The formula to determine how much each employee gets to keep for living expenses is called “the tax code,” and those who contribute to the national product are called “taxpayers.” The managers deciding how the pile is spent are “politicians,” who are chosen every two years in a shareholders’ meeting called an “election.” This system worked pretty well for quite a long time – until recently. It is only within the last few years that something remarkable happened: The number of contributing “taxpayers” in the country for the first time has fallen to approximately 50% of the population. Meanwhile, the number of unemployed, retired, disabled or indigent citizens grew, as did the number of citizens who earned so little in part-time or low-paying jobs that they paid no taxes, as did the number of people labouring in the untaxed underground economy, as did the number of bureaucrats.
The end result of this epochal demographic and economic shift is that for the first time in American history, the people who actually work for a living and contribute to the common good – the “proletariat” in Marx’s version, and the “taxpayers” in ours – no longer control the company. Vote-wise, the scales have tipped in favour on the non-contributors and the bureaucrats, and suddenly they are the ones making the decisions about what to do with our collective gigantic pile of money – while those who actually created the pile through their work and tax contributions have become powerless. It is outrage over this very power shift that spawned the Tea Party, which is essentially a movement of taxpayers angry that they no longer get to determine how their taxes are spent. Historically speaking, the Tea Party movement can be accurately defined as a workers’ revolution.
– Zombie, these two paragraphs having already been picked out this morning by David Thompson as deserving of wider circulation and cogitation. The words Thompson uses to introduce them: “Where Marxism meets the Tea Party”.
We in the UK arrived at the situation described above in the late 1970s, and I have long suspected that the USA is now also having its Thatcher Moment, the Tea Party being Thatcher, and President Obama being Arthur Scargill.
Using Marxist language, even for good purposes, is a mistake.
And the state never was anything like a company representing the taxpayers – shareholders can sell their shares,taxpayers….. Also a nation of many millions of people were hardly anyone knows the candidates for elected office personally…..
This sort of thinking may have some connection with say Bedford New Hampshire(where taxpayers might be argued to be in charge – and even to vote for national candidates on the basis of their POLICIES, not media created image) but “Our Town” was not really a picture of the United States – even before the age of the Welfare State.
By the way….
An example of a “greedy capitalist” on political matters (remember according to Marxists, and communal “anarchists” [the “libertarian” left] the state is the management committee of the “capitalists”) is DONALD TRUMP.
No ideology (not good like the Koch brothers or evil such as Warren Buffett) just straight forward self interest.
Against the Iraq war – because it would cost a lot of money.
But also horrified that Chinese (not American) business is benefitting from Iraqi oil wealth (and Afghan minerial wealth).
It should be noted that American “capitalists” have so little influnce over practical policy that when Mr Trump protested about these things to the Bush Administration – they treated him as if he was a bit of dog dirt on their neocon boots.
As for the Tea Party moverment……
Mostly good people with worthy aims – but the time was not yet right.
Only during a period of economic collapse will an alternative really be listened to by most people.
But at least the United States has a free market alternative on the streets.
In any other country – if their is a march or mass protest it is going to be people who do not think the status que is collectivist ENOUGH.
Who want MORE of a “social dimention” (even more collectivism) – even the so called “anarchists” take this position,
Whether it is a Red Flag or a Black Flag – the people marching under it are going to be evil (and they will often cooperate – even in the United States, for example in Chicago).
One can only “supplement” the Paul Marks’ Organization; but here from a keen observer:
Greg Mankiw is a professor of economics at Harvard he published the following information (14/07/2012) based on his research using the statistical information compiled by the Congressional Budget Office.
The “transfer payments” referred to are actual beneficial payments made to taxpayers by the United States government; they are not deductions or exemptions from taxation nor are they tax credits.~~~~~
Because transfer payments are, in effect, the opposite of taxes, it makes sense to look not just at taxes paid, but at taxes paid minus transfers received. For 2009, the most recent year available, here are taxes less transfers as a percentage of market income (income that households earned from their work and savings):
Bottom quintile: -301 percent}
Second quintile: -42 percent } effective tax rate is negative
Middle quintile: -5 percent }
Fourth quintile: 10 percent
Highest quintile: 22 percent
Top one percent: 28 percent
The negative 301 percent means that a typical family in the bottom quintile receives about $3 in transfer payments for every dollar earned. When the tax rate is negative, that means that the taxpayer received more in payments from the government than the taxpayer sent to the government as taxes of any kind.
