Tuesday, September 09, 2008

Progressive Taxation and the Myth of Redistribution

The problem with conservatives using of the cliche' "redistribution" in response to any question on progressive taxation, is that it assumes that the income going to corporations and wealthy people is earned in the first place. Corporations are chartered by the government and given special consideration, avoiding some forms of liability, to accumulate capital for investment. Corporate charters do not address any aspect of fairness in determining how corporate income will be distributed. Corporations sole reason for existence is to maximize return to shareholders and minimize the cost of the factors of production, including labor, whereas the Constitution charges government with promoting the general welfare. So there is a conflict in the goals of these two institutions. Wealthy people and corporate executives are much more dependent on income from capital than from wages. So benefits accruing to corporations also tend to accrue more to the wealthy than to average wage earners.

In assessing what income is actually earned, all factors must be considered, not just who receives income under current law. Clearly corporations and their largely wealthy benefactors would not prosper to the extent they do if they didn't operate in a country with an established system of laws and infrastructure bequeathed to them by past generations. So it is not clear that just because someone earns an income that it should be attributed only to their own efforts. Some credit must be given to the system they operate under and the contributions of others in generating their income. This is particularly true of corporate income, where executives get to decide where the income goes, without much interference from outside sources. Under conditions of labor surplus this results in most of the income being diverted to owners of capital. Under labor shortages, more would be claimed by labor. But, under our current system, where illegal immigration and outsourcing operates largely unfettered, labor is at a major disadvantage in maintaining it's interest without government assistance.

Aggravating this conflict of interest is the fact that wealthy people and corporations have more influence on government through lobbying and campaign financing, whereas average wage earners have a much reduced voice in how laws are made. This allows the wealthy to create tax loopholes which favor their interests at the expense of the average wage earner.

The solution to this conflict could come from two different directions. First, corporate law could be changed to charge corporations with some measure of promoting the welfare of their workers, not only the welfare of their shareholders and executives. The other way, which is currently used, is progressive taxation. It will be difficult to make major changes in this arrangement, so, at least for now, we must be content with using progressive taxation to promote the general welfare. So the next time you hear a conservative claim income redistribution in response to a question of on progressive taxation, point out to them that it is only a means to compensate for the unfair claims on income, due to the advantages given to corporations and the wealthy by our corporate charters and lobbying laws.

Sunday, September 07, 2008

Advice to My Grandchildren

After living in Sun City Summerlin, Nevada and witnessing world events over the past decade, and the long campaigns over the last year, I've come to the conclusion that the best advice I can give to my grandchildren is to settle in an area with as much diversity as possible. That includes diversity in race, culture, education, lifestyle, income, wealth, and environment.

It seems to me that most problems are created when a majority of people share the same outlook. They come to believe that because they are in the majority their way of thinking and doing things must be the right way, and that people who don't fit the mold must be wrong headed or inferior in some way.

This seems to be true whether it's a country, a small town, a university, a corporation, a club, a religion, or any other organization where like minded people come together. Only if no group predominates do people actually come to think for themselves rather than follow convention to avoid being ostracized, or get in a rut simply because it's the course of least resistance.

I think I first came to realize this by living in a community where people come from all parts of the country. But, even here the people share a common characteristic, age, which seems to be a basis for many of their thoughts and actions. This is mitigated by having close association with family of widely varying age. Living in a city which is a broad mix of people of different backgrounds and wealth was another broadening experience. And, probably, living alone has been an influence on my thinking, not having someone who shares most of my values to reinforce the rightness of my thinking. All of these things have given me a much more open attitude towards life and people.

Seeing how a government controlled by one political party operated was another eye opener. Witnessing how countries dominated by one religion operated was another factor. Observing how the West, the dominant countries of the world over the last century, faced the challenge of new world powers like China, India and Russia was another factor.

And, finally, seeing how the country became polarized to the point of ignoring reality and important issues, to seek belonging to political tribes bound mainly by like identity, was the final factor in my coming to this conclusion. The extreme reactions to a candidate of black/white heritage and to two different women making their first foray into national politics illustrated the point.

It is my hope, that as time moves on, we will come to realize that the right way of thinking and doing things can only be discovered by taking into account the wide variety of ways people live their lives across the world. Only then, can we draw conclusions about the best way to live our lives.