Nobody likes having to pay taxes, not even Warren Buffett. But as a piece of legislation with the famed billionaire’s name on it went down in flames on the U.S. Senate floor on tax day, we learned the insane extreme our legislators are willing to go to stop them.
Should the richest Americans be allowed to avoid paying taxes on their investment income? Should the most successful investors, raking in billions, only have to pay 15 percent tax on it? Should Buffett get to pay a lower tax percentage than his secretary? On Monday the U.S. Senate said yes to all three, grossly distorting the idea of fiscal responsibility in the process.
In a perfect world, where everybody got along, everybody pitched in equally, and nobody ever victimized anybody else, maybe we wouldn’t need taxes. It would be the perfect balance of human sacrifice. We’d all do our share, and we’d all get what we deserve through some magical system that made everything we communally enjoy — roads, water, clean air and protection from crime, fire and warring nations — universal.
But our uniquely American standard of living isn’t free. It never has been. Human nature dictates that in order to protect ourselves from the freedom of anarchy, we need to all contribute to keep society together. That costs money. So we have taxes — the necessary evil of living in our great society — to pay for it.
Despite lessons learned in exactly what works and what doesn’t to bolster our economy, as the Keynesians argue with the Friedmanites over bottom-up versus top-down growth, we’ve entered a new era of absurdity in taking an eraser to the chalkboard of history class. And that’s given rise to an untenable precept from alleged fiscal conservatives: That the necessary evil of taxes isn’t necessary at all. It’s just evil.
Enter the “starve the beast” concept: highlight the national debt as a hulking harbinger of our doom, use it to encourage cutting all non-military, non-prison government programs, and outlaw the idea of raising taxes on anybody.
That’s where we run into the confusing array of politically aligned directives that seem to be grossly inappropriate bedfellows. The pro-war, pro-military spending hawks frequently find themselves in the same ranks as those who want to cut government spending and cut taxes, even for, and sometimes especially for, the rich. No coincidence that, according to a November 2011 ABC News poll, 67 percent of the Senate and 47 percent of Congress are millionaires.
The professed fear by our legislature is that any added (or merely maintained) tax burden on the so-called “job creators” would hurt their post-tax incomes and blunt the hypothetical future job creating they would be doing.
But in leaving the top 1 percent of earners with their lowest top tier tax rate in 80 years, as reported by the Urban Institute and Brookings Institute Tax Policy Center, we’ve seen exactly what we’d expect to see, given human nature. Those who were already very rich, particularly individual investment speculators, have done very little to add jobs while enjoying the lion’s share of the economic growth we’ve experienced in the last three years.
According to a study by the University of California published March 2, the top 1 percent of earners saw 93 percent of the income gains in the first year of the economic recovery alone.
And if those income gains came from investments (the Dow Jones Industrial Average has more than doubled since its crash level of 6,547.05 in 2008), then we’re getting nearly nothing for their gains at our expense. And despite this professed need to cut taxes on the rich so they’ll create jobs, we’ve created no mechanism to force them to actually do so. We can promise the top earners that we’ll keep their taxes low, but we can never be ensured that they’ll hold up their end of the bargain.
Of course the cries of “Buffett should just volunteer to pay more taxes” have resounded off the thick dome of the blogosphere ever since he suggested we force the super rich to pay more. But that point rings hollow to those who know human nature. Taxes are a necessary evil because, if we’re not forced to contribute, the richest among us will do anything they can to avoid contributing to the necessary good.