03.16.05
Death and Taxes: An Uncomfortable Correlation
It was once said that the only two things that are for sure in life is death and taxes. Most everyone has had experience with at least one of those two and, in due time, will encounter the other also. It appears, though, the America’s Chief of the Federal Reserve, Alan Greenspan, wants to strengthen the relationship between these two eventualities.
At a recent meeting of the Federal Open Market Committee, Greenspan announced his proposed overhaul of the tax system to legislators to reduce income and property taxes and instead increase consumption taxes. The latter of the two types of taxation is known as a regressive tax because it has an unbalanced effect of the poorer populations. Imagine the difference between the amount of income spent on food and other essentials for an upper-class citizen as compared to a person struggling in poverty. It is clear that the poorer individual is left spending a much higher percentage of income than the richer man, or woman.
Income and property taxes are opposite to regressive consumption taxes because they tax every person at the same rate according to their income and property. Each person being taxed has the same percentage of overall income being taxed as opposed to the same amount of consumption goods being taxed that represents a different share of income for people of different economic classes.
Greenspan, along with most free market economists, argue in favor of consumption taxes because they claim that progressive taxes inhibit investment and therefore have an ill effect on the nation’s economy. A professor of Economics at Wright State University, a former professor of mine, even argues that consumption taxes will help to decrease American’s "over consumption" (the same kind of consumption that helps spur economic growth).
The argument over changing the tax system can be stalled by focusing on the effect of taxation on investment. First, though, we must first address what effect being taxed has on a person or family’s ability to sustain their most basic needs. If changing the tax system to benefit the rich in their investment only results in more people relying on government welfare services, then we have only weighed down our economic growth more. And, if taxes drive the poor into destitution, our investments must turn to their most basic and essential needs.
Chris P. Said:
March 16, 2005 at 10:05 pm
Do you think Greenspan is truly “party-neutral?” It would seem with a policy such as this it is more traditionally conservative.
Miriam Hummel Said:
March 17, 2005 at 10:47 am
Wealthy people in the United States equate their success to self-sufficieny; they do not rely on government handouts or other government programs to sustain themselves. The idea of “standing on your own two feet” is a myth though. The wealthy to the poor are all reliant on government policies, whether it be tax breaks to the rich to create an incentive to increase spending (trickle down theory?) or TANF which provides aid to needy families. The idea of self-sufficiency seems to be why so many poeple have negative attitudes about the welfare system. People who recieve aid under TANF are viewed as leeches to the our economic system. Some people, when they think of welfare, think of women popping out babies left and right just to recieve more aid, and families reliant on welfare for generations. That is definitely a falacy. Since the welfare reform, states have become much more strict and have placed caps on how long an individual can remain in the system. In regards to children, in Indiana in particular, if a woman gives birth to another child while recieving aid, she will not recieve any extra money. In addition, most state’s welfare system involves welfare-to-work programs, education, job-training, etc. (I’m not even going to get into this stuff…)
As you state:
If changing the tax system to benefit the rich in their investment only results in more people relying on government welfare services, then we have only weighed down our economic growth more. And, if taxes drive the poor into destitution, our investments must turn to their most basic and essential needs.
Do you really think that our investments would turn to the poor and their most basic needs though? I personally don’t think that would happen at all. I think most people would be more than willing to cut out welfare all together. It doesn’t have much of a place in the budget anyways. Most poeple on welfare are lazy people who won’t even attempt to find jobs, right? I’m not saying that this doesn’t occur, but for the most part, our opinions of the welfare system and the people it aids are based on myths, unfounded ones at that.
Maybe I take a more compassionate approach to the welfare system, or maybe it’s just my liberal, college professors coming out in me…
(For further reading, I highly suggest “The Way We Never Were” by Stephanie Coontz)