As you may be aware, the Federal minimum wage was scheduled to increase to $6.55 yesterday. Today I had a Facebox e-debate of sorts which I think has helped me refine my position on the issue of income support for poor workers. I am very interested in other people’s take on my position on the issue.
Standard neoclassical economic theory tells us that a legally mandated minimum wage, if it is above the market clearing wage, will reduce employment, especially for the most marginally employable workers. The microeconomic rationale for this is pretty straightforward; if you forbid employers to pay any wage under $X/hr., they will fire or not hire employees who are worth any amount less than $X/hr. So the guy who is worth only $7/hr. loses (or never gets) his job when the minimum wage is increased to $7.50/hr. As always, the standard economic theory is plausible. But, also as always, it must be empirically supported to form the basis of informed policy-making. The magical curves and lines don't always get it right.
When I took a labor economics class in college, this study was relatively new and represented kind of a coup d'etat. The Krueger and Card study compared the effect of an increase in the minimum wage on employment in the fast food industry in one state with the level of employment in the fast food industry in an adjacent state that did not increase its minimum wage. Surprisingly, the study found that employment had actually slightly increased (relatively) in the state that had increased its minimum wage. Naturally, this sparked a great gnashing of teeth and back-and-forth debate within the economics profession
So today, a right-wing Facebox-friend of mine posted something to the effect that any increase in the minimum wage is an "inane" policy. In response, I drew his attention to the Krueger and Card study. He, in turn, posted a link to this study, which provides a pretty comprehensive survey of the minimum wage literature. The study found that almost 2/3 of the studies it surveyed, and 85% of the studies it found "most credible," showed a negative, "but not always statistically significant" effect of minimum wage laws on the number of people employed and/or hours of employment. The majority of the studies appear to have found that a 10% increase in the minimum wage leads to a roughly 1% to 3% reduction in the employment of low-skill workers, with significantly stronger negative effects on teenagers and young adults and much weaker negative effects on adults 25 and older.
The study appears pretty thorough and I think I buy its conclusion – i.e., there’s generally a small, negative effect of a minimum wage increase on the employment of low-skill workers. But it's important to bear these results in perspective. A 1% to 3% reduction in low-income employment is not the end of the world, particularly if we had an adequate social welfare state to provide for the subsistence of the unlucky 1%-3% (which, unfortunately we don't, but many other countries do). But it is a significant downside effect that we should take into account when thinking about income support issues. Interestingly, left-leaning economist Paul Krugman appears to share this concern ("...the centrist view is probably that minimum wages 'do,' in fact, reduce employment, but that the effects are small and swamped by other forces.").
I have proposed a fairly radical solution to all of these employment and income support issues (see #'s 1 and 6). But it's probably safe to assume that that's not going to happen any time soon. In the meantime, I think it's helpful to look at the issue the way right-of-center Harvard economist Gregory Mankiw does: as a tax on employers of low skill workers which directly funds a subsidy to low skill workers. Looking at it this way raises the obvious question - why should the employers of low skill workers bear the whole burden of this subsidy? Surely, income support of poor workers is more of a general social responsibility than the exclusive responsibility of poor workers' private employers, just as medical insurance and care is a general public and social responsibility (even if, in this country, it is an abdicated one) and should not be regarded as the particular responsibility of workers’ employers. Therefore it would be fairer and more efficient to simply increase taxes (disproportionately on high earners and very disproportionately on very high earners, of course), and then to use the proceeds to significantly increase the Earned Income Tax Credit (the EITC, or "negative income tax") for poor workers.
With respect to the relative efficiency of using a negative income tax policy instead of a minimum wage policy, consider this CBO report which found that a hypothetical increase in the minimum wage in 2005 from $5.15 to $7.25/hr. would have given an additional $11 billion overall to workers making somewhere between $5.15 - $7.24/hr. (of which, startlingly, only 18% were actually members of poor families in 2005, at least according to the notoriously low Federal poverty guidelines), only $1.6 billion of which (or about 15%) would have gone to workers in poor families. On the other hand, an increase in the EITC with the same overall income effect as the minimum wage increase would have cost the Federal government a total of $2.4 billion, $1.4 billion of which would have gone to poor families. If these estimates are reliable, the minimum wage is a very blunt instrument for supporting the incomes of poor workers.
