Tuesday, January 8, 2013

Gratitude for the Highwaymen

There's been a lot of shifting and posturing lately around the cut-off and transition dates that permeate the second quarter of the fiscal year. But the newest occupation of idle hands and minds is raising hell over their first paycheck of the year being smaller. There were several "temporary tax cuts" which were extended recently, but one that wasn't was the temporary cut on Social Security taxes (about 2%). It's not a gigantic amount but it's considerable enough to be noticed and apparently lamented.

I don't have too much of a problem with people making a fuss about that publicly. Frankly, I'm more concerned about the federal government's spending than their taxing (as the latter simply follows from the former in one way or another), but I can't help but be a little off-put by the reactions of some people to the "fussing" of others. Their retorts simply aren't substantive.

The bread and butter of the collective response so far has been to, first, reiterate the historical arc of how the temporary tax cut came to be, and , secondly, lambaste dissenters for not being grateful for whatever temporary reprieve from said taxation that they had enjoyed the previous two years. This rubs me the wrong way for a couple of different reasons.

As I alluded to above, taxation itself isn't the issue per se. The government gets its funding by borrowing and taxing. But even when it borrows, it's merely taxing inter-temporally  If I use a credit card to pay for something, I'm merely transferring my costs to myself in the future, at a premium. In the case of the card, my savings in the present is much higher than 2%. But it is not a gift. I'm still on the line for that bill. I am in debt. So it is with tax cuts. They are deferrals of payment. When and how the payment materializes is trivial to that point. And this is why I believe serious fiscal discourse should focus on spending as opposed to revenue.

However, the main issue I take with the casual retorts is that they are laden with an inherent assumption that, once unearthed, makes their argument quite petty and meaningless. For the sake of argument, let's assume that the government was fiscally responsible and more closely bound spending and revenue. What is on the table for discussion is this 2% payroll tax increase. Percentages are relative. To say that the taxpayer should be "grateful" for the tax rates we "enjoyed" during the last two years is to assume that the current rate of taxation is optimal or correct. But that discussion isn't being had. The implication is that any deviation from the baseline is a gift from government, and less that we should otherwise be paying. But what is the grounding for that?

To illustrate my point, assume that baseline taxation would have been twice as high. I think that most people would consider that level of taxation oppressive. And if there was a similar lapse in a 2% tax cut you might expect that dissension would be more common. And yet that would not follow from the logic being currently employed. There's nothing about their argument that says that we shouldn't also be grateful for that 2% reprieve in the hypothetical scenario.

And you may say, "But of course, that is because we're now talking about ridiculously high taxes..."

Ah, but that's precisely my point. The argument in question, which is being used against current dissenters, makes no account of the appropriate level of taxation. It only holds so long as the current level of taxation and/or spending is acceptable. If it isn't, then such an argument falls apart under it's own weight.

Of course, I'm not arguing (here) about what is or isn't an appropriate level of taxation. I simply wanted to point out that, too often, conversations like this are rife with implicit assumptions - many of which are either incoherent or at the least not definitive. And way too often we simply don't question such premises, and instead set our dialectical fortifications within the framework they've already established with the question itself. I would know because I fall victim to it all the time. But if you're cognizant enough to step back and criticize such framing, you can stop a silly argument in its tracks and, more importantly, watch the scales fall from the eyes of onlookers.

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