First, take action to make
the whole lake rise
By Brad Warthen
Editorial Page Editor
POLITICAL NOSTRUMS often become obnoxious with excessive application. Some simply start out that way.
For me, one that has always fit in the latter category is “A rising tide lifts all boats.”
I’ve never denied that there’s truth in it. At least, I intuit that there’s truth in it. I’m no economist, but it’s always made sense that if you pump more wealth into a reasonably fair and open economic system, many people’s boats — if not most people’s — should float somewhat higher. Not all boats, of course, what with the poor always being with us, but there was logic in the saying.
I still didn’t like it. It was too devil-may-care: Don’t worry about whether everybody’s boat is seaworthy; just don’t impede the tide, and assume everything will be copacetic. It’s like something one would say over drinks at the 19th hole, followed by: “I’m fine. Aren’t you fine? Well, then everybody must be fine.”
Oh, and don’t give me a bunch of guff about “class warfare.” I enjoy a round of golf as much as the next man. That doesn’t mean I have to adopt an air of insouciance toward society’s have-nots. So the “rising tide” metaphor always left me a little cold.
At least, it did until last week, when I heard it put another way: “The whole lake has got to rise for my boat to rise.” That implies a sense of responsibility for raising the water.
Harris DeLoach — chairman, president and chief executive officer of Sonoco Products — said that Wednesday, when he and other state business leaders presented their “Competitiveness Agenda” for the 2006 legislative session, which starts Tuesday.
This is an agenda with considerable juice behind it, since it is being promoted in common by the state Chamber of Commerce, the Palmetto Institute, the S.C. Council on Competitiveness and the Palmetto Business Forum.
The groups banded together last year to push successfully for tort reform, retirement system restructuring, a measure to encourage high school students to choose “career clusters” that help them see the point of staying in school, and “innovation centers” to connect university-based research to the marketplace.
They had less success advocating adequate funding for highways and health care, but overall, the stratagem showed what could happen when state business leaders combine their clout and let lawmakers know they’re truly serious about some issues.
“This time last year, I’ll admit I was a little apprehensive,” said Chamber President Hunter Howard, who has carried water for his organization in the State House lobby for many a session. But once he tried a “whole new approach… going after the Legislature with really a stick kind of approach — but in a nice way,” he was pleased with the results.
There will no doubt be those who detect an odor of self-interest whenever business people push for anything. And there’s truth in that, too. Mr. DeLoach does want his boat to rise, after all. But the encouraging thing is that he and the others leading this coalition understand that for that to happen, the water has to rise for everyone. Rather than simply saying “I’ve got mine” and being satisfied, they are pursuing policies that — whether you think they’re smartly crafted or not — acknowledge the truth that we’re all in this together: If the least of these in South Carolina are left back, so are we all.
Take tax reform, for instance. As my colleague Cindi Scoppe noted in a recent column, the business sector is determined not to be outsqueaked by homeowners to the extent that businesses bear a disproportionate share of the tax burden.
But there’s good in that. Lawmakers are coming back to town this week all in a sweat to get angry residential property taxpayers off their backs, which creates the danger of overreacting yet again with little regard for the stability, fairness and efficacy of the overall tax system.
Basically, the business honchos are saying what this editorial board has said for years — that however much emotion swirls around property taxes or some other outrage of the moment, the goal should be “comprehensive tax system reform.”
Of course, the biz types have a few things on their wish list that most of us would never think to ask for, such as workers’ compensation “reform.” (I put that in quotes because I haven’t decided whether it’s reform or not.)
But I’m still struck by the extent to which these business leaders seem more interested than many of our politicians in doing, as Mr. DeLoach put it, “what’s good for the whole state,” seeing that as the way to benefit them all.
Those who reflexively distrust the private sector see it as wanting nothing more from government than to cut its taxes and leave it alone. But too many aspects of this agenda give the lie to that.
In fact, “We’re referred to as the group that wants to raise taxes,” said Carolina First Bank CEO Mack Whittle. “Well, we’re the businesses that pay the taxes” (about 43 percent of the total, asserts the Palmetto Institute’s Jim Fields). “We have to look at the road system; we have to look at education. And if it does take more revenue, then so be it.”
