This piece in Saturday’s Wall Street Journal was fascinating. The writer, a member of the Journal‘s editorial board, struggles mightily to figure out John McCain. He just can’t understand how someone could be so admirable and yet not recognize the "obvious truth" that economic policies should be structured to reward wealth.

And I just don’t understand why he can’t understand.

19 thoughts on “Reform!

  1. Mike C

    You write:

    He just can’t understand how someone could be so admirable and yet not recognize the “obvious truth” that economic policies should be structured to reward wealth.

    Would you discourage wealth? Our income tax system does, slightly, but not as much as it did before the Bush tax cuts.
    McCain’s confusion is evident in the following:

    “I just thought it was too tilted to the wealthy and I still do. I want to cut the taxes on the middle class.” Even when I confront him with emphatic evidence that those tax cuts have been an economic triumph and have increased revenues, he is unrepentant and defends his “no” vote by falling back on class-warfare type thinking: “We have a wealth gap in this country, and that worries me.”

    Take a quick look at the 2004 tax rates. A couple earning up to $58,000 pays $8,000 in federal income taxes, an effective rate of 14%. A couple earning $319,101 pays $86,328, an effective rate of 27%. If you were to bump the second highest rate from 33% to 36%, as would happen if the Bush tax cuts expire, this couple would pay $90,542, an effective rate of 28%. How does the additional $4,214 in taxes theses folks pay benefit the middle class? If they had worked a little harder and made $100K more, they would have kept only 65% of that. That does close the wealth gap by holding down the high earners, not by increasing the take-home pay of that middle class.
    Ditto for capital-gains and dividend tax cuts. One earns capital gains and dividends only if one saves and invests, that is, makes capital available for economic use. Successful use generates dividends for the investor. Do we want to limit that? Or do we want to encourage savings and investment so that more capital is available for economic growth? Isn’t that what will help the middle class more than anything else?
    What you and McCain both seem to misunderstand is that if you want to limit something, tax the heck out of it. The State understands this with tobacco and urges that taxes on cigarettes be jacked up. The same thing happens with high taxes on income, dividends, and capital gains. High taxes on those who succeed are no way to help the middle class.

  2. Dave

    Mike, McCain is a tax raiser and would run stronger as a Democrat than a Republican. Some recent polls show him trending well as a candidate in the eventual SC primary. He will run poorly here and with his health issues I dont see him as a contender in 08. His own constituents in AZ tried to start a recall on him a year or so ago.

    I like his position on the War on Terror and give him credit for being right on that. His McCain-Feingold law has accomplished almost nothing and is a violation of the first amendment.

    Your take on taxes is right. Most every economist now attributes the Bush tax cuts to pulling us through 9-11, the WOT efforts, and natural disasters with an ever stronger economy. McCain’s ego will never allow him to admit it worked.

  3. Lee

    I have met John McCain in an informal setting and had a 30 minute conversation with him one-on-one, while he waited for a tardy film crew in 2000.
    He is a nice person, very polite, but was unable to explain the major positions of his presidential platform. When I asked questions which the news media should be expected to ask, he often had no answer.
    His only legislative achievement, muzzling of election debate by individuals, is the result of turning vague notions into law.

  4. Brad Warthen

    Mike, I wasn’t quibbling with the idea of encouraging wealth. I was objecting to rewarding it — or more specifically, to the blind, unquestioned assumption that government should reward it, and do so at the expense of a federal treasury already profoundly in debt thanks to spending madness and tax cuts that are (thanks to the spending) almost equally mad.

    Wealth is its own reward.

  5. Nathan

    I respect John McCain in that he is not a partisan. That said, I disagree with many of his policies (it scares me a little that Senator Graham has taken to his side so much, I don’t want him becoming a mirror image of McCain). This is, quite frankly, a perfect example of the problem with the huge federal system that we have created.
    Somehow, our capitalist nation has been hijacked by the entitlement culture. People seem to think that just being born in this country entitles them to a middle class standard of living, and the government should provide it. There are some in this country who earn thier way through life. Some work hard in school, learn a skill, work hard in thier industry, sleep less, sacrifice more, and succeed. Shouldn’t our economic policies reward people like that? Why not?
    If I work harder to make more money, shouldn’t I reap more rewards? Why should the government punish me for working harder, and take my money to give to someone else so that they can be irresponsible and lazy? If those people need help, send them to a charity. I just don’t get the idea behind punishing the wealthy for working hard to get there. When did the government become Robin Hood?
    I found the comment that Mike C made above to be on of the most inciteful I have read on these pages. The State wants cigarette taxes higher to discourage smoking. Won’t high income taxes discourage working harder by taking away many of the benefits?
    I don’t want the federal government trying to force a socialist system down our throats by trying to force the rich to give to the poor. The economics of it are bad, and the philosophy is the exact opposite of what this country was founded on.

