My Take on Thompson’s Tax Plan
Nov 26th, 2007 by Micah Tillman | 11 Comments |
Fred Thompson (my favorite Republican presidential candidate, along with Rudy Giuliani) has just announced his tax plan. Woo! Nothing like tax-talk to get you going in the morning.
It’ll somehow be optional (that is, you can stick with the current system if you want), and will only have two brackets: 10% and 25%.
Seems closer to what I’m given to understand the Founders intended with Article I, Section 9.4 of the Constitution (changed in 1913 by the 16th Amendment). Taxes had to be levied equally on all, or something, and a Federal income tax wasn’t allowed.
Of course, a one-bracket system would be even closer, but two brackets is nice for now. (But I must admit I’m confused by the language of both the original and the Amendment. Any Constitution Scholars out there?)
It does a lot of other stuff too, regarding corporate taxes and capital gains and Social Security on which I can have only the broadest of opinions (given my lack of education on the intricacies involved):
Corporations are fictions, so I don’t think they should be taxed at all. I don’t think they should be legal constructs period. They allow people to not take responsibility for things they themselves do. Which is strange. And wrong.
And I think taxes are annoying, so whatever a capital gains tax is (something to do with return on investments?), the lower the better, so long as the Laffer Curve is kept in mind.
And Social Security is a bizarre idea to someone like me who thinks the function of government is to stop people who are trying to kill each other or otherwise inflict physical harm. So if Thompson wants to cut that back a bit, I’d once again say, “At least he’s headed in the right direction.”
It is a step in the right direction. However, Thompson might have just made himself unelectable. We’ll see.
I think our differences on the function of government are so wide that we’re not going to get very far on that debate, so I’ll take a pass on that and ask about the laffer curve instead.
Interesting stuff.
The question I understand it to be asking is a worthwhile one: What is the percentage of tax that gives government the most bang for it’s buck?
However, if the idea is that once we figure out this total and then apply it equally across the population, I think that would be foolish. Just because the rate that the government get’s the best trade off of profit incentive vs. collected money on a bazillionaire at such-and-such a percent, I don’t think it stands to reason that this percentage would be the same for somebody making minimum wage.
I’m not bringing up the fairness issue. (Seems like we beat the question of income redistrubution to death elsewhere.)
I’m making a somewhat unrelated point that this trade-off probably looks different at different income levels for a variety of reasons including average income levels, percentage of money needed to survive, etc.
O.K. Fine. I’ll do it. I’ll jump in the debate on Thompson’s tax plan. Here’s the reason I oppose non-progressive taxes.
A certain % of income is eaten for living wage. Let’s say that it’s 95% for somebody making minimum wage. (Minimum wage is actually lower than a living wage in most of America, so this is actually generous.) For a millionaire, the bare essentials to simply survive might cost 1% of his income.
To ask the minimum wage earner to pay 10% of his income is basically asking him to live on less money than is humanly possible. (95% + 10% = 105%) To ask the millionaire to pay 10% of his income is to leave 89% of his income as disposable.
I realize how valuable it is for the millionaire to have disposable income… I just don’t think it’s more valuable than a human life.
I know that people suggest that the minimum wage earner ought to just go and get a better paying job. I don’t believe that’s an option for many people. (I know that others do– and so the conversations often come down to competing explanations for why people suffer poverty.)
There is no mystery about why people suffer poverty. We’re born poor, almost literally with nothing. Poverty is mankind’s natural condition. The real question is why is there prosperity?
I have no interest in reviving our debate on the role of government either, but I will point out that, like our current system, Thompson’s plan has standard deductions/exemptions, and in fact much larger ones than currently exist.
I’m not sure what the federal minimum wage is these days, but I’m quite certain that a full-time minimum wage worker wouldn’t pay any federal taxes, and anyone at or around the poverty line won’t be paying anywhere near 10% of their actual income. And his system isn’t totally flat, because it contains the 25% bracket.
Count me among the “step in the right direction” folks, but then again, I’m sure no one is surprised by that.
Why do minimum wage jobs still exist? Why is there a market for them? They must be better than something (death?) if people take them. So who’s taking them?
The minimum-wage earner seems a lot like God to me. One is supposed to bring him in at strategic points in the argument, but one never actually sees him.
Andrew–
Good point/question.