So it seems to me getting rid of the minimum wage and drastically increasing the EITC (along with providing payments at least on a bi-weekly basis and not in one lump sum at the end of the year so the whole thing doesn't end up going to H&R Block or payday lenders) is the way to go, at least before we can push for anything more ambitious. The effect of this would be to allow employers to hire whomever they want at whatever price the employee will agree to, but to use the additional public revenues raised by a big progressive tax increase to bring everyone up to (at least) the poverty level. This way we fund the income support subsidy through the proceeds of a broad based progressive tax system rather than specifically punishing employers who happen to operate in low-skill industries by forcing them to pay for the whole burden, and a much higher percentage of the proceeds will go to workers who are actually in low income families. And of course then we would avoid the whole negative employment effect of the minimum wage (especially since, as we know, increases in tax rates generally have negligible effects on labor supply).
The bottom line for me is that the income support of the poor (ideally to the point where they are no longer “poor”) is a fundamental social responsibility, but that this responsibility would be fulfilled in a much fairer and more effective manner if the government (relying on high, progressive tax revenues) were to provide direct subsidies to poor workers rather than forcing private employers to serve as surrogate welfare agencies.
Showing posts with label Distributive Justice. Show all posts
Showing posts with label Distributive Justice. Show all posts
Friday, July 25, 2008
Wednesday, June 25, 2008
"It's Just Human Nature"
This is some amazing stuff. I'm not sure about you guys, but I find the original report a little mind-blowing, so here is a link to a more comprehensible synopsis. According to the latter report:
"In setting up this study the researchers wanted firstly to explore whether equity or efficiency was stronger to our sense of justice, and secondly, they wanted to find out how big a role emotions played in resolving such questions"
...
"The results showed that participants overwhelmingly chose equity over efficiency. 'They were all quite inequity averse,' said Hsu, who explained that the findings support other research that suggests people are fairly intolerant of inequity."
So which side has the upper hand in the "human nature" debate again?
"In setting up this study the researchers wanted firstly to explore whether equity or efficiency was stronger to our sense of justice, and secondly, they wanted to find out how big a role emotions played in resolving such questions"
...
"The results showed that participants overwhelmingly chose equity over efficiency. 'They were all quite inequity averse,' said Hsu, who explained that the findings support other research that suggests people are fairly intolerant of inequity."
So which side has the upper hand in the "human nature" debate again?
Tuesday, June 24, 2008
Two Deceptive Arguments
I've been hearing the following two conservative arguments quite a bit recently. I’d like to show that, while the factual assertions involved are true, they simply do not support the proposition they purport to.
Argument 1: The Rich Already Pay More Than Their Fair Share in Taxes (here and here)
Both articles purport to establish that our country's tax burden is already distributed progressively enough – indeed, perhaps excessively so. Both use an argument that goes something like:
“The top X% of income earners are responsible for over Y% of total Federal income tax receipts, while the bottom Z% are responsible for only 0.0003% (or some such low number).”
These facts, by themselves, do not say anything meaningful about the progressivity of the U.S. tax system. They do not reflect the distribution of any of the other taxes Americans pay, many of which are highly to moderately regressive (e.g., payroll taxes, sales taxes, gasoline taxes, tolls, property taxes, utilities taxes, vice taxes, service fees, etc.). Federal income tax receipts constitute only 45% of Federal revenues, while Federal taxes historically constitute about 2/3 (roughly 18% out of roughly 27%) of tax revenues collected at all levels of American government. That means that Federal income tax revenues constitute only about 30% of the country's total tax revenues, and the Federal income tax is one of the very few major progressive tax regimes (the Federal corporate tax, estate and gift tax, and state income taxes being the others).