The most surprising fact to me was that the effective tax rate is negative for the middle quintile. According to the CBO data, this number was +14 percent in 1979 (when the data begin) and remained positive through 2007. It was negative 0.5 percent in 2008, and negative 5 percent in 2009.
That is, the middle class, having long been a net contributor to the funding of government, is now a net recipient of government largess
RRS: the trend continues!
RRS:
Those are fascinating figures. Can you provide a source?
Paul:
That may be true, but probably not in the way I’d like it to be true. The nexus of Marxist-inspired views of society and Keynes-inspired macroeconomic policy really took off in the 30s, the last time we had what I might call an economic collapse. So, in the sense that those ideas were alternative then, the statement was true. But if we get another economic collapse my guess is that we’re going to get more of that kind of thinking, not less, because that’s the soil it thrives in. Free-market ideas are more likely to spread when economic times are good, in my estimation.
If economic success is caused by good economic ideas put into practice, then what is going to make the economic times good *before* free-market ideas spread?
i agree completely with the substance of these remarks, but I very much wish that persons making these arguments (and they are many) would not make statements such as “X people pay no taxes nowadays” because it is technically not correct (even the net recipients of state payments pay sales taxes and, if they have jobs, payroll taxes) and that technicality is the looked-for basis on which left liberals in the US feel they can continue to safely ignore those who are trying to call attention to the problem. If only writers would add “income” before “taxes” in such pieces and acknowledge the other “taxes” actually being paid, before proceeding to note that even factoring in these other “taxes,” more people today are net recipients of state largesse etc. . .
Tedd:
Yes, as noted they are taken from the 2009 CBO report by Greg Mankiw. He was CEA under Reagan and is the author of the principal basic Econ text in use today. The words are his except where I say the trend continues.
I actually downloaded that CBO report, double checked and learned even more.
Quint:
Are you familiar with A Nation of Takers by Nicholas Eberstadt with commentary by Yuval Levin? Worth a read, brief, concise,cheap on Kindle.
We may all pay for admission to the “tent,” but now, something more than 60% attending leave with more (some much, much more) than the price they pay for admission; and the price of admission is not equitable, proportional, nor measured by the benefits of required attendance.
Quint:
Note in Mankiw’s piece the following:
again: ANY KIND
Not really. If/When his total collapse happens the push will be to have even more governmental control…because clearly not having enough was the problem. This will be coupled with more cries of how evil the Republicans are, how the rich aren’t paying their “fair share”, how every program is at risk (except for the ones that can be completely eliminated with no effect save budgetary) and so on and so forth, especially considering the left leaning media is already in the bag for those lines of “reasoning”. The collapse will lead to even more government, not less.
The TEA Party was a good start, but they’ve been vilified and marginalized by the media and co-opted by the Republican Party. Beyond that, the TEA Party complained about being overtaxed and the need for massive cuts in spending…but only to the other guy’s pet projects. For every sign at a rally demanding tax cuts there was a sign demanding “Hands Off My Medicare”. It was okay to talk about cutting off funding for food stamps and education, but talk about Social Security and defense cuts were verboten. The underlying current at those rallies was “I’m pissed that I have to pay for other people but I don’t mind other people having to pay for me”.
How many current free-market supporters had their ideas influenced during the boom of the 90s? I would guess quite a large proportion. So those times of relative prosperity can be taken advantage of.
What happened during the 90s wasn’t sustainable in the 00s. So one thing we obviously do not want to do is to promote the kinds of policies that led to the 90s boom just to get a “boom period” where people might be more receptive to free-market ideas. That would be counter-productive. The case that needs to be made at this point in history is how free-market ideas best explain both what happened in the 90s and what happened in the 00s.
Steven – what you say may be true in Europe, but I hope it is not true in the United States (at least not in all of what is not called the United States of America).