  6. Nathan

    Brad, on your last comment:
    It is silly to suggest that tax cuts reward the rich for being rich. Tax cuts reduce the punishment for being rich. To suggest that is a reward would be akin to suggesting that a murderer has been rewarded with a life sentence since he will not have to face the electric chair. It only means that the punishment is less than it would have been.
    By the way, on John McCain’s actual point, it is difficult to cut income taxes on the middle class because they barely pay any. We already pay the poor (loose definition there too) just to file a tax return. According to IRS data from 2003, the top 25% of income earners pay 84% of the income taxes. How much more should they pay?
    Just answer this question for me: If I work hard and own my business, and my wife works hard and makes a good living as a professional, and we make a combined $250,000 in 2005 (by the way, I am completely making this up), how much should we pay in taxes? What is a fair amount that we should have to give to the government?

  7. Lee

    The primary defining criteria for most liberals on any domestic issue is, “How much will this punish people who are more successful and thrifty than I am?”

  8. Steve Aiken

    If you’re rich you’re going to get taxed, unless you’re savvy enough to hire a tax lawyer to find loopholes to slip through. On the other hand, what other country would you like to live in, if you didn’t have to pay taxes.

  9. Lee

    What natural law says that “if you are rich, you are going to be taxed”?
    Taxes on minorities are the creation of majorities. Discriminatory, punitive taxes on achievement are the creation of less productive people who don’t want to pay their “fair share”, in the sense they want someone else to pay extra.

  10. Nathan

    First of all, as a CPA I will tell you that there are fewer loopholes than people think. The rich sometimes can find loopholes to pay $2.4 million in taxes rather than $2.6 million, but that is about it. I think that the rich should pay taxes, but not to the degree that it is punishing them for success. While I am not completely sold on the “flat tax” or “fair tax” proposals, it is better than what we have now for sure. What we have now is welfare via the IRS (earned income credit) and punishment of success (increasing tax rates for higher incomes).

  11. Brad Warthen

    Hey, folks, how about answering Steve Aiken’s question?
    What country is there that you would want to live in where you would NOT be taxed? Personally, I’m picturing Somalia and saying “No, thanks,” but maybe others have some more attractive alternatives in mind.

  12. Lee

    Well, I could live in Ireland, and pay a top rate of 11%, or Scotland, and pay 8%. That’s why Sun, Oracle and Microsoft have no trouble getting employees to move there.
    If you want to emigrate to most European countries, Canada or Scotland, you have to bring about $250,000 cash. America, on the other hand, solicits poor illiterate, low-skilled workers to come here.

  13. Lee

    South Carolina long ago reached the point of being noncompetitive on tax rates, in the sense that highly-skilled workers who could began leaving the state.
    Our income tax laws not being in sync with the federal laws, and the double taxation of income earned outside the state has, since 1980, driven over 100,000 engineers to Tennessee, North Carolina, Georgia and Florida. Smart college graduates now leave as soon as possible.
    There are hundreds of things very wrong with taxes in SC that should be fixed immediately, but the phony reformers stall it with the ruse of waiting for “comprehensive tax reform”.

  14. Steve Aiken

    Pardon my skepticism, but has South Carolina even graduated 100,000 engineers since 1980?
    Secondly, it’s easy to admire tax rates in places like Scotland or Ireland. Try actually living there and paying housing prices, food prices, and utility rates and they don’t look so attractive. Although Ireland has boomed economically since it eliminated some of the dead hand of dumb economic policies –

  15. Lee

    To be precise, South Carolina has lost 100,000 engineers, technicians, scientists and heavy construction jobs since 1980, due to its tax laws. Many of them graduated from colleges out of state and moved here in the 1960s and 1970s.
    Its easy for people who don’t care about tax reform to toss out quick excuses for places with lower taxes, instead of doing some homework on living costs or anything else. They need to realize that punishing high achievers just degrades the economy, hurting the lower-income people the most.

  16. Steve Aiken

    Lee: You specifically said “over 100,000 engineers”, not “100,000 engineers, technicians, scientists and heavy construction jobs.” I moved here in 1988 (as a technical trainer), worked 17 years, lost my job because my company is in a financial bind. However, I’m starting my own business, so it isn’t like I lost a job with no recourse.
    I do care about tax reform, but it’s only one part of the cost of doing business. Quit trying to shuffle arguments to make a point.

  17. Nathan

    I would like to live in no country other than the USA. I would like to stop the waste of our tax dollars on “economic development”, pork projects, bridges to nowhere, hockey tickets, arts centers, baseball stadiums, and $200 hammers. We need to stop the use of tax dollars for vote-buying purposes. Taxes should pay for the items that can’t be provided in the private marketplace. Too many in Washington and Columbia spend taxes to make “groups” feel good about them.

  18. Lee

    I also reject the challenge from socialists and other advocates of big government to like their programs, or leave the country.
    Steve Aiken is engaginging in the usual game of focusing on irrelevant details of real examples in order to avoid the main point – that high taxes discourage economic activity.
    Here’s a one engineer example. A friend informed me yesterday that he quit working for the year. He keeps track of his income and tax projections on a monthly basis. When he hits the point of maxing out deductions for 401-k plans, etc, and moves into a higher tax bracket, it is not worth the effort continue working. Lots of people do that, and it hurts the entire economy, filtering right down to the jealous lower-income workers who cheer destructive tax policies.

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