So it is that you see the business community leading the charge for kindergarten for all 4-year-olds who need it.
It is, in large part, the kind of agenda that reflects what real pro-business conservatives — the kind who have a proven ability to meet a payroll, and a realistic grasp of what it would take to provide better paychecks for all South Carolinians — see as the state’s real needs.
What they come up with differs necessarily from what professional “conservatives” who are all theory and no practice tend to advocate. You know, the Grover Norquists, and those w
ho would play along with them.
Am I endorsing this whole agenda? Of course not. I haven’t begun to make up my mind about significant portions of it. Others I know I’m against. For instance, while I welcome these groups to the comprehensive tax reform cause, my colleagues and I staunchly oppose some of the particulars they advocate under that umbrella — such as imposing spending caps on local government. And we disagree with their position on the powers of the Ports Authority.
But I do like the stated attitude that underlies much of this approach. Like Mr. DeLoach, I want to see the whole lake rise.
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I realize that I am probably viewed as a wingnut by most folks who love and support TheState newspaper by faithfully buying and reading it…a wingnut because I vehemently dislike this newspaper and hold a profound distrust for its’ editors. Nevertheless, I attempt to keep up with whatever the editors are foaming about at the moment…and todays’ column by Brad Warthen brings into sharp focus the precise reason that I hold such a low opinion of his ideas in particular and those of the editorial board generally. And the beauty is that I don’t even think he realizes he’s exposed himself. Certainly it was unintentional. Basically this piece is largely typical of Warthens’ work…much blither about essentially nothing. BUT…But…but…right there in the middle of it we find a little pearl that distills and crystallizes everything one needs to know about Warthens’ superiorist, elitist and nearly clinical disdain for hard working, tax paying people in South Carolina. He says:
“Basically the business honchos are saying what this editorial board has said for years – that however much emotion swirls around property taxes or SOME OTHER OUTRAGE OF THE MOMENT (emphasis added), the goal should be…” blah blah blah…
That’s right folks! NO recognition or even acknowledgement from Warthen that property taxes have risen at ridiculous rates for the last 2 DECADES. NO acknowledgement that the average income in SC is 80% of the national average so that our tax rate, which is among the highest in the southeast, takes a disproportionate bite out of what we make and support our families with. To Warthen, the genuine outrage that has been simmering for years that we see in property tax payers who are literally being robbed and put in the street is nothing more than a momentary emotional “swirl”…the “outrage du jour” as he puts it, in other words. There you have it South Carolina: You work 45 to 90 hours a week doing your best to support your family and keep up with what the state takes from you in taxes, and Warthen thinks your outrage is a silly little emotional burble that is unworthy of any real consideration. After, you’re just “little people” who are really too unsophisticated to understand that you ought to be glad about the taxes you pay. Only the elites, the erudite and sophisticated editors are able to be “above the fray” and explain to us simple folk that we ought to shut up and pay up. Does anyone else see it this way? Or am I really a flake? Fritz
The rising tide can never lift all boats as far as relative wealth or income are concerned because the same shaped wealth and income distributions always develop (given the same rate of taxation). OK Mike, here is the real name of the wealth distribution and how I found it. I sent this information to a respected Econo-physicist yesterday. I just don’t have the time to pursue this matter in an expedient manner. I suspect that you’ll see more of this in the future:
1. The real name of the wealth distribution (I think): The log of wealth vs. the number of entities ranked in order of wealth from richest to poorest follows the Woods Saxon potential, where the log of wealth corresponds to radius, and number to potential. Fluctuations in the distribution of market capitalization are analogous to spin-orbit coupling shifts.
2. Wealth follows a shell structure and can be seen to reproduce the magic number sequence at certain times. I’ve got data on market capitalization that actually shows the shell structure. That’s how I found the Woods Saxon potential. Often in the stock market, one can see the groupings of the top two market capitalizations, followed by the next eight which are sub grouped as 2 then 4 and then 2 again. The next group is often twenty market capitalizations comprised of the sub groupings of 2,4,2,6,2,and 4 and so on. The top market capitalization corresponds to a nucleon in the ground state.
