Blumner bloviates on taxes

I'll take some more swipes at the great pinata of the St. Petersburg Times' editorial staff, Robyn Blumner.

Blumner wore her (pink-o) colors for an editorial column on taxation recently. Predictably, the column uses the fairness of progressive taxation as a premise.

Blumner begins by hinting that it is an outrage that a person with over $1 billion in income can pay a lower tax rate than teachers or mail-carriers. And it might well be, depending on why the rate is lower. Chances are the rate is lower because the former receives a different form of income than the others. Hard to say, however, since Blumner offers no details.

This imbalance is a consequence of decades of tax reforms that have benefited those at the top, with a marked acceleration under President Bush.
(St. Petersburg Times)

Uh, yeah, I figured she'd get around to mentioning George W. Bush.

If Blumner is aware of the manner in which capital gains tax cuts are more likely to return tot he government in the form of revenue (documented here) than a cut in income-tax rates in the lower half of the income scale, she's not telling.

Liberals really do have an interesting view of fairness. Their view of fairness tends to resemble Karl Marx's view of fairness. The rich, they believe, should not just pay more in taxes, but the rich should pay at a higher rate. In simple English, the tax system can only be fair if it is unfair (it needs to punish those with more money by taxing them at a higher rate).

Progressive taxation is inherently unfair, despite the prodigious spin applied by Blumner. A truly fair tax would look more like the Fair Tax proposal of John Linder, or the Flat Tax system used effectively in Eastern Europe and Russia.

Blumner isn't really favoring fair taxation. She's in favor of fairness in the distribution of wealth, and in favor of using the tax system as a means to achieve that end. If you have too much, the government needs to take more of it away to give to those with less. To wit:

The most well-adjusted and decent societies are those where the government provides basic social services (good schools, health care, police and fire protection), invests in infrastructure including human capital, and promotes a thriving middle class. A progressive tax code contributes to this model by having society's most advantaged citizens provide the necessary resources for a more beneficent society. It also tamps down income inequality, and since people tend to view their lot in life in relative terms, this increases general well-being.

But America has been moving in precisely the opposite direction. Since the 1960s, the widening of income inequality has been cheered on by a tax code that takes proportionately less from acquired wealth while keeping the burden on workaday paychecks.

Since we view our lot in life in relative terms, we should all be poor. That way we'd be relatively just as rich as the richest person. And this will increase our general well-being. Makes a great deal of sense, no?

Note the way Blumner simply exercises a bald value judgment with her opening sentence above. The most well-adjusted and decent societies provide health care as a government service. Why did I pick out health care? It should be obvious. The other three things she mentioned are typically supplied by the local government through property taxes. Those who own the most land supply the bulk of the money for the services. It's a relatively fair system of taxation because the rates need not discriminate, and it reflects the commonsense practice of taxing those who can afford to be taxed.

Honestly, it's just painful wading through Blumner's mindless twaddle. Note the role of the Alternative Minimum Tax in reducing progressivity (a piece of legislation designed to ensure progressivity):

[S]ome of the income bands below face higher overall tax rates than in 1960, thanks to the increasing pinch of payroll taxes and the Alternative Minimum Tax, which isn’t adjusted for inflation. For incomes between the 60th percentile and the 80th, overall tax rates have climbed to 21% today from 17% in 1960. If these trends persist, the authors say that in a few years the rich will end up paying the same overall tax rate as everyone else in America, meaning that in effect America has a flat tax.
(Wall Street Journal)

While Blumner bemoans the way the super-rich decrease our general well-being, she succeeds in overlooking the way the super-rich shoulder a huge part of the overall tax burden.

In 2002, the wealthiest one percent of the nation's taxpayers paid 33.7 percent of federal income taxes collected. In 1980, those top wage earners paid only 19 percent of the federal income taxes collected, the Tax Foundation says.
(New Mexico Business Weekly)

Blumner's statement about the difference between taxes on wage income and other forms of income reveals the error in her thinking.

For Blumner, it isn't fair that income from investments is taxed at a lower rate than income from a blue-collar job. But that's really only true if the purpose of taxation is to even out prosperity. That should not be the purpose of taxation. Taxation should provide necessary services, and derive its revenues from those able to pay the tax. Beyond that, the tax system should encourage economic prosperity. And that's precisely why taxing investment income at a lower rate than wages makes a great deal of sense. The CBO has it figured out. It's time for Blumner to get a clue about it.