Taxation Without Representation?

For some reason I woke up this morning thinking about the US midterm elections earlier this month.  I myself, to paraphrase one of the greatest writers of all time, don't vote, so I can claim the system doesn't represent me, and thus justify my further lack of participation.  Watterson's intention was sarcastic, but unfortunately for someone of my political leanings, not voting is more of a protest against the lack of an acceptable candidate than it is apathy.  But many of my fellow American's do vote, and I guess what worries me is the general lack of knowledge about policy decisions past that most of us share.
 
I am not suggesting that the American system has degraded to the point of having taxes cripple us financially so our government can go off and slaughter Huguenots; without asking if any of us really care if the Huguenots are gaining numbers in the south west provinces am I?...Am I?

But I do wonder, in a system where a vast majority of the voting public votes for a party line and knows little to nothing about the policy record of individual candidates, how often do elected officials stray from their party lines? 

More importantly, how often do political actions taken represent the desires of those who elected the official?  "Almost never?"  Yea that's my guess too.   Outside of local politics, where I still see some hope,  we are ruled by a wealthy elite....taxation without representation? yes and no, Policy decisions without representation, yes, profoundly yes.

Don't You Know?

The there is no difference between the two.  Efficient for whom is a nonsensical statement.
From "MR" this morning:

It is the comment that I am commenting on.

Parking spots as price controls

by Tyler Cowen on March 15, 2012 at 5:49 pm in Economics | Permalink

But not everywhere:

San Francisco is trying to shorten the hunt with an ambitious experiment that aims to make sure that there is always at least one empty parking spot available on every block that has meters. The program, which uses new technology and the law of supply and demand, raises the price of parking on the city’s most crowded blocks and lowers it on its emptiest blocks. While the new prices are still being phased in — the most expensive spots have risen to $4.50 an hour, but could reach $6 — preliminary data suggests that the change may be having a positive effect in some areas.

THE COMMENT THAT I LOVE:


 "They won’t stop at socially efficient prices. They’ll stop at revenue-maximizing prices. The latter may be considerably higher. If income inequality is high and there exists a class of super-rich people (e.g. internet entrepreneurs or venture capitalists), the city might discover that it can raise more revenue by charging one rich guy $25 per hour than by charging five middle-income people $4.50 per hour."


Really?
Do you really think that there is anyone with "middle-income" left in the American city.   These people left right after the second great war.  Cities are just the rich, and people who "service" the rich. Starting the day with a nice pun. 

Some Loosely Applied Logic to Taxation and Unemployment

Earlier today I can across an interesting counter factual argument.

I am slipping completely into the realm of modern epistemology for this post.

There is a clear correlation between having yellow nicotine stained fingers and getting lung cancer.  The counter factual would be a correlation between having clean appearing hands and not getting lung cancer.  This is fairly silly, as any classy smoker washes their hands regularly and thoroughly.

Many politically conservative Americans who have a public forum claim correlation between businesses paying taxes and unemployment.  Lower taxes means more money to hire workers right?
I propose that the counter factual argument works the same in this case. There is no correlation between lowering taxes to businesses and a decrease in unemployment in the current climate of financial paralysis.

Prove me wrong econometricians, oh that's right, you can't prove anything, only appeal to a relative standard of "truth".

Taxation and Employment

Two well known economists have written short posts in the past 24 hours commenting on the expiring tax cuts, as well as the Obama administration's tax policy in general.

Greg Mankiw posted a summary of the effective tax rate on the richest Americans, concluding that it will be about 50% by 2013.
This post is presented as a stating of "facts", however Mankiw's use of language such as "stealth provision" suggest that he believes himself to be illuminating some sinister attempt to steal the hard earned, or unfairly appropriated, your choice, surplus of our wealthiest citizens.

Paul Krugman's post "It's Demand Stupid" argues that an effective tax increase on "small business (earning over $250 000 a year) will not not affect firms ability to hire more workers in a meaningful way. Rather, to hire more workers companies need to see an increase in demand for their commodities, regardless of tax rate.

I decided to write on this tonight when Krugman's Keynesian perspective was backed up anecdotaly in conversation with a republican small business owning friend of mine. My friend mentioned that he needed to hire two new helpers because business has been steadily increasing this year. When I asked him if his effective tax rate influenced his decision to hire new workers he looked at me like I was crazy. Justin's* response was "I need to hire more workers because I have more work to do". Makes sense to me, even if Krugman did frame it with a title that makes him seem like a pretentious jackass.

I realize that Mankiw's post was not directly about employment, but my current opinion is that the greatest challenge facing the US economy during this Great Recession is the suffering being heaped on lower income Americans by sustained high unemployment rates.

The important question that I wish to ask and provide a part of an answer for here is, "what is the most effective way to allocate surplus to create the largest amount of (good) jobs?" Should we let the very wealthy in our society (and the not so wealthy small business owners, who are the new "Joe the Plumber" in the republican campaign this fall) keep more of the surplus they have gained through exploitation of their workers in the hope that they will distribute it to expansion, thus bringing more workers into the production process? Or should the government demand a higher share of the surplus from the wealthy so that it can be redistributed in such a way as to increase demand for commodities (transfer payments, reconstruction programs, cash for shitty cars, etc.)?