In fact, 2/3 of Americans pay more in payroll taxes than they do in income tax. Social security taxes are assessed only on labor income and constitute a flat 6.2% on all income up to $102,000 (in 2008), while all capital income and wage income beyond that threshold amount are not subject to the tax. The Medicare tax is imposed on 1.45% of the full amount of a taxpayer's wage income. Once all taxes are properly included into the analysis and tax burden is represented in terms of a percentage of income instead of total dollar amount, this is what the U.S. tax distribution looks like.
This should be sufficient to establish that these numbers do not demonstrate anything meaningful about the U.S. tax system. But let’s go one step further, because there is another important flaw in this analysis. Even if we were to ignore all other taxes besides the Federal income tax, the figures would still prove nothing. Here’s why. Consider a "fictitious" society called the Reagan Republic comprised of A, B, C, D, and E. This society is characterized by enormous concentration of wealth and an explicitly regressive tax burden:
A makes $2 million a year and is taxed at 15%; A will pay $300,000
B makes $200,000 a year and is taxed at 20%; B will pay $40,000
C makes $75,000 a year and is taxed at 25%; C will pay $18,750
D makes $45,000 a year and is taxed at 30%; D will pay $13,500
E makes $20,000 a year and is taxed at 35%; E will pay $7,000
This society will pay a total of $379,250 in taxes. Despite the fact that the tax code is explicitly regressive, the following statements are true:
The top 20% provide 79.1% of government revenues
The top 40% provide 89.7% of government revenues
The bottom 60% provide 10.3% of government revenues
The bottom 40% provide 5.4% of government revenues
The bottom 20% provide 1.8% of government revenues
So even under a regressive tax code, the well-off can pay the vast majority of tax revenues. But as you can see, this is not because the rich bear a higher proportionate burden, but simply because their incomes are so much higher. So this argument essentially allows conservatives to leverage a major failure of the economic policies they support – the extreme economic inequality they have helped create (see Figures 1-8D)
– to support the proposition that the U.S. tax system is already progressive enough. This is ironic to say the least.
And while the numbers in my example were cherry-picked to prove my point, perhaps my assumed numbers are not so far off (see this and this and this and this).
Argument 2: The U.S. Economy Displays an Amount of Social Mobility Consistent with the Idea That It Is A “Meritocracy” (also see this)
The WSJ editorial relies on the findings of a Treasury Department study to try to show that “social mobility is alive and well” in the United States. The study used the following method:
“[It] examined a huge sample of 96,700 income tax returns from 1996 and 2005 for Americans over the age of 25. The study tracks what happened to these tax filers over this 10-year period. One of the notable, and reassuring, findings is that nearly 58% of filers who were in the poorest income group in 1996 had moved into a higher income category by 2005. Nearly 25% jumped into the middle or upper-middle income groups, and 5.3% made it all the way to the highest quintile.”
These findings are not particularly robust to begin with. But they're even less useful than they appear.
First, look at the way the study was conducted. Consider a college educated business major still making $28,000 at 26 at a company in Champaign IL, but who later gets an MBA and makes $200,000 at 45 as a VP of Marketing in Chicago. Or a 28 year old who works at Starbucks before figuring out that what they want to do is to get a masters in education and teach in a North Jersey school district (where they may start at >$50,000, and can go up to as high as $100,000). Or a son of privilege who does not work between 25 and 35, but rather lives off of the support of his parents or a trust (both of which would be counted as gifts and therefore not included in income) but later gets a gig as a token board of directors member on his father’s company’s board and earns dividends and capital gains off of inherited financial assets. Or a law student who has an adjusted gross income of $14,000 at the age of 27 but whose income will increase substantially once he starts working next fall (i.e., me). All of these people could very plausibly be counted in the lowest quintile during their low income years, and in the highest quintile during their later higher income years. But this isn’t “social mobility” at all. It merely reflects individuals' earnings life-cycles. All of the hypothetical people given above may be, and most likely are, the children of middle class (or higher) families.
