Tuesday, November 1, 2011

A Liberal and a Libertarian II

An unusual snow storm hit the east coast the past weekend.  We received about 6 inches of snow here but some parts of New England saw a couple of feet of the white stuff.  Strange how we keep seeing weather related stories that lead with "unexpected..." or "unusual..." or "record...".  How much more evidence do we need to accept that climate change is happening? 

My conversations with my libertarian friend will most likely cease as I have been transferred to a new store.  It is a promotion so I am glad but I will miss working and discussing the topics of the day with him, especially as the election cycle continues to bring such a wide range of viewpoints and material to review.

One topic that I need to amend from my first Liberal and a Libertarian blog is concerning taxes.  I misunderstood my friend's position of taxes from the tax rate standpoint.  He is not in favor of the progressive tax system whereby those earning more pay a higher rate.  He is fine with a tax rate that only kicks in at a level of livability, for instance $50K for a family of four, but he would prefer the same rate to be applied regardless of income whether it be $50K, $500K or $5 million per year.  Sort of a flat tax but with consideration for size of household. 

In our last discussion of potential tax reform (something we certainly agreed needs to be addressed), we came upon a compromise plan that did not satisfy completely but did move the discussion forward.  These numbers are not set in stone, but the idea was to continue tax deductions for the lower income earners (unlike the 9-9-9 plan of candidate Cain).  These deductions, certainly number of dependents, probably mortgage interest and education expenses, perhaps state and local taxes, medical and charitable itemizations, would phase out as income increased.  Again, the actual income levels are open for debate,  and a yearly adjustment, up or down, would be required based on a cost of living index, but we were both willing to accept deductions which decreased for every $50,000 of income.  

100% up to $50K per year
90% from $50-99K
80% from $100-149K, etc
down to 10% for income from $449-$499K
and no deductions for those reporting an income of $500,000 or more per year.

As for the flat tax rate, given that some income earners are able to itemize, the same rate for everyone would not actually be the same rate given that someone with an income of $48,000 who can deduct 100% of deductions would lower their taxabe income to $28,000.  This persone would now pay a lower effective percentage after deductions than someone with an income of $480K who can only subtract 10% of their deductions or as compared to someone earning $800K who can deduct nothing. 

At this point, whether it be a 15% flat tax for everyone (or 9% or 20%), the idea was that once income reached a certain level, the tax percentage was paid.  Period.  No complicated rules or clever accounting.

Question?  Is there any chance a plan like this can be implemented?  It seems to give no side everything, simplifies the tax code, and reinforces the idea that while the government needs to collect taxes it needs to do so in a relatively fair and equitable way which provides some upward mobility for lower income earners without unduly restraining the motivation for ambition, innovation and growth.
As for disagreement, the two biggest areas were business and health care.

In the eyes of my libertarian friend, there should be very little if any restrictions on how someone chooses to run his/her business.  He should be able to hire whom he pleases.  Pay what he deems fair.  Provide or not provide health care, or any benefits for that matter.  In an ideal world, employees will take jobs for those with compensation packages that are attractive and not apply to those employers with sub par offers.  The market would rule.  Employers who treated employees fairly would get the best people and thrive.  Employers who treated their employees poorly would see high turnover rates and poor work performance.  Inevitably employees would help determine appropriate benefits by moving towards employers who offer the most inclusive benefits. 

Additionally, without government interference, there would be no need to lobby for special rules or exemptions for one industry over another.  No corporate lobbyists flying our elected officials to the Bahamas on "fact-finding" trips (did you ever notice that they never fly to Alaska or Greenland for these trips?) because there would be no reason to affect government policy.  To be honest, I have to wonder if merely eliminating all work rules would remove the necessity for all that corporate shenanigans?  Of course, we would also have to dial down the environmental laws, but what is a bit of smog or dirty water if we can rid Washington of all those special interest lobbyists for the business world?  There is certainly some envy in some parts of the west over the current Chinese version of capitalism.  We could have that too, as long as we are willing to turn a blind eye to $5 an hour wages, few if any work holidays, reduced heat in the winter, no air conditioning in the summer, effluent dumping in our neighborhood creeks and rivers, and just a bit more acid rain to help scrub away the dirt and grime on our roads and bridges. 

But wait, I thought employees would only work for employers who did the right thing?  Oh, that's right.  That only works when there are jobs to be chosen from.  In a high unemployment time, like now, we would just have to take what we could get.  We just need to have faith that once the economy recovers, all those low paying job holders will see an increase in pay as employers become flush with excess money.  (I guess the $2 trillion dollars that is supposedly on the books of our biggest corporations isn't quite excess enough). 

As for health care, again, the ideal world awaits us.  Since even fewer employers will provide health care coverage, you can pull up those boot straps and get your own.  And, as long as one stays healthy, premiums will be affordable, if you choose to buy coverage at all.  Of course, since you are on your own and there is no "group" to buffer the costs of health care should you get sick, be involved in an accident, or begin to age, you will pay the market price.  Can't afford it?  Well, I guess you should have been more careful and avoided that accident, or ate better foods so you didn't get sick, or made sure you were born to parents with better aging genes so your health remained good over time.  Cancer, diabetes, disabled in an accident?  If insurance companies had to cover the cost of all those people who fell victim to these problems, how would they make a profit?  Clearly, in a market driven economy, the sick must pay more for health care and health care coverage just as you would for any consummable or service. 

But then again, perhaps we can reverse the recent increase in life expectancy.  Without environmental regs, there should be more pollution so that will reduce the number of seniors.  And, less health care coverage will mean less health care services so people will begin to die younger.  So perhaps a truly libertarian viewpoint will work; each person is responsible for themselves, and those that can't provide are left to their own devices.  Survival of the fittest.  Darwinism wins again!  Put that in your creationism pipe and smoke it!



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