Wednesday, 10 August 2011

Skin in the Game

In the recent roiling of the nation over the ludicrous deficits we face, I came across the following commentary by John Derbyshire at National Review.
The notion that we should all have some “skin in the game” by paying federal income taxes strikes me as profoundly un-conservative, and to be resisted. We have “skin in the game” by virtue of being U.S. citizens. The nation’s misfortunes are our misfortunes. I have never heard that being American requires payment of an annual fee, like a golf club membership.
Mr Derbyshire's post is, as usual, provocative.  He's got a mathematical background, so I am reminded of one of the controversies of the 20th century in mathematics - the so-called "axiom of choice."  To make a long story somewhat less boring, arguments in mathematics are more or less soluble once one accepts a set of axioms from which to begin.

Here, the problem inherent is that Mr Derbyshire assumes as an axiom that the income tax need not exist.  In fact, the income tax is, I would think, a permanent element of our society.  If we could do away with the income tax, I think his argument makes sense.

But given that the income tax exists, and will continue to exist, his argument I think collapses.  A system where 50% plus one of the population do not pay any visible income tax,  where a sizeable chunk get government "services," and where we swim in waters where the message of tax-funded assistance is "compassionate" is ambient - well, such a system is fundamentally ultimately unsustainable.

In economic terms, the perceived demand for something without a perceptible cost is unbounded.  Unlimited.  The comments of the Georgia governor on his state's ratification of the 16th Amendment are instructive:
When asked why his state legislature had ratified, he replied that it was a matter of no importance to Georgians, since nobody in the state made enough to qualify for the income tax.
Thus the real question barking around the edges of Mr Derbyshire's column are, "What limit is there to the tax rates on the minority of citizens who pay them for ever more government freebies?  What do I care if someone else has to pay 35, or 50, or even 90 per cent of his income in taxes if some "essential" programme is at stake."

It's really the root of the divide and rule messages we hear constantly from Mr Obama and his enablers at MSNBC and the New York Times that he ought to let the tax breaks "for the rich" expire to help reduce the deficit, when their own data show that the relative share of the deficit that tax cuts for the $250,000+/$250,000- segments represent are $700BB and $3,100BB.

Those numbers were printed in the Sunday Times this past week in an editorial.  The "middle class" share of the hated "Bush Tax cuts" is more than 80%

It's not about "deficit reduction" at all.  It's about pure power politics.  Period.

Mr Derbyshire is right philosophically that citizenship should not be measured by whether one has economic "skin in the game."  But unfortunately, reality intrudes, and thus precisely that is necessary to keep the nation sustainable.

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