My point was (like Brian’s) that the United States does have an anti statist movement with an mass membership of local groups.
Britain does not – and nor does any other country.
Edmund Burke was right and Gladstone was wrong – property (i.e. the taxpayers) are passive, vulnerable – not alert and ready to take action (the Gladstone view).
The hard working people are like geese – ready to be plucked (and roasted).
The workshy (the students, the intellectuals the…..) are far more likely to take to the streets AND to have influence in the very government they attack (at the very time they are attacking them “bottom up, top down, inside out”).
Even when the “tax payers” outnumber the “tax eaters” the former are always in danger from the later – and (as the post points out) the tax payers are no longer in a clear majority anyway.
But they are still a clear majority in some States – the biggest of which is Texas (partly because most State revenue in Texas is from the Sales Tsx – which everyone pays).
As Simon points out – the idea that good economic times will spread good economic ideas puts the cart before the horse.
The need is to fundementally change policy – in order to create good economic times.
The coming crises is INEVITABLE.
Make me Lord Protector (the sort of mad dream the man in Kent has for himself) and I still could not prevent it. No more than I could prevent an hand granade going off after the pin has been pulled out (we are now in that irritating period between the pulling out of the pin,and the hand granade going off).
What matters is how people react to the comming crises.
If it is inevitable that people will react to economic collapse by demanding more statism – then we are indeed doomed (civilisation will fall).
However, for once, I take the optimistic view.
I do not think it is inevitabel at all – at least not in all of the United States.
Why should (for example) people in South Dakota (who hate Comrade Barack Obama and the rest of the mess in D.C.) want to entrust even more power to the Federal government thousands of miles away?
Why not (CORRECTLY) blame the coming crises on big government – and move away from it.
Someone with the learning, skills and data of Charles Murray (James Q. Wilson having left us last year)might regale us with a work: The Two Transformations.
The transformation of governments
The transformation of the citizenry.
The correlations of those two is significant to just about all that is discussed here (other than Cricket). Whether we can identify causal links is open to study (which of course will be highly biased in Academe).
My guess – conjecture only – is that the latter is the source of the former, which then feeds the morphology of the latter.
Actually @Paul
There is one thing that might cause economic “good times” : a boom.
@RRS:
I made that very point. My contention is that the people who need to be made aware of this state of affairs–left liberals–see the statements that “People X pay no taxes” as factually inaccurate, deliberately misleading by right-of-center types so they immediately stop reading. They never make it to the part later on when the writer says that the net receipts are net of ALL taxes of ALL kinds. They simply stop at the part where the writer states that “no taxes are paid” and say, “Well, the righties are lying again.” I am of the same mind as you and the OP, but I can’t tell you how many times I have had this argument with liberals who think they have refuted the facts (i.e., the facts about the percentage of net recipients exploding) by saying to me “The writer says people pay no taxes but yes they do, so the writer is obvioulsy a liar and nothing he says can be taken seriously.”
Does the statement “all taxes” include an estimate of the impact on prices of corporate taxes? Does it include an assessment of the impact of inflation? If no to both of the above then we need to work hard on those who appear to receive more from the state than they contribute but actually are net payers when corporate taxes and inflation are taken account of. If inflation starts to rise how many people will be pushed how quickly to the other side of the line?
QuinT –
Yo coon dog is chasin’ cats!
The people who need to BECOME aware of what is transpiring are in that mid quintile – the broad middle class (U S and UK)- few of whom are “left-liberals.”
They must become aware of those words from the Bard of Texas (Ross Perot):
Now, perhaps, as PM sees it, there is a possibility a sufficient degree of that awareness is dawning (spasmodically?)in the U S (intermittently in the UK?)but, the signs are still faint.
