The Lady Gaga Principle
Saturday, May 22, 2010
There is room for more optimism about America’s economy than there is for Europe’s. One reason for this is that polls in the United States show that for every person who wants government to equalize individual economic outcomes by playing the role of Robin Hood, two people want government policy to promote growth and job creation through tax reduction.
Barack Obama is out of touch with this pattern. He thinks that a family with an income of $250,000 is wealthy, but it isn’t. If there are two or three dependent young people in such a unit, including one in university or a private school, present taxes in most states would take about half of income; and if the family did not already own its home free and clear, it would be a scramble even to afford a new car or take an out-of-town holiday, without joining the national debt-binge. (In the United States, 94% of automobile sales are on some sort of variant of a lease or installment plan.)
As the brief hero Joe the Plumber pointed out to candidate Obama (before the liberal media took after him hammer and tongs because he wasn’t a master plumber and his dues to the plumbers’ union were in arrears), taking money from people who have earned it and giving it to people who haven’t is not fair.
The widespread theory that the American tax system is skewed to the advantage of the rich is not true. The highest-income 5% of Americans receive 37% of the income of the population, but pay 60% of the personal income taxes. The lower 50% of income earners, on the other hand, earn 12% of the income, but pay only 3% of the income tax; and include the 38% of Americans who pay no income tax at all and most of the 60% of Americans who receive a greater value in government services than they pay in tax.
It is true that a few very high incomes — earned by athletes, show-business people and some participants in the more rarefied strata of creative finance — scandalize general opinion by their massive size. The late William F. Buckley was, as he put it, “offended culturally by the fact that the Rolling Stones make more money in one night than Mozart did in his life, but it’s their money” (with great emphasis on “their”).
If society puts a high value on the talents of a Lady Gaga, (Stephanie Joanne Angelina Germanotta, of the New York Germanottas), no one has the right to say that those talents as a vocalist and entertainer should be surtaxed. (I have never heard or seen her, other than in still photographs, but I must say that a 23-year old woman from a working-class home in Brooklyn, who has five best-selling song recordings in one year and whose informal motto is “I get up on stage in front of the whole world in my underwear and I don’t give a f–k if they like me or not” has earned her money, no matter how screechy, trashy or outrageous she may be.)
There is fairness in wishing to help the disadvantaged, but none inheres either to tearing down the high-income earner nor to conferring an ex gratia salary from the productive earnings of others on the low-income earner. It is not naturally fair to penalize the hard-working, the imaginative, efficient or daring (Ms. Germanotta is all of those). It is fair to help the unlucky, but not the wilfully indolent. No one wishes to seem hostile or even indifferent to the poor and relatively few people are. But unequal incomes are not, in themselves, unfair; artificially leveled ones are.
While there seems to be a growing consensus in the United States that the country cannot enhance the welfare and health-care systems, and maintain an invincible national defence capability, without raising taxes (which this administration already has effectively done, effective January 2011, by raising the rates for high-income taxpayers), soaking the rich is not the answer: Any first line of attack on red ink should be to impose taxes on non-essential financial transactions, such as short-term stock trades and financial-advice fees on mergers, acquisitions
and bond and equity issues; and on elective gasoline sales (i. e., not on taxis and commercial delivery vehicles etc.). The gasoline tax would have the added benefit of reducing American oil imports, which is a matter of national security as well as economic stability.
If the richest Americans are to be enlisted in the fight against poverty, it should be in the form of private-sector anti-poverty projects that wealthy taxpayers could design and administer themselves. This would involve the best financial minds in poverty reduction and would give the wealthiest people an incentive to eliminate poverty, as the rate of tax would decline as poverty declined and would vanish when poverty, as reasonably defined, vanished.
Otherwise, income taxes are already too high and further tax burdens should be on consumption, not on effort or ingenuity. This, objectively, is fair; and as it is comparatively stimulating to job creation and economic growth, has less damaging consequences to future government revenue potential than the much-tried, oft-failed policy, now the core of Obamanomics, of describing the middle class as the rich, raising its taxes and paying a straight cash dole to the relatively or absolutely poor and calling it a “refundable tax credit.” (One of the most reliable criteria of poor government is more frequent recourse to Orwellian Newspeak.)
Incentivizing private-sector anti-poverty projects is better policy than just soaking the rich at one end and augmenting welfare dependency at the other. It would directly attack the problem without sluicing the money used through the clogged sieve of government welfare administration.
This would also be preferable to government taking unto itself the right to assess, for purposes of varied tax rates, the utility of different kinds of work and surtaxing the income of Lady Gaga and Alex Rodriguez. Free societies can’t get into this kind of thing, any more than, as I fear will shortly be advocated, they can surcharge the obese, smokers or those who engage in random unprotected sex because these are greater risks against the publicly funded health-care system.
The circle of spending requirements and health-care needs can be squared without confiscatory taxation, with a little imagination. This is even more true in Canada, where there is not a colossal defence responsibility as there is in the United States, nor a tremendous accumulation of past debt.
Fiscal management is not a zero-sum game, and we must banish to the proverbial dustbin of history the heirloom of Fabian attitude that any benefit to society’s shortchanged must be wrung from the sweat of the diligent and transformed into the penalization of success.