Thursday, September 22, 2011
Partisan conflict and ideological differences about the role and reach of the federal government are at a zenith, but the odd thing is that, if all of us -- progressives, liberals, conservatives, and libertarians -- are true to our principles, we may actually agree about how the burden of paying for government should be shared even if we can't yet agree about which functions the government should perform and the associated cost.
How can this be when liberals cry that tax rates for the rich need to be increased while conservatives and libertarians demand that they be reduced? Let's try a simple thought experiment based on a few propositions that people of all persuasions can probably support.
First, although we may differ on the proper role of government, there are some functions that just about everyone believes the federal government must perform. These include providing for the national defense, enforcing federal law, and supporting courts of justice to resolve disputes in a fair and efficient manner. These functions are agreed upon by everyone because they are necessary to protect everyone's rights and property. They are a form of insurance that allows us to go about our lives feeling secure in our persons and possessions.
This comparison to insurance is apt because insurance is something that's bought and sold in the marketplace every day. In fact, few economic activities are more purely market-driven than acquiring insurance for our lives, homes, and cars. (For the moment we'll sidestep the different and more complicated issue of health insurance.)
The principle behind insurance is simple. The greater the value of that which you wish to insure and the greater the risk that it will be lost, the more you pay. Premium rates for people whose property is at equal risk are basically the same and the absolute amount they pay in premiums simply varies in proportion to the value of the property they insure. It's reasonable, fair, and the terms are dictated by the market.
Now, what if we applied those same marketplace principles to the way in which we pay for the federal government? Since we all share the same risks to our property, we would all pay at the same rate and the amount we pay would only vary according to the value of the property each of us insures.
Conservatives and libertarians have long called for a simple, flat tax, so they should be thrilled at the prospect. And while liberals may be shaking in their shoes, even they may like the outcome. So, let's run the numbers and find out how the tax burden would be shared by various segments of the population if the cost was calculated in the way insurance premiums are.
But first, before completing our experiment we should acknowledge a couple of points often made by conservatives who want to reduce tax rates for top income earners. They justify their position by correctly pointing out that the rich already endure the highest rates and pay the majority of taxes. And they're right. According to a recent Internal Revenue Service report, in 2009 the top 5 percent of income earners paid 44 percent of all income taxes and the top 10 percent paid more than 50 percent. On top of that conservatives also correctly point out that 45 percent of households don't pay any income tax at all.
But, the interesting thing is that when those figures are compared to the percent of wealth and property owned by the richest Americans -- the property the federal government protects for them -- it turns out they're getting quite a break under the current system.
If the wealthiest 5 percent of Americans paid taxes in proportion to the value of what they're paying to protect -- the way we pay for insurance -- instead of contributing 44 percent of tax revenues, they would instead have to contribute 61%. And the top 10 percent, instead of contributing just over 50 percent, would contribute 83 percent. Meanwhile, the bottom 90 percent of taxpayers, the middle class and working poor who currently contribute about 48 percent of tax revenue would see their share drop to just 17 percent.
Conservatives and libertarians who are faithful to their principles will recognize this as the true "fair tax" for which they have argued for two decades. And for liberals this approach accomplishes the redistribution of the tax burden that relieves the middle class for which they have argued for just as long.
Plus, this approach would also raise standards of living across the board and powerfully stimulate the economy by putting more income in the hands of people who would spend it rather than bury it in trust funds. None the less, the political reality is that this plan has no chance of being enacted or even considered and in many ways that is a measure of our hypocrisy and timidity.
Of course, even if it were enacted, we would still have to come to agreement on which additional functions the federal government should perform and the associated cost. Still, as the President and Congress enter the next round of tax and budget negotiations, it's good to be reminded of what equally shared sacrifice as determined by the market looks like and how far from it we are today.
(The following essay was written for the "This I Believe" oral history program and will be recorded on November 21, 2011 at Shepherd University.)
Last year while filling out a computer dating profile and trying to offset the truth conveyed by my pictures, which can be summarized as, “bald, middle-aged, pencil-neck geek”, I experienced a small identity crisis. It happened when I came to the question about faith.
The options were generous – Baha'i, Buddhist, Christian Catholic, Christian Protestant, Jewish, Muslim, and others along with atheist, agnostic, and the ambiguous “spiritual but not religious”, which sounded suspiciously like taking credit for believing without the responsibilities. Anyway, the question stopped me for two reasons. First, I was looking for a date and . . . well, you know. But, I bravely defeated the temptation to dissemble only to encounter a bigger problem – I didn’t know what I was.
It wasn’t for lack of consideration. After all, I was once a philosophy major and had even been confirmed in the Lutheran church. But that was never more than a formality for my parents or me.
We just weren’t religious, which didn’t mean there weren’t occasional clerical encounters. Once while hitch-hiking at age 14 I was picked up by a tent preacher who was holding a revival. He asked if I was a Christian and, being a precocious snot, I opined that I thought not because at the time I was reading Hugh Schonfield’s book, “The Passover Plot” that purported to debunk the miracles of Jesus. The preacher gave me a dire look and said archly, “You know that book was written by a Jew!”, his implied meaning eluding my adolescent understanding altogether. At about the same time, the reverend at the Lutheran church where I was confirmed (and had ever since been absent) showed up on our front porch expressing concern for my soul to my equally unconcerned mother. Otherwise, I’ve been pretty much religion-free and I suppose faith-free as well.
But, the question on the profile demanded an answer. Although I could have checked “Christian Protestant”, it would have been hypocritical. And “atheist” was too dogmatic. Even “agnostic” missed the mark by suggesting a depth of contemplation about faith that far exceeded the amount I’d given it. For the truth is, thoughts of God and faith rarely cross my mind I suppose because their absence triggers no anxiety, creates no void, leaves no questions disturbingly unanswered.
Our understanding of the physics and biology of our world, although never completely settled, seems sufficient to me and, as important, moral principles such as love, compassion, duty, and charity are comfortable as well because I feel them spontaneously as I think all or at least most people do. And while I don’t always agree with others about how those values should be interpreted and applied, I know we share a common impulse to nurture and care. In that spiritual bond I comfortably place my trust.
So, in my dating profile I became “Spiritual but not religious”, because, I realized, it confers all of the responsibilities even in the absence of belief.