Paul Marks-
What the US has is a vocal political sub-minority of a sub-minority. Both the Democrats and Republicans are big state/big government advocates, although on slightly different issues. Sadly, politics in the US is little more than a spectator sport with my team being better than your team and “I’m a Democrat because my daddy was a Democrat and my granddaddy was a Democrat because the Democrats were for the workin’ man” mentalities. The Libertarians got a whopping 1.3 million votes in the 2012 election, which sounds like a crapload until you realize it’s still less than one percent of the overall vote. Those small government types yell loud, but make no headway at the polls. I could probably count on both hands and feet the number of third party office holders at any level, Federal, State, County, Local, School Board. The bottom line is everyone in this country has some grasp on the big government teat and nobody is going to vote that away. My own member of Congress ran on a small government TEA Party platform and the very first thing he did after being elected was assure the bluehairs that he would fight to keep their Social Security and Medicare benefits. If he had gotten any cuts in either program he would not be reelected.
Just to complicate matters, the electorate has no interest in what the small/no government types are selling. You start talking about no government funding for roads or schools or police or libraries or parks or fire departments(you know, because taxes are theft and government is evil) and the average voter tunes out. Ma and Pa Kettle might not like welfare, but they also don’t want people dying in the street from hunger. All politics are local and if the small government types can’t get a foothold in local elections why should they be taken seriously at the national level? Nobody wants to be seen as being soft on crime, so nobody runs on reducing the number of things that are crimes. Nobody wants to be seen as being heartless and cruel towards the poor and downtrodden, so nobody wants to run on a platform of eliminating welfare. Nevermind the whole dirty tricks of politics and the skeletons in closets being drug out into public view. But even worse is that for all the pithy sayings and quoting of dead philosophers, no one running on a small government platform can explain just how their plan will work. Tell me you’re going to eliminate food stamps but have a plan in place to explain how we won’t have children dying of hunger in my town.
But Texas isn’t some monolithic entity. There’s a big difference between a Texan from West Texas and one from Corpus Christi and one from Abilene and one from Houston. All those voters in Houston and Dallas/Fort Worth and San Antonio and El Paso and Austin want those big pork projects and they money that goes with it. They want those welfare dollars and the programs. The voters in small towns want those government jobs programs and the various projects and they want the welfare money (because they are either on it or might be someday). The ranchers and farmers might not care about youth centers and museums, but they do care about crop subsidies. The average Texan might be proud that his state doesn’t have a state income tax and is funded by property and sales taxes, but he still has his hand out for his personal favorite programs.
Agreed, but the people in charge will never be at fault. It’s always the other guy. The argument will be the same as when Wall Street shit the bed in 2008: there wasn’t enough government regulation or control. Politicians are opportunists and the big government types on both sides of the aisle will use that opportunity to get even more control.
Even if every single South Dakotan (including their congressional delegation) was against it, they don’t have the numbers to tell the feds no. South Dakota has one member in the House of Representatives. Metropolitan Chicago alone has 19 members. Between Gerrymandering and cases like Baker v. Carr and Reynolds v. Simms and Wesberry v. Sanders the system is just set up that way. Good luck getting that changed.
It’s too simplistic to say big government is at fault alone. There’s a whole list of contributing factors, between international finance and trade to regulation to how bank loans for housing and education are made to real estate value. Even if it were the case that government alone was at fault, it isn’t like the media is going to go out of its way to make the big government types the bad guy or that they system they have been pushing for over a century is bad. The media has willingly gone from watchdog to lapdog. Pravda had more journalistic integrity under the Soviets than MSNBC does under the Democrats.
In my conceited opinion:
A. an understanding of class interests and class conflicts is an essential prerequisite for serious thinking about politics;
B. the best way to understand class is to read Gaetano Mosca’s The Ruling Class, because Mosca was the least collectivist author who thought seriously about class analysis (that i am aware of): not a totalitarian (unlike Saint-Simon and Comte), not a totalitarian socialist (unlike Marx and the Marxists), and not a fascist supporter (unlike Pareto and Robert Michels).
If you have read Mosca’s book, you’ll notice the key problem with Zombie’s analysis: the claim that US taxpayers have lost power. The plain fact is that little political power has ever been in the hands of the voters (even in direct democracies, but obviously representative democracies are much worse) and therefore taxpayers had little power to lose. That they lost it, is regrettable; but it was predictable, because the logic of politics is that the ruling class uses its power to increase said power.
In this context i want to make explicit something that seems implicit in some of the comments above. RRS quotes Mankiw:
the taxpayer received more in payments from the government than the taxpayer sent to the government as taxes of any kind.
