Via this Greg Mankiw post I am pointed to a post by Steven Landsburg that argues
Just a couple of days ago, President Obama excoriated the Republican Congress for wanting to keep tax rates low for “people like me” — that is, people who, like the President, have very high incomes.
Now we learn that on an income of $1.7 million, the Obamas paid $450,773 in taxes, taking full advantage of the Bush tax cuts. I think it is fair to ask: If the President believes that people like him ought to be paying more, then why didn’t he pay more? There is absolutely no rule against sending in more money than you owe.
Landsburg goes on to argue that while the extra contributions from the Obamas would be small, so would their sacrifice, since they are only one family as opposed to many. Indeed, the Obama sacrifice would give more bang for the buck since it would go to the most underfunded areas of the government.
What this highlights is a breakdown in the way we talk about taxes. Its convenient to make simply moral plays – the rich should pay more taxes. Where in this case we use the word should like we do when we say you should call your grandmother more often. That is, the rich have a moral obligation to help the country by paying more taxes.
Some people may mean this and its certainly good for intensifying the debate. What is more likely meant by thoughtful commentators is that the world would be a better place if the law required the rich to pay more in taxes.
If we want to be truly honest then most people mean something like this: I would prefer a world in which all other rich people paid more taxes and I paid less. However, I doubt that anyone is going to go for this. So I am willing to settle for a world in which all rich people including me pay more in taxes. I am not willing to settle for a world where I am the only rich person paying more in taxes.
This is often how public decisions work. I would prefer a world in which everyone else had to obey speed limits but I could speed when I felt it necessary. Yet, its unlikely that anyone is going to go for this. So I will settle for a world in which everyone including me is subject to speed limits. I am not willing to settle for a world in which I am the only person obeying the speed limits.
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Saturday ~ May 7th, 2011 at 2:35 am
Billy
I believe that this is one way in which many Enlightenment philosophers viewed a properly functioning republic. In particular, Rousseau (and I think Montesquieu) talk about how reciprocity or mutuality is the central feature of liberal government.
Saturday ~ May 7th, 2011 at 3:08 am
Schisma Tism
Karl visited this issue a few weeks ago here: http://modeledbehavior.com/2011/04/21/hypocrisy-and-the-social-contract/
You both explained the same thing with different language. Good show.
Saturday ~ May 7th, 2011 at 8:54 am
Ryan P
1. I’m not sure how useful it is to draw an equivalence between true coordination problems like speed limits and issues like taxation & redistribution that can only be likened to coordination problems through complicated political economy arguments. In the former, there really is a fundamental problem if you drive faster than me. Also, in the former, there’s a reasonable argument that, at least in principle, there’s a Pareto improvement here.
2. It’s fine in general to say that taxes aren’t a morality play, etc, etc. What is not fine is for a person to use the language of morality — “the rich aren’t paying their share!” — and then, when the incoherence bites one in the butt, complain that it’s not a morality play after all. It’s okay for Karl Smith to say it’s not a morality play, but any protestations on behalf of Mr. Obama seem less reasonable.
3. If we’re going to be truly honest, what we really mean is this: (if I am not “rich”) I would like for income groups who aren’t me to face higher marginal rates, but I am not willing to have them pay substantially higher taxes if it required higher taxes for me too; (if I am “rich”) I don’t wish to pay more taxes or give more to charity, but I’d like to have that reputation, so I’ll do the much cheaper thing and say that I’d like to
Saturday ~ May 7th, 2011 at 4:00 pm
Psychohistorian
If I say, “We should all bring a dish so we can have a potluck,” but people don’t agree, I am not a hypocrite if I later fail to show up with food. If I suggest to my two brothers that we should all pitch in to buy our parents a vacation, I am not morally obligated to pay for a third of a vacation regardless of their decision. If I advocate that our cities zoning laws should limit houses to three stories, there’s nothing hypocritical about building a 4 story house if that ordinance fails – doubly so when all my other neighbors are building four story houses.
There is nothing inconsistent about being willing to bear a larger part of a reciprocal burden, but being unwilling to pitch in absent a larger framework. This is particularly true at the high reaches of wealth, where income is significantly positional. If other people’s incomes are also reduced by taxes, there’s an overall downward shift in the demand for certain luxury services. If I pitch in without this reciprocation, my ability to pay shifts, but the equilibrium price does not.
Saturday ~ May 7th, 2011 at 5:30 pm
Ryan P
Right, and if that’s what you said, you wouldn’t be a hypocrite. But initially we were actually talking about someone who said anyone who earns more than $X has a moral duty to pay more. In that case, such a person would clearly be a hypocrite if they don’t donate voluntarily. It’s no fair to back out on a morality play during intermission
Saturday ~ May 7th, 2011 at 6:36 pm
GVChamp
“This is particularly true at the high reaches of wealth, where income is significantly positional. If other people’s incomes are also reduced by taxes, there’s an overall downward shift in the demand for certain luxury services. If I pitch in without this reciprocation, my ability to pay shifts, but the equilibrium price does not.”
Yeah, the argument that we need to consider Obama’s ability to pay for goods and services is so not going to fly with me. What is he going to spend the money on?
Friday ~ November 4th, 2011 at 12:11 pm
Steve Roth
Psychohistorian, thanks. Absolutely the best answer I’ve seen to this adolescent rhetorical argument. I’ve posted, tweeted, and facebooked it.
Saturday ~ November 5th, 2011 at 2:08 am
TallDave (@TallDave7)
Sorry, but that’s a fairly lame argument, since you are not forcing anyone to bring food to the potluck, threating violence if your brothers do not pitch in for the vacation, or demanding that your neighbors’ four-story houses be torn down. Taxation is both coercive and injurious to those it’s levied on.
How about “If I suggest my poor cousin rob my rich uncle of $1K at gunpoint, I am not a hypocrite if I refuse to give my cousin $10.” Hmmm, suddenly that doesn’t seem so tidy.
Friday ~ November 4th, 2011 at 7:31 am
Should redistributionists feel compelled to give more of their own money away? — Marginal Revolution
[...] Smith is irritated by the argument, but I don’t see that he offers a good response. In general the responses I read or hear to [...]
Friday ~ November 4th, 2011 at 11:49 am
Asymptosis » Why Doesn’t Warren Buffett Give All His Money to the Government?
[...] comment over at Modeled Behavior gives the best answer I’ve seen to this question (a specious [...]
Friday ~ November 4th, 2011 at 3:39 pm
Liberal Order
Is your analogy with the speed limit really comparable? http://bit.ly/sYXzdK
Saturday ~ November 5th, 2011 at 1:56 am
TallDave (@TallDave7)
I am not willing to settle for a world in which I am the only person obeying the speed limits.
What world do you live in where people obey the speed limits? Generally people will honk at you if you even try.
Saturday ~ November 26th, 2011 at 10:13 pm
The Spamlist! » Should redistributionists feel compelled to give more of their own money away?
[...] Smith is irritated by the argument, but I don’t see that he offers a good response. In general the responses I read or hear to [...]