Monday, August 22, 2005

De-Mushy, Revisited

Reader gljunket reminded me that I had promised to start a conversation about Mark Satin's 12-point proposal for a creative-centrist platform. I'm not really a policy expert - far from it, as a matter of fact, but I guess I brought this on myself. So without any further adieu...

1. Balanced budget amendment. I don't really have much to say about this -- it's a natural part of any sane platform. What it would take to move it through Congress, where spending bills conjure crazed lust like the scent of freshly smoked chorizo, is another matter entirely.

2. Flat tax. I agree with Satin that our tax code is too complicated. However, as another Mark points out here, there is a logical leap from saying "our tax code is too complicated" to saying "we need a flat tax."

Those with greater incomes have a greater ability to pay. Satin acknowledges this somewhat by including a large personal exemption of $20,000 for individuals and $40,000 for a family of four. As an individual who makes about $20,000, this is undeniably attractive to me. However, I would be remiss in not pointing out that our balanced budget amendment, above, would require that the government makes enough money to cover its ass, and that many of the last 10 platform proposals require significant funding. It is not at all clear to me that Satin's tax proposal would cover the needs of the federal government, even assuming a massive reduction in pork. If not, his flat tax could turn out to be seriously regressive, especially if it were expanded to include a sales tax (like the so-called "fairtax").

I could potentially be persuaded of a flat tax for work income, given the significant personal exemption above. However, I'd be incredibly leery of applying this principle to investment income for anything other than retirement accounts. As the more sane Democrats are arguing nowadays, we should value work over wealth.

3. Patient capital. Pass.

4. Require cleaner cars. I'd add that we should significantly up our R&D investment for alternative fuels, especially biofuels (although watch the agriculture subsidies rocket if that ever takes off). And we should probably expand the use of nuclear energy as well. The old-school lefty in me isn't wild about that last one, but hey, France did it.

5. Minimum retirement income of $15,000/year. I'm not sure what to make of this one yet, honestly. There's probably a whole separate post or two about it in my head, hopefully to be published sometime in the future. For now, I'll say that I'm very wary of benefits that get expressed in dollar amounts without being tied to any other criteria.

6. Universal health care via private insurance. Not an awful choice, and certainly better than the status quo. You can read more about Satin's thinking here.

That said, I'd have to qualify this as the least radical of his radical-middle proposals. It just doesn't seem very inspired; I'm not sure why, exactly. Perhaps because, like HillaryCare, it's a rather incestuous private-public alternative to single-payer health care; private in name only, or PINO for short.

Why is this? Because the level of federal subsidation involved would be considerable. As we all know, health insurance is not cheap; divorced from the group rates achievable by employers, it is even more expensive. Much more expensive than auto insurance, which Satin compares it to. My guess is that the majority of taxpayers would have trouble paying for mandatory health insurance without some kind of subsidy. What results is an indirect subsidy to the health insurance providers; given what we know about subsidies, we can only expect it to increase over time.

7. Education reform via utopian fantasy. Okay, I shouldn't be so snarky. Actually, Satin and Miller are completely right on this topic; for all the promotion and criticism of NCLB, the need for competent, empowered teachers has much more to do with solving our educational system's woes. However, is the "grand bargain" Miller describes politically possible? My guess is that it's definitely NOT possible given the status quo; the Democrats would alienate a huge fragment of their base, and the Republicans have staked out a very different terrain with regard to education.

8. Universal parental counseling and preschool. Took me by surprise. Seems like a good idea, but a little touchy-feelie.

9. A nest egg from birth for poor children. I find this and the next one to be the most intriguing of Satin's proposals. There are some problems with it -- for instance, the determination of who's eligible seems rather arbitrary. For instance, what if a poor kid's parents strike it rich five years later? Or worse, what if a non-eligible family has a crisis and becomes poor after the child is born? What protection is there if the market goes splat? But these don't seem like insurmountable challenges to me, and the expenditure is really pretty modest.

10. A national service draft. Not the most popular of Satin's proposals, if you look at the numbers -- but if done right, I think this would sell. Calls to service always resonate with people; I'd say one of the mistakes the current administration has made, actually, is not to call people to service more than it has. I remember when, about a year after 9/11, Bush gave a big speech about the importance of service, calling on every citizen to volunteer for 2 years. It was one of his more impressive speeches, and yet it was quickly forgotten, because there was no follow up.

