Friday, January 04, 2013

Stephen Moore: "Who's the Fairest of Them ALL?" Why "flat" is fair

Author: Stephen Moore (with Foreword by Glenn Hubbard)

Title: “Who’s the Fairest of Them All?  The Truth About Opportunity, Taxes, and Wealth in America

Publication: 2011, Encounter Books, ISBN 978-1-59403-684-2, hardcover, 122 pages (also available as e-book), seven chapters

Amazon link is here

First, let’s mention that this book went to press before the “Fiscal Cliff” deal was patched together over the New Year’s holiday, and it often mentions the Fiscal Cliff and upcoming debt ceiling issues, in order to criticize Obama’s desire to make the rich pay higher marginal tax rates, as “fair”. 
Morre offers the simple argument that well-off people are typically more productive, and, when left alone from government, tend to innovate more and raise the standard of living for everyone, including the poor.
He offers many specific examples where innovations made people rich, but those individuals (like Steve Jobs and Bill Gates) continued to invent in such a way as to make everyone better off.  And of course, in many areas of life, that is certainly true.

He also argues that when marginal tax rates on higher incomes are lower, rich people actually wind up paying a larger share of the taxes.  That seems to be true.  He also argues for not taxing investment income or corporations at all, because then, he says, companies will employ more people.  Perhaps so.

His last chapter is, “Why flat is fair”.  Remember, back in the 1990s, Steve Forbes had argued for a flat tax.  Moore mentions Hong Kong as a booming place with a flat tax.  He also notes that states without state income taxes (Texas) are generally faring better than the “high cost, high service” states.

There is something a bit offensive about the tone of some of this rhetoric.  “We rich people employ you and spend our money on your products, so you do what we say.”  Coming from a Rand Paul in the Fiscal Cliff debate, it sounds a bit like power hunger. And the opposite side of that is, of course, “Marxist” class warfare.  Moore argues well that “workers” may indeed be better off when the rich keep more about what they earn.  There is, of course, a good question: why not carve out lower rates for businesses hiring workers, even closely held family businesses, and tax “discretionary” income more and separately.  Aren’t we doing that sort of thing (social engineering) with child tax credits?

The media has portrayed this book as about “fairness” although for more of its brief length it doesn’t seem so.  It seems more about economic pragmatism.  But there are places to pick bones.  For example, the FICA tax has always been separate, and “regressive” because it seems to be set up as a “pseudo-annuity”.  Moore asks, is it “fair” to keep collecting it when Social Security may not pay out in the future?  That leads to the question, why not means test social security payments now (maybe based on accumulated or inherited wealth as well as income).  But is that fair to me?  After all, I paid into the system for thirty years expecting my “annuity”.  Is it fair that I should be stiffed? That just could happen if the debt ceiling really gets broached early in 2013.

Moore does mention unwed mothers and welfare, but for the most part he stays away from the social issues, and he is likely a social libertarian.  (Let me add here, that I read this on the Metro, and got some dirty looks.)  

But much of the current debate about social policy – most recently gay marriage – has been about “equality” and “rights”, and about “fairness” that goes beyond economic equity (for example, discrimination in the workplace and equal pay for women) to the more subtle areas about how we perceive each other as individuals, who obviously cannot all assume equal risks or equal “personal responsibility” for results.  People do “start ahead in line” (or behind), and people do benefit from the unseen sacrifices of others.  That can generate indignation, and sometimes violence and social or political instability.  Totalitarian governments have tried to make people share this sort of risk and burden more “equally”, and the end result can be poverty for everyone.  Look not only at North Korea but also at Maoist China after the 60s.  Social conservatives sometimes try argue that the “natural family” should mediate local inequalities among people inasmuch as they occur as part of nature, but then you have the problem that different individuals (including gays and lesbians) sometimes have very different ideas about how bloodline and family (and having children at all) fits into their self-interest, and that feeds for inequality (as over discretionary income and very personal sacrifice and risk taking).  Social values will certainly figure into the way we handle entitlements in an aging population with fewer children.  How much of this needs to be the (not always chosen) responsibility of other family members and not government?  

A little technical note about the book.  The text is not right-aligned, giving it a ragged look, and there was at least one accidental font change. 

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