they reduce wealth, it will be
politically difficult to build support for the kind of tax cuts that I think
are desirable."
Friedman was one of my heros and still is. I have been on the sidelines for a good many years and haven't kept up with him.
Will you expand on your bread and circuses comment for benefit of those of us whose brains curl up and refuse to understand the meat of articles regarding taxes or the economy.
"If we're to have an income tax, it's a good thing for everyone to pay at least a nominal amount," he said. "If non-taxpayers become a majority in society, what would restrain them from voting for ever higher taxes on others?"
Hope to shout, they almost are a majority in society insofar as perceptions are concerned.
A government which robs Peter to pay Paul can always depend on the support of Paul.
-George Bernard Shaw
Right now the bottom 60% perceive a light tax burden,(in many cases even a handout) and continues to clamor for more from government looking for the top 40% to pay for it. Both Bush and Gore propose to make that perception even stronger by eliminating even more participant from the Individual Income Tax rolls.
A prime example of what is happening comes from an analysis, the Individual Income Tax effective rates in comparison with the Total rates of Federal taxation:
Those who perceive little burden play the role of Poor little Paul:
| Effective Individual Federal Income Tax Rate (Percent of reported gross income) | |||||||||||
| Income Category | 1977 | 1979 | 1981 | 1983 | 1985 | 1987 | 1989 | 1991 | 1993 | 1995 | Projected 1999 |
| Lowest Quintile | -0.6 | -0.8 | -0.2 | -0.5 | -0.2 | -1.3 | -1.9 | -2.9 | -3.4 | -5.6 | -6.8 |
| Second Quintile | 3.6 | 3.9 | 4.6 | 3.5 | 3.9 | 3.2 | 3.3 | 2.7 | 1.8 | 1.8 | 0.9 |
| Middle Quintile | 7.1 | 7.5 | 8.3 | 6.8 | 6.8 | 6.1 | 6.5 | 6.3 | 5.9 | 6.1 | 5.4 |
Those that readily perceive some of the burden.
The top 40%
| Effective Individual Federal Income Tax Rate (Percent of reported gross income) | |||||||||||
| Income Category | 1977 | 1979 | 1981 | 1983 | 1985 | 1987 | 1989 | 1991 | 1993 | 1995 | Projected 1999 |
| Fourth Quintile | 9.7 | 10.4 | 11.3 | 9.5 | 9.3 | 8.7 | 8.9 | 8.7 | 8.5 | 8.7 | 8.4 |
| Highest Quintile | 15.8 | 16.3 | 17.1 | 14.5 | 14.3 | 15.1 | 15.1 | 14.8 | 15.5 | 16.2 | 16.1 |
| Top 10 Percent | 17.6 | 18.0 | 18.7 | 15.9 | 15.6 | 16.9 | 16.6 | 16.3 | 17.4 | 18.2 | 18.0 |
| Top 5 Percent | 19.3 | 19.7 | 20.0 | 17.1 | 16.8 | 18.5 | 18.0 | 17.6 | 19.3 | 20.0 | 19.6 |
| Top 1 Percent | 23.1 | 22.6 | 22.0 | 19.3 | 18.7 | 20.9 | 19.7 | 19.9 | 22.8 | 23.4 | 22.2 |
To play the role of mean ole Rich Peter.
While Politicians play both ends against the middle.
Thew NRST would accomplish much more along the lines that Milton F. approves of than would any tinkering with the income tax.
Far more! And for a far greater portion of the population.
Little Willie is "The Worst President In American History".
Once the electorate discovers it's power to vote themselves, "bread and circuses" the *democracy* is doomed. Thus we have our supposed republic, whereby elightened representatives vote their conscience and do not fall into the trap of "feeding the many" from the labors of the few.
Yeah right.
Ah ... that and Ancient Geezer's posts helped, thank you ve much.
Once the electorate discovers it's power to vote themselves, "bread and circuses" the *democracy* is doomed.
Problem is that that vote for bread and circus is contrived the reality is much grimmer.
As one may note from the effective Individual Income Tax rates above, where 60% believe they pay rates of -7 to +6% and the top perceive tax rates rising from there upto 22%.
When one looks at the full range of all taxes laid by the Federal government including corporate income and payroll taxes the overall rate of taxation is substantially greater, especially considering the 15.3% SS/Medicare tax on the 1st $70K of wages/self-employment income, plus the 6% Federal Unemployment tax, all of which are but a portion of the effect of federal taxes embedded the price of all products we purchase. Taken together with the Individual tax rates above we all pay more than:
| Effective Total Federal Tax Rate (Percent of reported gross income) | |||||||||||
| Income Category | 1977 | 1979 | 1981 | 1983 | 1985 | 1987 | 1989 | 1991 | 1993 | 1995 | Projected 1999 |
| All Families | 22.8 | 23.4 | 23.5 | 21.4 | 21.8 | 22.6 | 22.5 | 22.6 | 23.5 | 24.7 | 24.2 |
All Data from IRS collections statistics and The Bureau of
Economic Analysis as compiled in tabular form by the
Congressional Budget Office.
http://www.cbo.gov/showdoc.cfm?index=1545&from=4&sequence=0
With a peak near the center when one assumes we all pay corporate/business taxes through higher prices, higher loan interest rates, lower wages and earnings; with the EIC reducing burden on the low end, relief from SS/Medicare tax and exception rules reducing burden on the high end; The middle stuck gets stuck in the crunch between.
