Thursday, December 1, 2011

Which Rich Tax Tack?

He may be one of the richest guys you've never heard of.

Nick Hanauer earned over $6 billion when he sold one of his start-up tech firms to Microsoft in 2007.  He's a venture capitalist in Seattle who's co-founded the True Patriot Network with Eric Liu, a former speechwriter for President Bill Clinton.

It's easy for conservatives to write off True Patriot Network and its "progressive patriotism" shtick as a liberal think tank in right-wing clothing.  But having Hanauer write an op-ed piece for the strictly-business should be compelling, if for nothing else but the sheer irony.

After all, Hanauer writes a provocative commentary in the official blue-blood One Percenter's online stock market bible eliciting an appeal to the masses for raising taxes on Bloomberg's readership base.  His curious assertion is that America's One Percenters aren't as good at creating jobs as our middle class is.  In other words, it's not the millionaires who deserve tax breaks, but the rest of us, since we're the ones upon whom our economy lives or dies.

It's All in the Math

Consider, he suggests, the storied purchasing power we like to imagine One Percenters enjoy.  Apart from the large homes and private planes rich people buy, most of them don't contribute much more to our economy than average folks.  Mostly because there are much fewer of them than there are of us.

Think of it as a matter of volume spending.  When the rich exercise their lavish purchasing power on a $2,000 suit while the rest of us can only spend $400, their ability to do so is actually less significant than when many more poorer Americans spend less money individually purchasing more suits collectively. 

Which benefits America most:  when one person buys a $5 million house, or when 100,000 people each purchase a $120,000 house?  Or, when one rich person spends $100,000 on a car, isn't that less important to our economy than when 100,000 middle class drivers spend $25,000?

To the extent that America's consumer-driven society needs people with spending power, logic dictates that having more people with enough to afford a satisfactory standard of living is better than having only a few people being able to afford a luxurious lifestyle.

Where Do Jobs Come From?

Which means that for a middle class to flourish in the United States, middle class people need lots of jobs.  Which is where many Republicans claim that taxing the rich disproportionately will cost us the very jobs we need.  But, as Hanauer asks, does taxing the wealthy automatically mean that employment rates suffer?

When it comes to creating companies that employ people, Hanauer points out that oftentimes, entrepreneurs use other peoples' money do to that.  Bank loans, venture capital - which is what he himself does now - and even government loans provide the bulk of start-up capital or long-term financing that pays salaries, secures raw materials, keeps the lights on, and acquires updated technology.

Eventually, of course, an enterprise needs to start making money so it can pay off its debts, stash away reserves in case of an emergency, develop new products, and grow.  In other words, everything that was happening before income taxes were lowered for the rich starting back in the 1960's.  According to Hanauer, anyway.

Rich people rarely use their own money to hire people, other than perhaps their household staff.  Besides, most hiring is done by corporations these days, not individuals, so where's the drastic economic impact on individual executives?

In other words, might the scenario of higher taxes decimating employment be more of a Republican myth than economic certainty?  Hanauer thinks so.  And frankly, I tend to agree with him.

In the past, I've argued that our middle class has become a marginalized asset, not only by the rich, but by many conservative middle class voters who apparently view themselves with the same contempt as their economic betters.

Overlooking the Obvious

But that's about as far as I think I can go with Hanauer's ideology.  Because although he makes a beguiling analysis of economic forces at work between the classes, he fails to recognize one key aspect of conservative conviction.

The government, to which taxes are paid, is not the answer to all our problems.  In fact, oftentimes, it is the problem.

Raising taxes on anybody - rich, middle-income, or poor - isn't a good way to fix what's currently wrong with America's economy.  Doing so fails to address some fundamental problems with government itself.

We have a bloated bureaucracy which wastes taxpayer dollars.  We have a terrifying debt crisis that grows worse by the minute.  We have entitlement programs that, in and of themselves, are well-meaning, but are woefully fraught with corruption, mismanagement, and outright failure.  We have a needlessly complex tax code, insufferable regulations, and entrenched redundancies, all of which are being managed by a political coterie of duplicitous micromanagers more concerned with re-election than stewardship of our nation's resources.

Resources which include not only its revenue, but the people who provide the revenue. No matter their income.

Neither am I convinced that disproportionately high taxes on a certain class of taxpayer is fair.  Just as I wouldn't want middle-income earners shouldering an unfair tax burden, I don't think we should expect the rich to do so just because they could more readily afford it.  Taxation shouldn't be a penalty for wealth, no matter how little or much of it you have.  Instead, taxation should serve as the basic mechanism by which government collects the minimum it needs to fund the services most of its citizens consider essential.

Therefore, we should not be talking about raising taxes just for the sake of raising taxes.  Nor should we talk about raising taxes on anybody before we address the flagrant waste taking place in our government bureaucracy.

If, after we've weeded out the excesses in our federal, state, and local bureaucracies, we still need to raise revenue to pay off our staggering national debt, then maybe we can look at taxing top income earners at a greater rate than the rest of us. After all, several of them have already asked us to.

A Conservative Pipes Himself Aboard

But even so, on this same day the liberal Hanauer has written on conservative about taxing the rich, conservative Republican Tom Coburn has written on liberal about stripping the rich of their ludicrous tax breaks.

In his equally provocative editorial for CNN entitled "End Welfare for the Wealthy," Coburn blasts his peers in Congress for being unwilling to strip $30 billion in perks such as interest deductions for luxury yachts and mansion remodeling from the tax code.

Coburn writes,  "it's hard to understand how limiting the mortgage interest deductions for yachts will hurt working families. Defending spending in the tax code is not conservative. Providing tax earmarks and deductions to millionaires is a tax increase on everyone who doesn't receive the benefit."

Now, speaking as somebody with relatives in job-starved Maine, where companies which construct luxury yachts provide desperately-needed work, I can kinda see where somebody from land-locked Oklahoma wouldn't understand how tax subsidies benefit the middle class.  But will rich people stop buying multi-million-dollar watercraft simply by losing its tax benefit?  Owning trophy boats is a status thing that rich people use to determine their pecking order in their stratified world.  In fact, I'm sure that those same folks could use the amount of money they pay in taxes each year as yet another calculation for their standing in the social register.

Fairness or Money?

At the end of the day, however, none of this is about money.  At least, it shouldn't be.  It should be about what's equitable.  Unfortunately, money controls American policy more than fairness does.  Especially when it comes to taxes.

The time may have arrived for middle-income conservatives to take stock of how much longer we can afford to be taken advantage of, by both abusers of our entitlement programs, and by One Percenters who think they can scare us by threatening to shut down even more jobs if their taxes get raised.

In capitalism, demand for products should stimulate job growth.  Not whether the rich think they're being taxed to death.  Otherwise, wouldn't we have an economy in which the rich give us work only because they can afford to?  What kind of capitalism would that be?

Where's the innovation?  Where's the national pride?  If it's come to blaming our economic woes on taxes the rich are or aren't paying, then what does that say about how spoiled we've become?  All of us?

Maybe that's why I get a bit intrigued when One Percenters like Nick Hanauer say they should be paying higher taxes because they need a viable middle class.

Sure, he can talk, since he's got his six billion stashed away now and he's set for life.  Financially, at least.  Still, good for him, I say. So why do some conservatives want me to feel guilty about wanting to be able to survive on a fraction of such wealth?

I don't get it.  Unfortunately, if they have their way, I probably never will!

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