Consequently, it is more appropriate to gauge the level of social mobility by comparing a group of people’s socio-economic status to that of their parents. Studies (1, 2, 3) that use this method consistently show that the United States exhibits a low level of social mobility relative to its first-world peers, countries which invariably have stronger welfare states and more "socialist" policies. Thus, conservative “meritocrats” must somehow account for the strong empirical implication that social democracy is more conducive to social mobility than free market capitalism.
A few more points should be made. The study only counted tax filers. Many very low income people (including the domestic chronically poor and immigrant laborers) do not file income tax returns (Table 3). These people are not counted at all, so the study totally ignores some people at the very bottom – people for whom we know the prospect of social mobility is the most far-fetched (p. 27). This feature will also bump down people whose income may not seem extremely low (like the hypothetical people I mention above) into the “lowest quintile” group, the group whose subsequent earnings form the crux of the study’s supposed implications. Furthermore, the statement that “the after-inflation median income of all tax filers increased by an impressive 24% over the same period,” paints a very misleading picture of reality. Overall median income growth has stagnated over the last 40 years (an average annual growth rate of about 0.54% from 1967-2008) despite significant increases in total family hours worked (an average annual growth rate of a little less than 0.75% from 1979-2002). Moreover, mobility may not necessarily represent the workings of a meritocracy. Indeed, some annual earnings variation may in fact reflect an undesirable degree of volatility in people’s incomes that it is attributable not to meritorious behavior (or the lack thereof), but instead the result of unforeseen financial disruptions. See Jacob Hacker’s The Great Risk Shift.
Perhaps it is fruitless to point out these (somewhat distressingly obvious) errors in reasoning of the WSJ editorial writers, but I do encounter these arguments frequently, and it will be handy for me to have this post on hand to counter them.
Argument 1: The Rich Already Pay More Than Their Fair Share in Taxes (here and here)
Both articles purport to establish that our country's tax burden is already distributed progressively enough – indeed, perhaps excessively so. Both use an argument that goes something like:
“The top X% of income earners are responsible for over Y% of total Federal income tax receipts, while the bottom Z% are responsible for only 0.0003% (or some such low number).”
These facts, by themselves, do not say anything meaningful about the progressivity of the U.S. tax system. They do not reflect the distribution of any of the other taxes Americans pay, many of which are highly to moderately regressive (e.g., payroll taxes, sales taxes, gasoline taxes, tolls, property taxes, utilities taxes, vice taxes, service fees, etc.). Federal income tax receipts constitute only 45% of Federal revenues, while Federal taxes historically constitute about 2/3 (roughly 18% out of roughly 27%) of tax revenues collected at all levels of American government. That means that Federal income tax revenues constitute only about 30% of the country's total tax revenues, and the Federal income tax is one of the very few major progressive tax regimes (the Federal corporate tax, estate and gift tax, and state income taxes being the others).
In fact, 2/3 of Americans pay more in payroll taxes than they do in income tax. Social security taxes are assessed only on labor income and constitute a flat 6.2% on all income up to $102,000 (in 2008), while all capital income and wage income beyond that threshold amount are not subject to the tax. The Medicare tax is imposed on 1.45% of the full amount of a taxpayer's wage income. Once all taxes are properly included into the analysis and tax burden is represented in terms of a percentage of income instead of total dollar amount, this is what the U.S. tax distribution looks like.
