Friday, September 02, 2005

A Civilized Commentator

I often disagree with Jim Maule. He is somewhat conservative and, as close readers of this blog may have observed, I'm . . .not. His most recent posting, Taxes and Sustaining a Civilized Society, is, however, a must read regardless of one's location on the political spectrum.

In a sense, it ought not be necessary for any educated adult to read Maule's essay, since the lesson he teaches is one that we should all have learned by now--taxes are necessary to pay for that community which we call civilization.

At times, I think that Maule is being too charitable. For instance, he says:
During the past several decades, the anti-tax movement gathered steam and rolled through the political landscape. The impetus for this movement is understandable. Aside from corruption and other commonly held unacceptable activities, the most significant object was the use of tax proceeds to fund government programs that did more to enrich bureaucrats than the intended beneficiaries, and to nourish government programs that were inconsistent with the goals of those who flocked to the anti-tax movement. Cries for tax reduction reflected a frustration with a political process that was not responsive.

Unfortunately, the cries for tax reduction drowned out the rest of the argument. Full and open debate on how tax proceeds ought to be spent took a back seat to the rush to find ways of "cutting taxes." Trickle-down or not, even with the occasional tax increase (including one that doomed the re-election of one president), taxes were cut. Tax revenues increased at times as the economy grew, with tax cut supporters claiming that tax cuts were the cause of the economic upswings. Does that mean cutting taxes to almost zero would generate almost infinite tax revenues? No. The economy bounces up and down for many reasons, tax being just one, and not necessarily the most important one.
My views here are well-known. I do not view the rabid tax cutters with nearly Maule's degree of equanimity. Thus, I frequently refer to them as fools and knaves. I firmly believe that the radicals of the tax cutting movement possess the same true-believer psyche as our homegrown Communists of an earlier era. Greg Mankiw was right to brand them "charlatans and cranks." (If you're still not convinced that these people are of a piece with, say, the Jim Jones Kool-Aid drinkers, take a look at Grover Norquist's latest (via the Daily Kos) where he argues that abolishing the estate tax will assist the victims of Katrina. Of course, even Norquist didn't have the balls to articulate it as "A rising tide raises all ships.")

However, I agree with the core of Maule's argument:
The nation allegedly is at war. We are allegedly at war with terrorism, or terrorists, or terrorist-sponsoring states, or insurgents, or well, bad people, I suppose. Whether or not one supports none, one, or all of the various military actions undertaken in connection with this war, it is inconceivable to me how one can disagree with the notion that if there is a war the war must be funded because wars cost money. Would opposition to specific military campaigns been stronger, or developed sooner, had taxes been increased to fund the campaign, as good fiscal management demands? Maybe. My guess is that those who supported a campaign, or at least most of them, would have acquiesced, reluctantly or otherwise, to a tax increase. . . . . I've been told, and I've read, that when the nation went to war in 1941, and even as it was preparing to do so in 1939 and 1940, taxes were increased. I don't know if there was much griping, or how extensive it was, but people knew that war means war. It requires sacrifice. My parents have described what life was like under a rationing program for a long list of items. The nation allegedly is at war. A few individuals and their families, constituting a very tiny percentage of the population, have made and are making sacrifices. The rest of us, it seems, are living lives that somehow don't seem consistent with what life is like during war. Perhaps I am wrong, but for me, war is like pregnancy. Either a woman is pregnant or she isn't. Women cannot be partially pregnant or have limited pregnancies. Concepts of limited war or partial war get used not only to create the sorts of conditions that preclude victory, as happened in Vietnam and Korea and as is beginning to happen in Iraq, but also to deflect the effects of war-waging decisions so that war seems, somehow, more palatable. War, at times, unfortunately, is necessary. War, though, should never be palatable.

Now the nation faces another, more serious catastrophe. Hurricane Katrina has all but destroyed a city. It has closed the nation's largest port. It has shut down a significant portion of gasoline refinery capacity. It has closed and damaged much of the Gulf of Mexico oil and natural gas production, the latter getting very little attention, but wait until October's chills set in for that to flare up as a mainstream media and politician soundbite. A quarter of the nation's coffee supply is rotting in New Orleans warehouses. Steel, zinc, rubber, and bananas must find their way in through some other port, if that is possible. Most of the grain harvest, and other domestic agricultural product, has no way out. If 9/11 disrupted the economy, Hurricane Katrina has the potential to devastate it.

And thus I turn back to taxes. Money is being spent, and more money will be spent, by governments on rescue, relief, and recovery. Government surely will spend money on rebuilding, as will the private sector. Where does government get that money? Does it borrow, thus increasing the deficit and thus fueling the "foreign ownership of dollars" problem? Does it raise taxes, thus taking money out of the private sector? Doesn't the private sector have a better chance of spending the money more efficiently than does the government? Perhaps taxes need to be raised. Certainly, they should not be lowered.
Maule goes on to argue (I think) for a fairly high degree of progressivity in any new tax enactments:
It is time to consider raising taxes on those whose taxes are not as high as they ought to be. Those folks happen to be the ones enjoying low tax rates on dividends and capital gains. I've yet to see the evidence that lowering taxes on dividends and capital gains, but not on wages is better for the economy. Many of the displaced people in the Gulf Coast region have been paying taxes at higher rates than those imposed on dividends and capital gains.
He then goes on to discuss an end to dividend tax rate preference and the current effort to repeal the estate tax. (However, he is willing to consider a full estate tax repeal in exchange for taxing capital gains at death subject to what he terms a "sensible" exemption. Here, we part company.)

Finally, he directs an appeal to the tax reform commission that will soon be issuing a report on ways to restructure the federal tax system. Maule is pessimistic that the nation can "reset its course." In an sense, I am both more pessimistic and more optimistic than he is.

On the side of pessimism, I have no faith in the tax reform commission. I think that too many of the people who will populate its warrens will be ticket-punchers, seeking to get one more star on their report cards.

However, I am optimistic that there are sufficient numbers of political leaders (today, the Mayor of Houston comes readily to mind) who recognize that, ultimately, Benjamin Franklin was correct: We must hang together, or assuredly we shall all hang separately.

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