Satin's proposal might help military recruitment; it would definitely help national guard and peace corps/americorps recruitment. It would help create a culture of service, which in a society that values competition and greed as much as ours seems wise to me. I'm in favor.

11. A whopping increase in foreign aid. I know amba's itching to give Satin a smackdown on this one. The basic problem with foreign aid is that so much of it ends up getting diverted away from the people who actually need it -- and so often goes to line a dictator's pockets. I don't know enough about Sachs' proposals to really say if he's right or not, but that would definitely be my major concern here.

12. Opening the agricultural and textile markets. I'm strongly in favor of this. However, it's relationship to #11 - which might very well act like a subsidy to third world farmers and weavers - needs to be considered. I know it's hard to be a family farmer in the third world; it ain't easy in the first world. If we remove our subsidies here and give them to farmers in other countries, I wouldn't blame our farmers for becoming seriously pissed off.

22 Comments:

At 1:06 PM, Blogger Jerry said...

Tom -- you mention the "so-called 'fairtax.'" A friend turned me on to this idea,and I've read a lot of things about it that are appealing. However, I notice that it has only Republican support, and I always get nervous when Repubs get together to advocate tax reform. On the other hand, Dems are probably a little too much in love with every page of the million-page tax code, which may explain their lack of support for it.

What I'm looking for is a good, honest argument against FairTax. Can you make one, or point me to one?

 
At 2:32 PM, Blogger gljunket said...

THANK YOU, for renewing the topic! Very provocative, and I hope you get a lot of comments. For what it's worth, I totally support the balanced amendment point - gotta be a priority; do favor a flat tax but realize it'll never fly, so very curious about "fairtax" (never heard of it!); VERY skeptical of huge foreign aid, but agree with the principle; totally support National Service -- BIG MISTAKE to not implement it back when the draft was eliminated, OR as you say, after 9/11.

 
At 3:04 PM, Anonymous Anonymous said...

Thanks for the Chorizo link! They are to die for!

 
At 3:34 PM, Blogger Tom Strong said...

Jerry,

Sure!

An oldie but a goodie: Don't Buy the Sales Tax by William G. Gale .

There's also a good, critical discussion of it on Free Republic and Wikipedia.

 
At 3:42 PM, Blogger Tom Strong said...

My own simplistic take on it: Like it or not - and I don't, really - this is a consumer culture. A national sales tax might increase our paychecks, but the increase in prices would be shocking to people. And the simple fact is, for most of us the size of our paychecks depend on other people buying our products and services.

Raise the prices of everything, even common necessities, by 23% and you will see a huge shock in consumerism, as each dollar is suddenly worth much, much less. That in turn will just ruin the economy, and that 23% raise we get will be all but negated.

I could be wrong, but it smells like a crackpot idea to me. And the fact that super-optimist Reihan Salaam likes it means to me, God help us all.

 
At 5:55 PM, Blogger Jerry said...

Tom: Wikipedia, don't know why I didn't think of that ... looks thorough, and more up-to-date than the Brookings link. Thanks a bunch!

 
At 5:58 PM, Blogger Jerry said...

gljunket: Tom gave you some good anti-fairtax arguments. The best pro-fairtax arguments I've seen are at the FairTax home page.

Something to keep in minds as you read both is that the existing FairTax bills have something like 50 Congresspeople co-sponsoring it, all of whom are Republican, and one Senator sponsoring, also a Republican. What does that mean? I don't know, but it means something.

 
At 8:40 PM, Blogger Tom Strong said...

Never in my life did I think I would live to see bonsai spam. We've entered a brave new world, folks.

Anything we can do about this?

 
At 8:45 AM, Anonymous Anonymous said...

Next comes bonsai enhancement spam. I get up every day and delete all the stuff like this that I get. Takes a couple minutes. For some reason I get a lot of the gambling spam.

Michael Reynolds
And for the best in moderate blogging go to www.mightymiddle.com

 
At 9:13 AM, Blogger Jerry said...