(That applies to MOST taxpayers, presumably.)
The point to note is that a taxpayer pays tax simply by virtue of earning money; but if said taxpayers wants government handouts, (s)he must jumps through hoops to get them … and of course must vote for the preservation of handouts!
Even people who receive a net benefit from the government, are still in serfdom.
RRS:
That middle quintile you point to is too busy demanding even more money & services from the government, as the chart above shows.
Snorri-
You may miss Mankiw’s point. Go back and read the full text posted @12:56 pm.
No, the Lowest quintile (and most of the next) are required to make NO efforts for the great bulk of their transfer payments. The bribes are offered and taken, but are probably not eagerly sought by the next quintiles.
QuinT –
Probably not so “demanding” as seduced. And it is worse now than in 2009.
RRS: in your 12:56 post, i see no evidence that the middle class are not required to engage in any tax planning to get the transfer payments that they get. (Not having paid taxes in the US for quite a while, i am not familiar with the system.)
Anyway it is a safe bet that the middle class still have to file tax returns to get their bribes, which signifies their dependent status.
Also, your inference from average net transfers per quintile, to the percentage of US citizens getting a net benefit, is faulty: it could well be for instance that the middle quintile as a whole gets a net benefit (5% according to your figures) from the tax+transfers system, while at the same time most people in this quintile pay more in taxes than they get back in transfer payments. More fine grained stats are needed to rule out this possibility.
Snorri-
You may misunderstand the 12:56 post.
It is a direct copy of a post by Greg Manikew on his website (date given).
The data are not “inferences:” they are actual calculations from the CBO spread sheets. CBO uses a “government revenues derived” approach. Those are NOT “my” figures. They are the CBO figures, you can look them up on the Gov website.
You are correct that people in certain quintiles are subject to taxes which require the filing of returns (self-assessment). But, they do so under other “incentives (coercions), not “to get bribes” (or other rent-seeking). The “Bribes” originate (and are spread) largely (if not exclusively)from the objectives of the political class, rather from seeking by the middle class [ymmv].
RRS: sorry but i do not see any reply to the issues that i raised.
Nowhere did i say that your/Mankiw’s data are “inferences” but you (or whoever wrote “The most surprising fact to me…”) do draw questionable inferences from them.
More important is the fact that you have not addressed the issue of tax planning (or: transfer planning).
That was Greg Manikew, noting “a fact;” not making an inference. It’s a fact, and it’s larger now! Look up the CBO data.
Not to be querulous but I have addressed the issue[s] (not just one)of “tax planning” (particularly in enterprises) many times over many (60+)years at the Bar including my start as a “tax lawyer” under a mentor who became IRS Cmsr. Fortunately, as time passed, I was able to find “honest employment” of a value adding nature.
Perhaps we have a differing understanding of the term “tax Planning.” While most, if not all, is done to reduce or mitigate the impact of taxes on the objectives of activities, little (Medicaid excepted), if any, is done to obtain transfer payments.
If you note in Manikew’s piece:
We are talking about things like Medicare, SSDI, etc. which “tax planning” does not cover. How would one go about “transfer planning?”
Zombie blames a “… demographic and economic shift” that took control of “the company” away from America’s producers, giving it to non-producers. James Madison foresaw that such a shift could occur, but the blame for transfer of control is best placed on the Constitution drafted by Federalists. They omitted safeguards against a tyranny of the majority, including a bill of rights. We have George Mason and James Madison to thank for correcting that.
The Constitution of 1787 relied on separation of powers among the branches of the central government, as well as between the States and central government, to protect against the rise of a tyrant. Congress was allowed a power of impeachment and conviction, but this is useless in cases of collusion between/among branches. The Constitution was written before the rise of formal political parties, and subsequent changes to the document neglected to address their influence. One basic error made by the founders was to cede control of the amendment process to Congress. Our first task is to take it back. The People do not need a gatekeeper.
Future safeguards must include a scheme for review and redress, independent of the central government; no impeachment is necessary to summarily remove an incompetent or corrupt official, just the will of the states, backed by the people. No finding of unconstitutionality is needed for a law to repealed, either, just the common agreement that it’s a poor one, and we don’t need it.