To me, market capitalization seems to be in some way related to the independent particle theory in nuclear physics.
Also, Mike and Brad, in developed countries, the Gini coefficient over the past fifty years for personal income is .5, and for family income is 3/8 (the higher the ratio, the more unequal the population). Marriage in fact does reduce poverty as a relative measure. The only way to reduce poverty that I know of other than marriage, after much study on this subject, is to use progressive, re-distributive taxation to flatten out the distribution. Capitalism is inherently unfair since the correct wealth and income distributions can be synthesized using statistically people with equal chance in simulated free market economies.
PS Fritz-Wealthy people and corporations no longer pay the high taxes that they used to pay. As a consequence, ordinary citizens have picked up the bill in the form of property taxes. It’s bad to raise sales taxes because they are regressive and they will only make the situation worse.
Mark –
We’ve been through this before too, although I can’t seem to find the thread.
But first I want to agree with Brad and add that it’s both ironic and heartwarming that those who are carrying the load are willing to take on more for the benefit of the state’s advancement. Now if only those we elected will listen, we may have something.
But back to your analysis, the problem is that it’s static while wealth is dynamic, not stochastic. (Please tone down references to the magic number sequence and nuclear physics for your own sake, okay?) Your analysis is suitable to a pre-industrial economy wherein the privileged class derived income from lands granted by the crown. It may be applicable to economies based primarily on the exploitation of natural resources as are found in the Middle East.
What it does not account for is the folks like these:
They created wealth by starting enterprises that succeeded beyond their wildest dreams. They were not inheritors of wealth or members of the court, but guys who had an idea and brought it to market.
Nor does it explain the success of Hong Kong, the former city-state without natural resources or a social safety net. Yet it has produced more millionaires per capita than any similarly size place on Earth.
Finally, how does it explain the current conundrum facing Ford and GM?
Fritz brings up an interesting point, one that’s often overlooked: a “fair” tax system presupposes efficient and frugal government. Elected officials have an incentive to buy votes by satisfying the needs of the special interests that help them get into office. They tend to look at what funds are available or can be readily gotten (via bonds) rather than at the impact of the current tax mix, especially the effect on those at the lower income levels. So while many folks can afford the property taxes that increase as the property’s value does, other cannot. These others usually don’t have much clout and rightly feel that their interests and situation are represented.
Mark, two questions. What is the magic number? Are you using fuzzy math?
Brad, I read the Chamber proposals. They seem to agree with the governor on state government restructuring. Strengthen the governor’s power and streamline many departments including the health area. Pretty interesting reading. New Mexico lowered their state business taxes and revenue increased. SC needs to follow that model.
Fritz, I agree with you completely on the tax burdens. But then you look at how Cong. Spratt keeps getting re-elected and this is a guy who continually votes against tax cuts and for ANY tax increases. When he is campaigning he will proclaim that he wants to lower taxes and help his constituents but if you peruse his voting record. YUCK!!!! That describes it re: economic issues.