Tom, talk to Jeremy at Charging RINO. He's been having to deal with this crap -- don't know if he's made any headway or not.

I'm once again left to wonder, who is buying stuff from these people? Good lord.

 
At 9:54 AM, Anonymous Anonymous said...

I would hope that you would take a closer look at the Fairtax and not be so critical. The claim is that it is inherently regressive, but that is the furthest from the truth. In actuality it is the ONLY completely progressive tax plan possible. Everyone below the poverty line pays ZERO in taxes thanks to the monthly prebate that every American recieves. The Flat Tax has the potential to be the most regressive of all, when everyone making above $100,000 a year finds out how easy it is to get a bank account in the Cayman Islands or Narutu with an easy to use debit card, then every bit of teh tax burden will be passed on to the lower and middle class. A sales tax cannot be escaped in this manner. No more hidden corporate taxes in our goods and prices plumet by 18-22% before the 23% is added and we are right back to where we started in prices (roughly). Then we have every illegal activity that is not being taxed such as illegal imiigrants, drug dealers, and Barry Bonds signing autographs. This is estimated to be 1 to 2 TRILLION dollars that is currently untaxed. The Fairtax is the ONLY plan to keep America competitive and Free. Go and pick up a copy of "The Fair Tax Book" by Neil Boortz. Yes, most of the time he is a liberal bashing moron, but in this case, he has toned his rhetoric down and is just presenting the facts of teh Fairtax. Give it a chance and find out the facts before you dismiss it simply on the basis of who is supporting it.

 
At 10:04 AM, Blogger Alan Stewart Carl said...

I'm deleting it all now. Never had a problem until you and Amba started posting here. Hmmmm...do you run a bonzai farm?

Only way to prevent it is to make all commenters register with blogger. But that drops the number of comments we get WAY down so I'd prefer not to go that course.

 
At 1:10 PM, Anonymous Anonymous said...

Don't be so quick to judge the FairTax.

Harry Reid himself cosponsored the bill last session.

 
At 2:00 PM, Blogger Jerry said...

Alan: As Charging RINO found out, even disallowing anonymous comments does not do the trick. Apparently spammers can register valid names easily enough that it's no hindrance to them to have to post with a registered name. I say you & everyone with a blog here should push them to require visual verification for registration.

 
At 2:11 PM, Blogger Jerry said...

anonymous (1:10 pm): Unless I'm reading this wrong, Saxby Chambliss, R-GA, was the only sponsor in the last session of the Senate.

 
At 6:47 PM, Blogger Sam Nicolas said...

I had a chance to review Mr Satin's proposed "platform" and my take on it is posted at The Daily Belch.

Sam Nicolas
www.dailybelch.com

 
At 8:04 PM, Blogger amba said...

Yeah, Tom -- I'm getting a hell of an education on foreign aid from a friend who's in that business. He's starting a foundation the purpose of which is to study the most effective and cost-effective ways to help struggling countries up out of the mire. They all require considerable political reform on the ground, because unless you have a vessel that isn't full of holes, any money you pour in is going to pour right out again -- usually into some kleptocrat's pockets.

He just sent me a huge packet of printouts on the subject. I'm so glad foreign aid is #11, because I'm exhausted right now. Maybe by the time we get down to #11 I will have recovered enough to put something cogent together. Meanwhile, this post is a start. Watch me learning as I write.

 
At 8:06 PM, Blogger amba said...

BONSAI SPAM???????

 
At 8:08 PM, Blogger amba said...

Wait a minute -- Blogger DOES have visual verification. Go look at Ann Althouse's comments, she's using it!

We just have to find out how to activate it.

 
At 10:36 PM, Blogger Alan Stewart Carl said...

Good work, Amba. I didn't know blogger offered that feature. I've turned it on. Let's see if it works.

 
At 1:49 PM, Anonymous Blue Cross of California said...

We have a major health care crisis and I hope something can be done very soon to help prevent it and help many receieve health coverage.

 
At 1:37 PM, Anonymous Anonymous said...

Sales tax is more burdensome for the poor who have to spend all their income to survive than for the wealthy who only have to spend a fraction of their income to live comfortably. It is unfair for the poor to be burdened more than the rich.

