Taxes are a politician’s favorite lever to tinker with. In fact, many a pompous pronouncement, idealistic bombastic dream, gets translated in practice into either a tax cut or a tax hike. My suspicion is that very little can be affected at the real micro level by twisting and cranking the tax knobs from the comfortable central offices of Congress. So I don’t have a horse in the partisan back-and-forth. However, I felt compelled to comment the recent quote by Elizabeth Warren on the subject of “taxing the rich”.
It’s actually better to listen to the full quote, because it gives context to the passage that was extracted and Warren’s tone is relevant (it also contains a surprise). To summarize, the president is supposedly proposing tax hikes on the super rich. This plan immediately raised silly screams on the right about “class warfare”. Such rhetoric, in turn, inflamed the left and, whether Warren intended it to be a response to the class-warfare meme or not, the second part of her YouTube clip was extracted as the greatest argument ever in support of raising taxes on the rich. What she’s saying, essentially, is that nobody acts and becomes successful in a vacuum. Presumably she’s addressing herself to the image of a super-individualist rugged self-made man who doesn’t want to pay taxes. But in fact she explicitly refers to “someone who built a factory”, the stereotypical “job-creator”. The problem with this line of reasoning is that the idea that society is a complex web of cooperation, exchange and support, goes way back at least to Adam Smith. In fact, free-trade logic implies that one cannot restrict this complex web within the confines of a nation: in reality, everyone, even a person on the other side of the globe, even an avowed enemy, is an accomplice in a person success. So should taxes be collected and remitted to the Chinese people who helped us make America great? It’s not clear.
I’m here leaving aside other aspects that are unsatisfying with the quote, such as the fact that the rich already pay most of the taxes that are being collected, and thus (as a consequence?) have disproportionate influence on the way the money collected gets redistributed. The real scandal is not that job-creators in the society explore gains from trade and engage in positive-sum games with the rest of us, leading to win-win enterprises that create wealth for society as whole. The real scandal is how cronies are able to divert government’s largesse in both money and regulatory privilege towards their narrow self-interest.
The irony here is that the first part of Warren’s speech addresses exactly this issue and her money-quote that should be immediately immortalized into a bumper-sticker is: “Just don’t do those things!”. Instead the focus was shone on the second part where she works up a scolding tone and goes after positive-sum creators. Demonstrating once again that partisan bickering is a device to divert the conversation away from what really matter.