Getting Skin in the Income/Wealth Redistribution Game

I am on Elizabeth Warren's mailing list, which goes to my University of Illinois email.  Either I once gave a donation to her political campaign or I wrote some comment on her Website.  At this point I'm not sure which.  I also get email from other political sources, but sometime ago I changed the settings for my email and put those in my Junk Mail folder automatically, so I rarely if ever look at them.  For whatever reason, I have never done that with the Elizabeth Warren emails.  They still come to my Inbox.  I get a huge number of solicitations, vendors who think I'm still working, some who think I am in Medical IT (perhaps confounding me with my brother), and some meant for my wife (we're both L. Arvan).  And there are econ prof ones - publish in this journal that is just starting out, for example.  My campus email largely has been commandeered by folks that I would rather not hear from.  This probably explains my lethargy for keeping the Elizabeth Warren mails.  Mainly, I don't even look at the previews, but this message caught my eye.

I'm going to take this on, with my own critique that I don't see being talked about elsewhere.  (For example, John Cassidy has an analysis of the proposal.  It gives the usual critique of most tax proposals, based on tax avoidance, and also considers the alternative of taxing accrued capital gains, as opposed to only taxing realized capital gains - when the asset is sold.)  Before getting to that, however, I want to note that I'm not close to figuring out which candidate I favor for the upcoming election.  Criticizing Warren's proposal doesn't preclude me from voting for her in the Democratic primary.   We tend to treat supporting a candidate like we treat rooting for your favorite team.  Fans show loyalty and in that context I understand that.  (Truthfully, I've given up on the Knicks and the football Giants.  It's just too hard to be loyal now.)  But I don't think the same approach should apply to politics.  I prefer to argue out the ideas of candidates and elected officials, when I have a different view of things.  And I would prefer that other voters do likewise. Now, onto my argument.

Why isn't there another category?  For example, why not tax wealth over $10 million at 1%.  This is not just a question of where to draw the line, though that is definitely part of it.  It's whether there is any core principle we can invoke about who pays the tax and who is exempt.    In my book, a household  worth $45 million is rich.  Yet under Warren's proposal they are exempt.  Why is that?

Now let me get to my core issue, which is how to view taxation.  Here are two quite different possibilities.

1.  Taxation is a taking by government of private property owned by citizens. 
2.  Taxation is a way for citizens to express their responsibility to their community, their state, and their country. 

The first view is what generates tax avoidance.  The second view is consistent with people willingly assuming their tax obligations.

The issue for me is this.  Are the views people hold about taxation intrinsic to them, or can they be shaped by how we go about taxation and government spending?   Anybody who reads my blog (I want to thank all 10 or 20 of you who do that) knows I believe that these views can be shaped and what is needed, as much or more than a policy change, is a deliberate educational effort that strongly encourages view (2).  My last few posts have been on this theme and I've written about it, on and off, after the Tea Party showed prominence in the midterm elections in 2010.

Now I want to switch gears some and talk about metaphors, because I think that is the way people might best be convinced to reconsider their views about taxation.  (Once upon a time, I read Lakoff and Johnson.)  And because consistency is the hobgoblin of small minds, I'm actually going to return to sports as my source of metaphor.

For years and years, I've considered paying taxes as like getting hit by a pitch in baseball.  It hurts, maybe a lot, but getting on base helps the team.  Ron Hunt is the name I associate with getting hit by a pitch.  He led the National League in this category a few times.  Sometimes getting hit by a pitch is purely an accident.  When you lead the league in the category, however, there has to be some intentionality to it.  In any event, this is how I thought about taxation till recently and I would label the good behavior I wanted to see as taking one for team.  But my views have evolved. I've been involved in volunteer work that is quite intensive, both in the time I put in (mainly writing) to support the organization but also in the money donated.  Both are needed.  And I feel good about giving both.   The feeling good part is what I now want to emphasize.

So I've looked for a different example from sports that is more like my volunteer experience. The example of Jack Twyman and Maurice Stokes readily came to mind.  Maurice Stokes had a paralyzing injury that shortened his career and Twyman took care of Stokes financially (with the help of others) for the remainder of Stokes' life.  Both were players on Cincinnati.  They knew each other as teammates and as friends.  Friends help each other when needed.

What would it take for Americans to view their fellow citizens as members of the same team?  And then, beyond that, what would it take to offer up help for other Americans who are hurting by willingly pay more in taxes?

On this score, the problem with a wealth tax as Warren proposes it is that the vast majority of us are not sufficiently wealthy for the tax to have any direct effect on us. If I hadn't been trained as an academic economist, would I care about whether there is another category above $10 million, or about Warren's original proposal?  Maybe a bit, if I felt the rich are demons and Warren's proposal was a way to give them their comeuppance.  (Trump and his cronies are making that view more prominent.)  But as somebody who is financially comfortable, yet not rich, would I make this the make or break issue of the campaign for me?  Or would I focus on other things that seem more directly related to my own financial well being?  If the latter, would my views about taxation change at all?  I doubt they would.

It has seemed to me for some time that the needed way to get those views to change about paying more in taxes is for people to witness others like themselves doing just that.  It then becomes fashionable, the new black, if you will.  It must begin with a vanguard who do it voluntarily and visibly.  Then others get caught up in it.  It diffuses a la Malcolm Gladwell's The Tipping Point.  This is the way to get everyone who can afford to pay more in taxes to do so.

Now a different criticism of Warren's proposal, which is using a 10-year time frame to consider revenue generation, while not impacting the way people do view paying taxes now, so leaving a considerable chunk of the population, including many of the very wealthy, who consider taxation from the perspective of (1) above.  Our recent experience shows that even if Democrats win out in 2020, and possibly 2024, the Republicans will make a comeback.  Then what?  My bet would be tax cuts, of the type that would undo Warren's proposal.   We might get a little bit more realism to the public debate the next time a tax cut proposal comes around.  Tax cuts may very well not stimulate the economy much if at all.  So the real reason for the cuts would be that rich people hate paying taxes and rich people disproportionately fund political campaigns.  But I wouldn't count on the realism to emerge. Yet I would expect this top happen.

If you want to talk about a 10-year time horizon, you need to explain how the approach will endure even after a regime change that puts the Republicans back in charge.

What if, instead, Eisenhower Republicans make a comeback, because the anti-tax views of the wealthy hard right have been discredited?  Would that make for a greater likelihood that the approach will be sustained even if there is a regime change?  If so, then it makes sense to to encourage such discrediting.  It seems to me this can only happen if many people who currently hold views about taxation as in (1) change their views to (2). In turn, this can only happen if many more people have their taxes raised, so they are bearing some share of the responsibility.  It simply can't work if only the uber rich are the targets.

I will close on this note.  The demographics of who votes Democratic and who votes Republican have been changing.  Red districts now typically have average household income below the national average.  For Blue districts it is the reverse.  If we are to heal as a nation, income redistribution should go from Blue districts to Red districts.  Getting that to happen might be a very tough sell, as most people still think about voting their pocketbook rather than voting to help a fellow citizen in need.  We need leadership to get people to change their views, on taxation and on spending.  What I think I'm seeing instead, in both the proposal of Elizabeth Warren and that of Alexandria Ocasio-Cortez, on raising the top marginal tax rate to 70%, is some awareness of a historical norm and then trying to reproduce that norm in one fell swoop.  I think we need a process, one that changes minds as well as changes fiscal policy, taking many steps to do so.  The changing of minds is the key factor missing from our current politics.  If by magic our political leaders could listen to me, that's the one message I'd want them to hear.