Part of the reason we would like to see income tax done away with is because we have a sense that the rich don't pay their fair share of taxes. However, if income tax loopholes were closed, it would force the rich to pay their fair share. No loopholes exists that can be closed to force the rich to pay their fair share of sales tax if they simply choose not to spend all their income. And many are rich enough that they don't need to spend it all.

In a sense individuals rather than the government determine how much they will pay in taxes. Income tax provides the government much more control over how much tax someone pays than sales tax.

Tax is paid on a new item. If it is sold later at a reduced price as a used item, the reduced price is based on the total amount paid for the new item, not simply its pre-tax value. This is the hidden tax of the sales tax system. To claim that used items are not taxed is misleading. To complain about hidden tax in the current system and not acknowledge this hidden sales tax is hypocritical.

Because state and local governments employ people who do not produce taxable goods or services, they will be required to pay the federal government an amount equal to 30% of wages paid to their employees. This increase in government operating expenses will be passed on to citizens in the form of increased state and local taxes. This is another hidden tax.

Sales taxes is always there even when one loses a job and has no income. Proponents of sales tax see this as a good thing, since government revenue will be more stable. In other words, why should the government suffer just because the economy is going through a difficult period and people are hurting?

Many people who would have been self-reliant otherwise and could have made it on their own will become dependent on the prebate. Moving in this direction is immoral.

Money provides incentive. The larger the family, the larger the prebate. This will encourage poor, uneducated, single women to have more children.

There will be incentive for the rich to purchase items abroad and avoid sales tax. When chosing a location for a $20M mansion (pre-tax value), one might consider Mazatlan rather than Carmel with its additional $6M in sales tax. Buying a yacht in Italy and keeping it docked in the Bahamas might be cheaper than doing it locally.

If the government needs to increase revenue, it will increase the tax rate, which will decrease spending. Decreased spending will in turn slow the economy and spending will decrease even more. To increase revenue by 1%, the tax rate will need to increase by significantly more than 1%.

The government cannot require tax payment for any transaction it cannot verify. Since the seller is responsible for collecting and sending tax to the government, verification must come from the buyer. The government cannot require individuals to report their
purchases. Instead it will need to monitor every transaction of every individual, or it will not be able to verify the amount of tax due from sellers. Paper currency will disappear, and bartering will become illegal. The government will know about about every purchase you make: when, where, what, and how much. The monitoring system will be expensive to implement, operate, and keep secure, because it will have to be installed at every possible point of sale. It will be hacked into from time to time. The government will know whenever you buy s, rent a flick, or purchase a jar of Preparation H. The monitoring system is as inevitable as the current system's requirement that your employer, banker, and stock broker send in verification of your income. If you are concerned about privacy issues and the IRS under the current system, just wait until sales tax is implemented.

Companies will be exempt from sales tax but individuals will not. Tax will be collected on new items but not on used items. It is inevitable that individuals will invent clever ways to make personal use of company goods and services, and to sell new items as used. For example, corporations will spring up that provide services that are known only to the taxing authority. No one will ever buy these services, but they will eliminate tax for the CEO's, who only eat business lunches, drive company cars, and live where the office is. Companies will sell items as used after renting them out for a short period. They will also lease items they own to private individuals for an indefinite period at a cost approximately equal to the pre-tax value. All of this will be illegal, but it will be difficult to detect. The cost of eliminating tax fraud will likely not decrease as claimed.

Individuals who hire someone to work as a maid, mow the lawn, or babysit the kids will have to keep detailed records of payments. Every month they will be required to fill out forms and send the government an amount equal to 30% of what they pay for these services. That is, they will have to file once a month rather than once a year.

All goods and services purchased by every individual for consumption will be taxed at the same tax rate. That statement will continue to be true until congress reconvenes. Then rules will develop on what is taxed, who pays tax, and the tax rate. Ultimately it will become as complex as the current system. If you don't believe that, you neither understand politics nor polititians.

Tax will not be collected for U.S. goods and services sold abroad. That means foreigners will get a better deal on our products than we will. How fair is that?

For what it's worth, God's formal program for funding His kingdom on earth (the church) is tithing, which is based on income, not consumption. Is God's program less fair? Does God know something polititians don't?

 

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