Micah-
Is the issue that we don’t see him (or her) or that we don’t notice him (or her?) Many retail and fast food places feature minimum wage earners, entry level jobs all of the place. Folks answering phones and cleaning and doing the stuff most of us would rather not.
I assume people take minimum wage jobs because it’s better to be paying half your bills than none of them and there’s more government assistance that pays half your bills than none.
Scott:
I’m not saying what minumu wage earners pay currently is unfair. I’m wondering if it would be fair under Thompson’s system.
While there are a variety of exceptions for a variety of reasons, one of the main “purposes” of minimum wage jobs (from the earner’s standpoint, not the employer’s) is to gain work experience. These jobs are largely held by the very young. I think my work history is reasonably illustrative of what’s possible:
1990: 2 months at McDonald’s, age 15, wage $4.25 (minimum wage)
1991/1992: 6 months at Sonic Drive-In, age 15/16, wage $4.25
1992/1993: 8 months at Dairy Queen, age 16/17, wage $4.25
Fall 1993, dropped out of first semester of University
Winter 1993, 4 weeks at Dairy Queen, age 18, wage $4.25
Moved out of parent’s house, moved out of state Dec. 30 1993
1994 to 1997 living arrangements of anywhere from 1 to 6 roommates, rent never higher than $250/month. My first year living on my own my total gross income was approximately $8000.00.
I took on no debt.
1994 Jan-April at Godfathers, $4.65/hour (minimum wage) age 18
1994 April-September at ACT (temp data entry) $5.50/hour
1994 June-1995 March at Hardee’s, $4.90/hour
1995 March-June at ACT (temp call center) $6.25/hour
1995 June-December at Arby’s $5.25/hour
1995 December-1996 May at NCS (temp call center) $6.75/hour. I am still only 20 years old when this job ends.
1996 July – 2000 November MCI WorldCom starting wage $8.25/hour, ending wage $12.50/hour. I declined opportunities for advancement and MCI and left to enroll full time at community college from Spring 2001 to Fall 2002, when I dropped out.
1996 November, by the way, I buy my first car, for $2500 cash, in payments over a period of 90 days.
2000 November – 2001 March at Wal-Mart, $10.50/hour
2001 March – 2003 February Cab Driver, maybe $12,000/year
2002 April – 2007 February Veterinary Technician, this is what I went to school for. Starting wage, $8/hour, ending wage, $16/hour.
The point of all of this is that even with a colorful job history, and entirely entry level work, wages rise with experience, provided one works hard and is reliable. Most of the people making the lowest wages are, like I was, very young and inexperienced, not completely reliable, and with minimal financial responsibilities. I had a number of opportunities for advancement as well which I declined to pursue. (I am unambitious (or say lazy if you like) and not temperamentally suited to manage other people.)
In reference to the 16th amendment it does not say that we cannot have a federal income tax. it states :”congress shall have the power to collect taxes on incomes from whatever souce derived, without appointment among the several states, and without regauard to any census or enumeration. this is saying that they can impose a taz system on us an not have to take into account the states or the people as long as the system is fair. by the way you don’t think that coorperatons should not be taxed?! so multi-billion dallor coorperations should not have to pay taxes when they were more than likely founded by money from the federal system? it should be left up to the families of this great nation who work hard for their money to pull this nation out of debt? taxes are not anoying taxes are what keep america’s freedoms, and social security is a great system that helps people who would otherwise have nothing when they retired. here’s a hint dude: don’t have an opinion until you have all the facts and especially don’t put it on the internet!
Here’s a hint, Angela, learn to type and spell. Maybe then people will take your ideas seriously.
My two cents, Micah, ignore trolls.
Angela (or should I return your favor and call you “dudette”?)–
(1) Why is this post just bothering you now? It’s months old, and no one else cares about it.
(2) Use correct punctuation, spelling, and capitalization when you comment, please.
(3) I never said that the 16th Amendment said “that we cannot have a federal income tax.” And I asked for help in understanding both the 16th Amendment and Article I, Section 9.4. Read the post before you comment, please.
(4) The post answers your question regarding why I do not think corporations should be taxed. Read the post before you comment, please.
(5) Being “annoying” and “keeping America’s freedoms” are not incompatible attributes. Use logic when you comment, please.
Thanks Anon, but I had already posted my reply before I found your comment. I appreciate the support. :-)