September 17, 2010

Bush Tax Cuts Need Adjusting.

Raising the taxes of the wealthy, while maintaining the tax rates for the middle class makes sense and is justified. The rich have gotten richer at the expense of the middle class as a result of our government not doing its job of defending our freedom.

We have a historically large disparity between the income of the wealthy and the middle class. A significant reason for this disparity, as compared to earlier times in the '70's and '80's, is the government turned its back on its responsibility to govern "free markets" and allowed such markets to be controlled by oligopolies.

A central role of our government is to protect our freedom. This includes not only from foreign enemies, but also enemies from within. Why are we not quoting Justice Louis Brandeis when he said in 1928:

“Experience should teach us to be most on guard to protect liberty when the government’s purposes are beneficial. Men born to freedom are naturally alert to repel invasion of liberty by evil-minded rulers. The greater dangers to liberty lurk in insidious encroachment by men of zeal, well-meaning but without understanding.”

I am not so sure of the "well meaning" part of the above quote. Private markets and free enterprise are at the core of what conservatives stand for. So why are they not demanding our markets be protected from tyranny? What our representatives in Washington should be doing is fighting to make the private sector of the economy free from the oligopolistic powers preying on many of our industries. This in turn will result in wages of the middle class coming closer to historical differences to the upper class. This neglect of protecting our freedom from the consolidated power of oligopolies is directly related to corporations and unions being able to contribute to "our representatives" campaign funds.

One result of the slow erosion of free markets is the governing bodies of these companies, the Board of Directors, are no longer concerned about delivering the best product to the market at the lowest cost to the consumer, us citizens. They know if they increase their price for goods and services other members of the oligopoly will do the same. Therefore, they freely reward senior management with egregious compensation packages to keep the oligopoly alive.

As a result, we have a huge compensation disparity between the upper and middle class. Further, the strapped middle class will spend a larger portion of its income than will the wealthy, and therefore it will provide more of a stimulus.

3 comments:

  1. Dear Sir or Madam,

    I have read several of your posts and find your thinking insightful. I have no idea how large your readership is. Do you have an interest in a dialogue?

    Regarding taxes, I believe the USA made a wrong turn in the 20th century with the institution of the income tax. The income tax was initially instituted as a way to tax those who grew wealthy by owning non taxable assets, the mortgage rather than the land at this concept's simplest level. Financial asset ownership, stock certificates stuffed in vaults in the beginning of the 20th century was hard if not impossible to trace. Along the course of the 20th century the tax burden was shifted from the holders of wealth to the high earners and then to the weakest of our society. Social Security tax is the most onerous of taxes for those lacking sufficient capital and earnings to escape this tax. Working "off the books" has become "the way" to start a small business and be able to compete; illegal immigrants work until they get caught and then leave the country; they compete and export capital. The ancient Roman republic over time taxed the weakest of its citizens and the part of its populace which had no voice. The Caesars changes all of that. They taxed the entire empire by its proportional wealth. This created the Pax Romana.

    In my opinion we need to replace all income based taxes with a simple low percent wealth tax. In 2008 when last I looked and before the drop in the US's net worth, a 3.5% wealth tax with an average $100,000 per individual exemption would have generated as much income as the Federal Government took in for the year and a 4.5% net worth tax would have resulted in a balanced budget.

    What I advocate is a complete abandonment of all income based taxes and the institution of an annual 4% net worth tax with an exemption of $4000 times the payer's age.

    The benefits are myriad to name a few:
    1) Reduced incentive to speculate on unproductive assets.
    2) No tax on work, the muscle, or consumption just on fat, excessive wealth accumulation - oligopoly.
    3) Complete removal of the friction caused by taxation on sale of assets to move them into the most productive hands.
    4) Elimination of all progressive and regressive taxes. Elimination of "the more you make the more they take" - appeal to the working man to work double shifts without getting kicked into a higher tax bracket.
    6) Elimination of the death tax.
    7) Elimination of special interest lobbying.

    I invite your response.

    Thomas J. Costagliola
    gotothomas@aol.com

    ReplyDelete
  2. I enjoyed your comment and apologize for taking so long to respond. I was on a trip where I had no access to the internet. I would love to correspond with you and share your thoughts with my web readers.

    ReplyDelete
  3. Hi Banicki,
    Let's connect on Facebook or LinkedIn
    Sorry about my slow response.
    Thomas J. Costagliola
    gotothomas@aol.com

    ReplyDelete