Today’s Tea Party movement is conservative, or reactionary in nature. They are steeped in the lore of America’s founders and founding documents, but fail to recognize the original flaws, believing (mostly) that progressive-era amendments are to blame for our crisis. We must learn how early Americans united as a People to gain independence. It will require courage: governments use intimidation as their primary tool for enforcement. As the arch- Federalist Alexander Hamilton wrote: “A power over a man’s subsistence amounts to a power over his will.”
RD – you remind me of the vital difference between American conservatives (conservatives – not just libertarians) and British ones.
British ones (in the main) accept the “liberal” story of “reform” (starting with a total misinterpretation of Edmund Burke – “do not get me started” on that) – with whatever has happened in the past being good (because it helped create the present) – basically Hegelianism (of a bastard sort).
So British conservatives (in the main) will, for example, applaud at ceremonies that celebreate the birth of the NHS, the BBC and…(well all the past statist agenda).
That is why I am sometimes upset with developments in American politics – upset to the point of tears (dry tears – the water never actually flows) and violent rage (oddly, as I get older, I seem to have less control over violent emotions than I did when I was young). But this never happens with British politics.
Because British politics, philosophically speaking, does not exist. Something first noted (as far as I know) by P.E. Moore (the tutor of T.S. Eliot) on a visit to Britian in the 1930s – where is found that the ideological divisions of American politics – or at least only half existed.
In the United States (as in Britain) there were plenty of socialists (there still are) although they did not normally have the guts to call themselves socialists. There were also status que people (what are now called RINOs) who did not want to do anything. And there were people who wanted to roll back statist “reforms”.
In Britain the last group were missing – because there was no philosophical basis (or historical undertanding basis) for them to exist.
Please do not misundertand me – there are a few people here who want to roll back the state, but not enough to rank as a political movement (when there is a large seeming conference it turns out to have a very different hidden agenda – a “social justice” one, not a “reactionary” one).
After all if (for example) Disraeli was a “good conservative” and his statist policies were valuable “social reforms” – then there is no philosophical (no historical) space for “reactionaries” in Britain.
And, therefore, there is no hope for politics here – and where there is no hope there is no false hope (no dashed hopes – no feeling that “if only….”). So when evil and/or insane things happen (such as the government aid to the housing bubble) the natural response is – indifference.
Of course the above may be too dark – I am in one of my dark moods.
Short version of what I am saying.
If, in the United States, someone said “John Adams would have supported the creation of the Federal government Welfare State” even in these latter days they would be laughed at (not even RINOs would pretend to believe them).
In Britain if someone said “Edmund Burke would have supported the policy of social reform that led to the Welfare State” they would not be telling the truth (the real person called “Edmund Burke” who lived from 1729 to 1797 spent his life trying roll back statism not increase it), but they would (most likely) be believed.
Not by the vast mass of people who do not have a clue who “John Adams” or “Edmund Burke” were – but by most of the people who actually have heard of these people.
That is because, in Britain, the idea that conservatism is about trying to roll back “social reform” (i.e. government spending and regulations) is alien.
Tbe American conservative view (at least among movement conservatives)is that the Founders had a set of PRINCIPLES and one should try and live up to them. Which the Founders never fully did themselves (for example on slavery).
The mainstream British view is more of an “evolutionary” one (Hegal or Woodrow Wilson) with the past simply being a preperation for the wonderful present – and the even more wonderful future.
This strikes me as not conservtive at all – but as Radical (but then I do not regard Disraeli and his ilk as conservatives).
The modern British view of law rejects Natural Law and holds “rights” to be granted by GOVERNMENT (not by nature and natures God).
I was born in Britain and have lived here all my life. But I find it a deeply alien place – and, therefore, do not get very upset by it.
I would have understood the old Britian better – the one of the “Constitution Clubs” and the vast National Rifle Association, where what Prof Greenleaf called “The Libertarian Strand” was still alive.
But that Britain was losing even in the late 19th century (inspite of the resistance of the Liberty and Property Defence League) and basically died during the First World War.