Neither of these options has been particularly successful in lowering the national unemployment rate over the last couple of years. I believe proponents of both sides would argue that the unemployment rate would be higher without their weapon of choice being in place, tax cuts and "stimulus" respectively. In reality neither strategy has been nearly effective enough, and the pain and suffering of the unemployed continues to be our country's most pressing economic issue. Perhaps neither strategy has worked because of an inability to implement policy to the extent necessary because of pressure from the other perspective? Perhaps because these theories just do not result in effective policy? Perhaps for a large and complex number of reasons not listed here?

The short and long term consequences, economic, social, and otherwise, of massive unemployment are a topic for another time. Suffice to say that more needs to be done soon to get more people into full time jobs. The damage to individuals and to working Americans in general grows more drastic by the day as unemployment stays high and meager benefits begin to run out.

I would like to propose a third alternative. It is time to change things so that instead of extracting surplus from workers, and then distributing more or less of it to the government in the form of taxes, depending on how effective you think the government can be in creating effective demand, and/or how much you believe a business will hire people because of the relative amount of their surplus that they have to distribute to the government via taxes, or not distribute to taxes, we should allow more workers to be the first appropriators and distributors of the surplus that they create in the production process in our economy.

Perhaps the distribution decisions of workers will be more effective at creating jobs for fellow workers than the decisions of a very small number of our wealthy citizens have been. And perhaps the distribution decisions of workers will be more effective than those of committees of professional politicians, who as a general rule are also among our wealthiest citizens. The current system run by and for capitalists is failing the working people of this country in epic proportion in terms of employment.

Is it not time that workers at least consider trying to run things themselves? Even if worker appropriation and distribution does not solve the unemployment problem would we not be better off having tried to help ourselves and failed than waiting for those who exploit us to "fix" the unemployment problem while our lives and families are destroyed by being out of work? Before the US can become the land of the free for the working class we need to be free to distribute the surplus we have created in an attempt to fix our own problems.

government and taxation

At the risk of pointing out the obvious, taxes are far too low in the United States.
Having grown up in a culture very similar to that in which I now live I find the different attitude about taxation in the United States very difficult to accept.
Is the government wasteful and inefficient? sure ...of course.....who is not? but the opposition to raising taxes in this country baffles me. For a vast majority of people a small increase (in dollar terms) of the taxes they pay could result in gaining far more in the way of transfers back to them. Be they directed to the very unlucky (or lazy as they are characterized in this country) or more relevant, be they in the form of lower costs on health, power, transportation, etc. Even a flat tax increase of 5% income across the board (this is not what I am advocating) would result in a vast majority of the population getting back far more in benefits than the 5% extra they would put out.
The only losers from higher taxation are the ones who can afford to lose it.
The misrepresentation that we are "being screwed" when the government takes our money is causing massive social ills in this country. I can understand why people at the top have fostered this perception, it does not take a genius to figure that out,
but it is time for the American people to wake up and pay some taxes. Only the very top would be hurt by higher taxes the rest of us would finally get some of the trickle down we so desperately need...
How do we get this trickle down? History has shown there are only two ways: take the money from the rich via taxation and use it on programs for everybody (health, power, etc.).
Or take a bigger slice with force. This second option has worked on micro level since the dawn of civilization, would it work on a large scale in the US? Not under the current conditions!

Does bigger government cause bigger waste?
Sure
Does bigger government help more people than it hurts?
For sure if it is the right kind of government.
Can our current government help more people that it hurts?
I would like to think so but I doubt it will.
Does bigger government mean greater democracy and rights as a citizen....not this government...not in this country....it is time for political a change ....a necessary beginning to the economic change we so drastically need. Not the removal of Obama, the man seems like his heart is in the right place. The change we need is a readjustment of power towards state and local governments. Places where changing who the corruption benefits are manageable battles in terms of scale.

localized government some early thoughts

For some reason I am pondering the idea of transfer payments from federal to local governments this evening.

It strikes me that a relatively higher federal tax rate compared with state and local rates, and the transferring the money to local governments based on specific programs gives both a clear problem and a clear benefit.

The benefit is because of a problem that is suffered both on the state and especially at the local level in this country. Poorer areas collect less taxes on a local level, and thus in the interest of equity (and all that goes with it) federal transfers provide an important source of funding for less wealthy areas of the country.

On the other hand the idea of federal transfers bothers me in the sense that it allows the federal government to only fund programs that fit with the current administration's view of what are "useful" programs.

Thus I can easily make the case that we as a nation would be better off with a system of much higher domestic tax rates and much lower federal taxs. That is much smaller federal government and much larger local. It is very rare that I agree with a traditionally conservative view point (smaller federal government) however I think smaller federal government may be useful in this country on that condition of much larger power and amounts of money in the hands of local administrations. I am holding aside the issue of coruption of local governments which is certianly a problem....but a bigger problem than federal coruption?

Certainly I know what is best for me better than my neighbour does, and does not the same hold for localized government?

The role of the federal government regarding equality would then become generic transfer payments based upon regional income instead of funding specific programs?

More on this later. I just wanted to write some thoughts down tonight before I forgot them in the sea of life.