As I discussed in two of my earlier postings on this weblog, I have become increasingly interested in two related questions: how high the highest rates should be in a progressive tax system, and how steep the rate of progression should be. I argued on May 4, though, that the most important fiscal policy issue is not directly related to those two questions at all. Instead, we must be primarily motivated to bring up those at the bottom of the economic heap to an acceptable minimum level. If that could be achieved, other issues of distributional fairness would still be important to address, but the arguments surrounding them would not be as morally charged as that imperative step of helping the poorest among us.
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The key phrase here, though, is “not ... as morally charged,” which is not the same as “morally unimportant.” While it seems clear to me that determining the precise rates that should be applied to higher-income earners is a less important issue than ending starvation and providing access to basic medical care, there are still morally compelling arguments for applying progressive tax rates throughout the range of incomes above the poverty level. Much to my surprise, one such compelling argument appeared in last Sunday’s New York Times Business section, and it was authored by the conservative Republican commentator Ben Stein. (“You’re Rich? Terrific. Now Pay Up.” May 7, 2006, sec. 3, p. 4.)
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Most readers have probably heard of Ben Stein. He is the former host of Comedy Central’s “Win Ben Stein’s Money,” a show which actually won an Emmy or two, if I recall correctly. He has been in TV commercials (ClearEyes being the product that most readily comes to mind) and movies (most famously as the monotonous high school Social Studies teacher making fun of Voodoo Economics in “Ferris Bueller’s Day Off”). Many people probably don’t know that he was a staffer for the Nixon White House or that his father, Herbert Stein, was a very prominent economist in the mid- to late 20th century.
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The elder Stein, though proudly conservative, was famous for his independence of mind. He had been the chair of the Council of Economic Advisors under Nixon and Ford, and he later became affiliated with the conservative American Enterprise Institute. Even so, before his death in 1999, he argued for more spending to fight poverty. At a time when conservatives were bashing liberals as deficit spenders (How times have changed!), Stein argued correctly that obsession with deficits was inappropriate and would lead to policy mistakes. His obituary in the New York Times (Sept. 9, 1999, p. C22) referred to him as “the liberals’ favorite conservative.”
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Ben Stein always struck me as much more ideologically right-wing than his father. He would occasionally let his partisanship show through on his TV show, such as his reference to former Democratic Congressman David Bonior as “that sleaze.” He also signed a petition in favor of George W. Bush’s 2003 tax cut plan, which was particularly regressive even by Bush’s standards. Imagine my pleasant surprise, then, when the younger Stein began to show his father’s sensibilities! (Although I didn’t save the article, at least one other recent Stein column in the Sunday Times also impressed me along similar lines; so this is apparently not an aberration.)
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In essence, Stein makes a case for what is known as the “benefit theory” of taxation. He argues, for example, that the superrich (his term) “derive special benefits from life in the United States that the nonrich don’t. For one thing, they can make the money in a safe environment, which is not true for the rich in many countries. IT IS JUST COMMON DECENCY THAT THEY SHOULD PAY MUCH HIGHER INCOME TAXES THAN THEY DO” (caps mine). He then points out that taxes on the rich are lower today than they have been since WWII.
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Pretty inspiring and surprising. Stein also invokes the sacrifices of the decidedly nonrich people who serve in the military and on police forces and in fire departments as one strong reason that it is indecent for rich people to be paying as little in taxes as they are today.
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Most significantly, Stein reaches back to his father’s inspiration, the economist Henry Simons of the University of Chicago, who in the early part of the twentieth century described extreme inequality as being simply “unlovely.” The younger Stein argues similarly that such inequality is “not pretty. The rich should simply not be that much richer than everyone else – especially those whose lives protect them from terrorism.” Sometimes, you just have to feel it in your bones.
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Stein says a few things in his article that will maintain his standing with his conservative brethren. He argues, for example, that high executive pay is “between [the CEO] and his stockholders, not a matter for Congress,” as if the rules that Congress sets do not define the terms of the struggle (and the likely outcomes) between shareholders and executives; and he describes a windfall profits tax as “an idea that has been tried and has failed miserably,” an assertion for which he offers no proof and that is at best contestable.
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But why should I be greedy, especially in a discussion about greed? Stein, a card-carrying conservative, invokes two even more prominent card-carrying conservatives to support the notion that progressive income taxation is morally required. Adding a political/social argument, Stein states that we cannot deal with terrorism “unless we feel that we are all in the same boat, pulling at the oars together. That includes the rich.” He even allows that his previous support for Bush’s 2001 tax cut was based on circumstances that no longer exist. Based on his argument here, it appears that he would feel the same way about Bush’s later tax cuts as well.
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Notably, Stein does not specify how high taxes should be on the rich. He only says that “they should pay much higher income taxes than they now do.” (Noting that he is one of the rich, he concedes that this means that he, too, should pay much more in taxes.) As I pointed out two days ago, sometimes the right answer to “How much?” is “More!” Stein even answers: “Much more.” If we repeal the 2001 tax cuts, that at least would reinstate a top rate of 39.6%. I would argue for a higher rate, but that argument can await another day.
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Although he leaves unanswered the question of the perfect rate structure for high income people, Stein’s argument is very important. Even if there were no poverty, extreme differences in after-tax income would still be “unlovely,” especially given the unique benefits that living and earning in America provide to the rich and superrich. Moreover, the social cohesion necessary to deal with a world of terrorist and other threats is easier to maintain when the haves and have-mores are at least within sight of the Joneses.
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As Stein concludes: “It’s about fairness.”
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Neil H. Buchanan, guest blogger
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