Adam Smith and Equal Sacrifice

I keep reading Adam Smith quotations. What do I know of Adam Smith? I’ve never read him and I don’t know if he knew what he was talking about, but I’m always reading quotations from him…

by Charlie Leck

Adam Smith, in book five of the Wealth of Nations, had this to say about asking the wealthy to pay a bit more in taxes than that paid by lower income citizens…

"…it is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion", because a tax on "the luxuries and vanities of life [which] occasion the principal expense of the rich... would in general fall heaviest upon the rich; and in this sort of inequality there would not, perhaps, be anything very unreasonable."

I read that quotation in The Guardian, a British news source. It was on a web publication that was published on 18 October 2006. The argument has been going on for a long time.

Robert Reich, a professor at the University of California (Berkeley) and a former Secretary of Labor during the Clinton administration, argues that citizens should make equal sacrifices when it comes to paying income taxes – that paying equal percentages of income doesn’t make sense. Well, I’ll be the first to admit that Reich is really a liberal; but, believe me, he’s also brilliant and I think he makes sense on this particular subject.

“Equal sacrifice means that in paying taxes people ought to feel about the same degree of pain regardless of whether they’re wealthy or poor. Logically, this means someone earning $20 million a year should pay a much larger proportion is his income in taxes than someone earning $200,000, who in turn should pay a larger proportion than someone earning $50,000.

“But Romney’s alleged 13 percent tax rate is lower than that of most middle class Americans who earn a tiny fraction of what he earns.

“At a time when poverty is increasing, when public parks and public libraries are being closed and when public schools are shrinking their offerings and their hours, when the nation’s debt is immense, and when the 400 richest Americans have more wealth than the bottom 150 million of us put together – Romney’s 13 percent is shameful.”  [Robert Reich: Mitt’s 13% Tax, 17 August 2012]

Now, as has happened a number of times, I will likely have some reader send me a comment accusing me of just being jealous and urging that I leave the rich alone. I just want to say, for the sake of honesty and in the hope it will make my advocacy more powerful, I pay federal incomes taxes at a lower rate than the rate paid by many citizens who make 10 times less than I do. It just isn’t fair. “So, send a contribution to the fed,” some commenter will say. “No,” I reply. I want the tax adjustments to be across the board so that we can truly do something about the deficits and debts we have accumulated in this country because we have not fairly taxed those of extremely high annual incomes and high investment earnings.

Raise my taxes by increasing the rate that all higher earners must pay!
Warren Buffet, whose voice is a million times more powerful than mine – perhaps a billion times more – has been asking this for years. It only makes sense.

The concept of Equal Sacrifice makes sense!

Here, on the web site of the Library of Economics and Liberty you can read about Adam Smith (1723-1790).

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Read My Lips: Raise My Taxes!

A report by the Congressional Research Service leaves little doubt. The income gap has grown enormously!
by Charlie Leck

Preamble!
Is it important that I state up front that I am not in the middle or lower income tax brackets. In a fair world, I should be paying more taxes. This statement is only a preamble to the subject of today’s blog about the dramatic growth of the separation between the wealthy and not-wealthy in this nation. I only think your understanding of my standing makes the following statement more credible.

A report has just been released by the (nonpartisan) Congressional Research Service that seems to explain the reasons for the growing divide in economic status in America. For a full explanation of the report I recommend this story in Monday’s edition of the Washington Post. If you really want to read the report itself, you can find it here.

What you’ll find is that Warren Buffet has been right-on in what he’s been telling us about the income tax rate for years; essentially that “the share of total after-tax income attributable to dividends and capital gains grew by 40 percent, faster than any other category.” Those in our society who receive such income pay a much smaller rate on it than the fellow who files his w2 forms on his earned income at the end of the year.

George W. Bush’s income tax cuts for the wealthy made an enormous difference in this country and are primarily responsible for this huge and widening gap. “…the Bush tax cuts of 2003 blew it wide open by slicing the top rate on dividends and long-term capital gains from 28 percent to 15 percent.” (Don't get me wrong, a Congress controlled by Democrats had to approve the Bush tax cuts!)

And, the impactful recession we’ve just gone through has made matters even worse by deadening the ability of middle class income to grow.

“Not only does this foster inequality, it also creates an incentive to seek investment income rather than the ordinary kind…”

The report argues convincingly that this income of the wealthy has already been taxed at the corporate level to the tune of approximately 35 percent. While a hike in the amount of taxes the wealthy pay on dividend and capital gains taxes seems appropriate, a lowering of the corporate tax rate might also make sense.

One has to decide whether this growing and enormous gap between the haves and the have-nots in this country is creating an unhealthy society. To me, there doesn’t seem to be much to argue about.

Our federal tax system must be reformed in a manner that will enable a strengthening of the middle class.

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The Rich Must Pay their Fair Share III

Why is it that we don’t just do the obvious!
by Charlie Leck

Back in November of the past year, Warren Buffet, of the Berkshire Hathaway Company, told Christiane Amanpour, of the This Week show, that the wealthy should be paying more taxes. [See this Bloomberg News story about the interview and watch a video of Buffet’s discussion with Amanpour.]

"If anything, taxes for the lower and middle class and maybe even the upper middle class should even probably be cut further," Buffett said. "But I think that people at the high end -- people like myself -- should be paying a lot more in taxes. We have it better than we've ever had it."

Buffet doesn’t buy the argument that the economy will suffer if taxes are raised on the wealthy. Amanpour suggested that “they” keep saying that the lower taxes for the wealthy “energizes business and capitalism.” Buffet replied with firmness.

"The rich are always going to say that, you know, just give us more money and we'll go out and spend more and then it will all trickle down to the rest of you. But that has not worked the last 10 years, and I hope the American public is catching on,…"

It’s quite silly that we shall try to solve this debt crisis on the backs of those who can least afford to give or have resources taken from them.

Buffet is a multi-billionaire who is considered one of the wealthiest people in the world. He has pledged to give half of his wealth away.

“If anything,” Buffet said, “taxes for the lower and middle class and maybe even the upper middle class should even probably be cut further… But I think people at the high end – people like myself – should be paying a lot more in taxes. We have it better than we’ve ever had it.”

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