But even those statistics are being substantially distorted:
"The estimates of effective tax rates shown in Table 1 have been published previously, but the methodology used to estimate them has changed over time. In particular, CBO has changed its method of allocating corporate taxes from one that splits the corporate income tax between workers and owners of capital to one that assigns the whole tax to owners of capital."
And the fine print at the bottom of the tables:
SOURCE: Congressional Budget Office.
NOTES:Pretax family income is the sum of wages, salaries, self-employment income, rents, taxable and nontaxable interest, dividends, realized capital gains, and all cash transfer payments. Income also includes the corporate income tax and the employer share of Social Security and federal unemployment insurance payroll taxes."
In short, the income divisor is inflated over what the wage earner will ever see lowering the effective percent tax rate; hiding the effect of higher prices and lower wages have on the lower 60% of the electorate.
We wonder why over 60% of the public voters PERCEIVE no problem with the taxrates and vote for polidiots that promise to bring home the most bacon telling constituents they are the only ones that benefit from higher taxes with more spending on socialistic "gimme" programs. If this continues under any administeration, expect a liberal tax and waste congress in short order, and for many years to come.
And I haven't even touched the costs impressed on business and the consumer(Voter) that are a concequence of trying to determine the amount of tax to pay. That increases total tax burden to approximately 133% of the table rate values.
Town Crier Staff Writer
Clyde Noel : http://www.losaltosonline.com/latc/arch/9528/
"In a book titled "Costly Returns," economist James Payne estimates the nation's bill for tax record-keeping, audits, filing tax attorneys and accountants totals an astonishing $593 billion. To put it another way, that's more than twice as much as last year's entire defense budget and $240 billion more than all 1996 Social Security outlays."
And that was 5 years ago, adding by itself an additional burden attibutable to the the current income/payroll tax system. I hesitate to guess what it is today, all due to the income tax.
It is long over time to end the Income Tax once and for all and a bill to do just that:
H.R.2525
SPONSOR: Rep Linder, John (introduced 07/14/99)
A bill to promote freedom, fairness, and economic opportunity by repealing the income tax and other taxes, abolishing the Internal Revenue Service, and enacting a national sales tax to be administered primarily by the States.
We all pay through the nose, rich and poor while politicians play the tune of envy and resentment that Americans continue to respond to not understanding the full picture what is happening to them.
Bread and Circuses (panem et circenses)-- from Juvenal's 10th Satire:
Now that no one buys our votes, the public has long since cast off its cares; the people that once bestowed commands, consulships, legions, and all else, now meddles no more, and longs eagerly for just two things -- Bread and Circuses.
Hey thanks ... I've never actually read the entire line!
Professor Friedman gave the keynote address recently at a conference at the Hoover Institution at California's Stanford University.
I wonder if Chelsea was in the audience.
Geez, you are one depressing font for all the gory details. In particular, the cost of compliance figure in excess of defense spending is just, just, damn!
"The real virtue of tax cuts," the professor explained, is not their impact on economic growth or health, but their impact on personal freedom."
Worth repeating. I wish GW would phrase it this way in the debate this evening.
I wonder if Chelsea was in the audience.
No, she was brokering the Mideast peace.
Geez, you are one depressing font for all the gory details.
Hehe, wouldn't want to destroy any illusions.
That's jess the obvious Federal, tax rate of 24.2%*1.33 = 32.19%, overall tax burden as a minimum. The above for example does not include the effect of 5% for Federal estate taxes, not to mention what a state does to yah or the cost pushed on to tax payers by non filers, and other miscellaneous odds and ends.
Nasty picture ain't it?
"Insofar as lower-income people who pay no federal income taxes - and most don't - the Democrats offer credits for various expenses. But those are transfer payments, not tax cuts."
Why the need to be so accomodating?
They are extortion payments pure and simple. Albeit legalized and institutionalized.
Full circle.........bread and circuses.
Pandering to the *whine!*
Now, as to the definition of slavery, uh reparations, hmh,
I wanna be compensated for my years of servitude.(grin)
Disclaimer: Opinions posted on Free Republic are those of the individual posters and do not necessarily represent the opinion of Free Republic or its management. All materials posted herein are protected by copyright law and the exemption for fair use of copyrighted works.
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