On Canards: I. Taxation

A canard is a lie, but it is a particular kind of lie. To believe a canard is to accept a ride from a stranger. Once the invitation is accepted, the dupe will be plied with lies and the truth will become increasingly remote. In time, the truth, like the hope of safety, will dissolve in a cloud of unknowing.
   

The 47 Percent That Do Not Pay Taxes

During this election cycle, one of the popular canards is the claim that 47% of Americans do not pay federal income taxes. Now, it is true that nearly half of Americans do not pay income tax, but what is deceptive about this claim is the implication that these Americans are entirely spared the burden of federal taxation, and do not contribute in any way toward the general revenue. Two thirds of Americans who do not owe federal tax still owe payroll tax. Payroll taxes fund programs such as Medicare and Social Security. Of those who pay neither income tax nor payroll tax most are elderly Americans (many of whom have paid income taxes for most of their lives), and others are desperately poor (source).

Of course, Americans become emotional on the subject of taxation, and even those who pay no income tax claim that their taxes are too high. To complain about taxes has become a sort of ritual; the aim of the ritual is to give vent to the concern that one’s earnings are insufficient, and no matter how hard one tries to hold onto these insufficient earnings, the money dwindles away like water in a leaky bucket.

Tax day in an undemocratic society

If Americans blame taxes for the insufficiency of their income, then the true nature of the canard reveals itself. The canard that says “47% of Americans do not pay federal taxes” is a trick; a means of misdirection to divert attention away from the real reasons behind stagnating and falling income. The real reasons for the gradual impoverishment of Americans are these: first, American business leaders have decided to pit American workers against Chinese slave laborers and Mexican sharecroppers to see who can manufacture least expensively. Secondly, American political leaders are dependent on business leaders for their continued wealth and power, and are therefore willing to advance the interests of business leaders even though their interests are at odds with the interests of most Americans.

Ironically, if it were true that 47% of Americans were spared entirely the burden of taxation, this would be just as the Founding Fathers intended. As Thomas Jefferson once said, “Another means of silently lessening the inequality of property is to exempt all from taxation below a certain point, and to tax the higher portions of property in geometrical progression as they rise (letter to James Madison, 1785).”

What’s the Matter with Kansas?

Liberals have enthusiastically embraced the canard articulated in Thomas Frank’s book, What’s the Matter of Kansas? The book argues that low income conservative voters vote in a manner that is transparently at odds with their self-interest. The reasoning may be summarized thusly: “many conservatives depend on social programs such as Social Security, Medicaid, and Medicare, but demand that the government spend less on social programs.” It is technically accurate to say that many opponents of government spending are beneficiaries of government spending. It is also technically accurate to say that “red states” such as Alabama and Mississippi receive a greater share of federal money than they contribute in taxes. And it is accurate to say that “blue states” donate a greater share of federal money than they receive in the form of programs and services (source).

In what respect is the notion “low income conservatives vote against their self-interest” a canard? Again, it is a matter of misdirection. To illustrate the point, consider the fact that the state of West Virginia receives more than twice the amount of federal money than it contributes in the form of taxes. And yet, a low-income West Virginian can be forgiven for believing that federal dollars are being spent poorly – or at least, the money is spent with little effect. Their roads are unpaved and their highways are crumbling. Nine counties experience unemployment in excess of 10%; 7 counties experience unemployment that is between 9 and 10%. The state has the fifth highest poverty rate in the United States (source; source). Adults are not eligible for Medicaid unless they are below 33% of the federal poverty line – for a family of 2 that amounts to less than $10,000 yearly income (source). Because the transportation infrastructure is poor and because many residents cannot afford the costs of transportation, even those who are eligible for Medicaid are unable to take advantage of the medical care that is available to them. West Virginia ranks among the top 5 states in terms of the percentage of residents suffering from serious chronic diseases such as diabetes and high blood pressure (source).

In terms of understanding the economic plight of West Virginians, it is useful to consider what they pay in state and local taxes. Here, the estimates vary depending on how tax burden is assessed. Tax Foundation data indicate a misleadingly rosy picture. However, if one looks at the extent to which a state exploits all possible revenue sources (e.g., sales taxes, use taxes, the imposition of fees), and if one considers the extent to which these taxes are regressive (the burden falls disproportionately on the poor), it turns out that West Virginia ranks 7^th highest among all U.S. states in terms of the thoroughness with which state and local government deprive residents of wealth (source).   

It is predicted that WV will vote Republican this fall.

Thus, if the perception “we are being taxed too much” is based on the perceived benefits of government programs and services, West Virginians are justified in believing that government is “too big” – that is, the revenue it collects does not translate to an improved quality of life. It is entirely appropriate to be concerned if there is an apparent gap between the amount of money collected by government and the amount of tangible good the money achieves. New Yorkers may be proud that they donate more federal money than they take, but this pride is disingenuous if the money does not make a positive difference in the lives of the poor.

Here again, Thomas Jefferson offered a valuable perspective. He endorsed Montesquieu’s belief that, “The public revenues are a portion that each subject gives of his property in order to secure or enjoy the remainder.” Thus, what individuals spend in taxes ought to have a direct relationship with increased security and personal satisfaction. Jefferson believed that taxes should only be owed by individuals whose “first wants” are satisfied – individuals who have enough to eat, who can pay basic living expenses, and able to afford medical care and a secure retirement (source).   

Benjamin Franklin made a similar point -- only more forcefully. In a 1783 letter to Robert Morris he wrote, 

All Property, indeed, except the Savage's temporary Cabin, his Bow, his Matchcoat, and other little Acquisitions, absolutely necessary for his Subsistence, seems to me to be the Creature of public Convention. Hence the Public has the Right of Regulating Descents, and all other Conveyances of Property, and even of limiting the Quantity and the Uses of it. All the Property that is necessary to a Man, for the Conservation of the Individual and the Propagation of the Species, is his natural Right, which none can justly deprive him of: But all Property superfluous to such purposes is the Property of the Publick, who, by their Laws, have created it, and who may therefore by other Laws dispose of it, whenever the Welfare of the Publick shall demand such Disposition. He that does not like civil Society on these Terms, let him retire and live among Savages. He can have no right to the benefits of Society, who will not pay his Club towards the Support of it.

This was the balance the Founders struck between an extreme redistribution of wealth on one hand and extreme inequality of wealth on the other. Americans, they believed, should be free to earn and keep property. However, Americans should not be blind to the fact that if they achieve great wealth, it is because their country has given them the opportunity to do so.

Conclusion

Seen through a partisan lens, taxation is viewed as an unmitigated evil by many conservatives, whereas many liberals view taxation as a means to the end of improving the lives of the disadvantaged. Partisans on both sides are mistaken. Taxes ought to be viewed as the moral obligation of those who have achieved prosperity. And, revenue that is obtained by taxes ought to be spent with great care and with close attention to the tangible benefits of these expenditures as measured by increases in general prosperity.