The State paper doesn’t like “voluntary” tax revenue. The lottery is an example of that. $1 Billion has now been provided for educational needs in this state. ALL new money and not a word from the State paper on how great this is. Yet the educators want more and even more. I know, Brad, that brings us to that “throw more money” at it phrase that you really hate. Wealthy liberals spend a lot of time figuring out how to tax working people’s money and they also spend a lot of time paying tax lawyers to reduce their own taxes. The funniest one of all is when Hillary donated Bill’s old undies and wrote off the charitable deduction on their taxes. You can’t make this kind of stuff up. But, she is a liberal, and anything for the children, YOU KNOW…………
Thanks Dave…I am glad that there are at least a few others out there who see it the way I do. Another piece of the picture that I intentionally left out of my first tirade is the intellectual vapidity with which many folks (like Warthen and Ross Scoppi and these supposed “business leaders” she spoke to) treat corporate taxes. Warthen and Ross Scoppi tell us “business leaders” don’t want to be “outsqueaked” by property owners and end paying more than their share of taxes. Listen, can we be honest? Corporations DO NOT PAY TAXES! It’s that simple. If you assume that the corporation is in business to make a profit and increase the wealth of its’ shareholders, it simply MUST pass any taxes levied against to its’ customers just as it does ANY costs associated with doing business. That’s right friends, corporations do NOT pay taxes, WE do. Warthen and Ross Scoppi apparently do not get this simple but profound point…they simply parrot whatever some “businessmen” have told them, for whatever reason, (probably to strengthen their position in the tax debate)…I don’t know. But I believe every legitimate businessman knows that he must and does pass his tax burden on to his customer…doesn’t he? Could we have editors at TheState who get this and acknowledge it when they attempt to make some point or other please? Fritz
Here is a link to nuclear shell structure. The “magic numbers” are 2,8,20,28,50,82,and 126. Just as “magic numbers” of nucleons make for stable nuclei, the market seems to try to stabilize itself by grouping together “magic numbers” of market capitalization. These groupings make a shell structure. On almost any day in the market, you’ll notice that the top two market caps are separated from the rest of the market (if you graph it out). On certain days you’ll see the shell structure develop further to include the grouping together of the next eight market caps (2,4,2), and on other days the groupings will go down even further to include the next twenty market caps (2,4,2,6,2,4). I say days, but they are really more like periods. The market will go for a couple of weeks or months and show a well defined shell structure, and then later only the top two market caps will show the shell structure. Regardless of the shell structure however, the entire market cap distribution can always be well approximated by the Woods Saxon potential as I have described above.
Fritz points out the basic fact which tax gougers like Warthen and Scoppe refuse to address:
The rate of taxation is rising faster than incomes, which cannot continue much longer.
We are at the point now that every income tax increase results in economic recession.
There is no excuse for increasing tax rates, because if the tax system were rational and government honest, the increased rates of economic activity would generate a matching increase in revenue to pay for NECESSARY services.
In fact, tax revenues at all levels have increased by huge amounts due to the very good overall economy, yet mismanagement and corruption at all levels of government consumes the surplus and schemes to extract more money.
Fritz –
You are correct that any successful business must recover all costs, including taxes, in order to survive. I think that The State’s editors know this. A company’s income taxes, property taxes, franchise fees, etc. all have to be recovered. The State newspaper itself is in the same position.
The same is true of an independent contractor. A house-painter or accountant has to charge enough and have enough work to cover his costs; in that sense the customers are paying the taxes too.
I think you understand that if a business can’t get enough customers to voluntarily purchase its goods or services, it will fail. But it’s only the business’s customers that allow the business to survive or thrive.
Applying your logic, isn’t your employer paying your taxes?
No, your employer is trying to avoid paying any of the employee’s taxes. He tries to reduce the employee’s gross wages by the amount of the employment taxes.
The employee actually pays the full of amount of Social Security and Medicare. The smart employer already reduced his gross wages to offset “the employer contribution.”
The state Chamber of Commerce, the Palmetto Institute, the S.C. Council on Competitiveness and the Palmetto Business Forum are lobbyists for:
* exempting their members from the taxes imposed on small business.
* tax credits for themselves, but not for all businesses.
* direct cash handouts to themselves.
* government forcibly buying land from private owners and reselling it to big business below market price.
* other taxpayers taking over the bankrupt medical care plans of big business
* other taxpayers taking over the bankrupt pension plans of big business
Lee –
Please provide supporting links.
Links!! Are you serious? I assumed everyone here was was familar with the agendas I listed, with at least 100 samples of each.
Just go to their websites and read their guest columns in THE STATE. Everything on my list is from their list of top priorities. Ask Brad to give you links to all the space they give to Big Business for Big Taxes.
Or pick one you question.
Or pick a big business and we’ll start listing all the subsidies and special treatment they get, which is denied free market entrepreneurs.