This should be sufficient to establish that these numbers do not demonstrate anything meaningful about the U.S. tax system. But let’s go one step further, because there is another important flaw in this analysis. Even if we were to ignore all other taxes besides the Federal income tax, the figures would still prove nothing. Here’s why. Consider a "fictitious" society called the Reagan Republic comprised of A, B, C, D, and E. This society is characterized by enormous concentration of wealth and an explicitly regressive tax burden:
A makes $2 million a year and is taxed at 15%; A will pay $300,000
B makes $200,000 a year and is taxed at 20%; B will pay $40,000
C makes $75,000 a year and is taxed at 25%; C will pay $18,750
D makes $45,000 a year and is taxed at 30%; D will pay $13,500
E makes $20,000 a year and is taxed at 35%; E will pay $7,000
This society will pay a total of $379,250 in taxes. Despite the fact that the tax code is explicitly regressive, the following statements are true:
The top 20% provide 79.1% of government revenues
The top 40% provide 89.7% of government revenues
The bottom 60% provide 10.3% of government revenues
The bottom 40% provide 5.4% of government revenues
The bottom 20% provide 1.8% of government revenues
So even under a regressive tax code, the well-off can pay the vast majority of tax revenues. But as you can see, this is not because the rich bear a higher proportionate burden, but simply because their incomes are so much higher. So this argument essentially allows conservatives to leverage a major failure of the economic policies they support – the extreme economic inequality they have helped create (see Figures 1-8D)
– to support the proposition that the U.S. tax system is already progressive enough. This is ironic to say the least.
And while the numbers in my example were cherry-picked to prove my point, perhaps my assumed numbers are not so far off (see this and this and this and this).
Argument 2: The U.S. Economy Displays an Amount of Social Mobility Consistent with the Idea That It Is A “Meritocracy” (also see this)
The WSJ editorial relies on the findings of a Treasury Department study to try to show that “social mobility is alive and well” in the United States. The study used the following method:
“[It] examined a huge sample of 96,700 income tax returns from 1996 and 2005 for Americans over the age of 25. The study tracks what happened to these tax filers over this 10-year period. One of the notable, and reassuring, findings is that nearly 58% of filers who were in the poorest income group in 1996 had moved into a higher income category by 2005. Nearly 25% jumped into the middle or upper-middle income groups, and 5.3% made it all the way to the highest quintile.”
These findings are not particularly robust to begin with. But they're even less useful than they appear.
First, look at the way the study was conducted. Consider a college educated business major still making $28,000 at 26 at a company in Champaign IL, but who later gets an MBA and makes $200,000 at 45 as a VP of Marketing in Chicago. Or a 28 year old who works at Starbucks before figuring out that what they want to do is to get a masters in education and teach in a North Jersey school district (where they may start at >$50,000, and can go up to as high as $100,000). Or a son of privilege who does not work between 25 and 35, but rather lives off of the support of his parents or a trust (both of which would be counted as gifts and therefore not included in income) but later gets a gig as a token board of directors member on his father’s company’s board and earns dividends and capital gains off of inherited financial assets. Or a law student who has an adjusted gross income of $14,000 at the age of 27 but whose income will increase substantially once he starts working next fall (i.e., me). All of these people could very plausibly be counted in the lowest quintile during their low income years, and in the highest quintile during their later higher income years. But this isn’t “social mobility” at all. It merely reflects individuals' earnings life-cycles. All of the hypothetical people given above may be, and most likely are, the children of middle class (or higher) families.
Consequently, it is more appropriate to gauge the level of social mobility by comparing a group of people’s socio-economic status to that of their parents. Studies (1, 2, 3) that use this method consistently show that the United States exhibits a low level of social mobility relative to its first-world peers, countries which invariably have stronger welfare states and more "socialist" policies. Thus, conservative “meritocrats” must somehow account for the strong empirical implication that social democracy is more conducive to social mobility than free market capitalism.
A few more points should be made. The study only counted tax filers. Many very low income people (including the domestic chronically poor and immigrant laborers) do not file income tax returns (Table 3). These people are not counted at all, so the study totally ignores some people at the very bottom – people for whom we know the prospect of social mobility is the most far-fetched (p. 27). This feature will also bump down people whose income may not seem extremely low (like the hypothetical people I mention above) into the “lowest quintile” group, the group whose subsequent earnings form the crux of the study’s supposed implications. Furthermore, the statement that “the after-inflation median income of all tax filers increased by an impressive 24% over the same period,” paints a very misleading picture of reality. Overall median income growth has stagnated over the last 40 years (an average annual growth rate of about 0.54% from 1967-2008) despite significant increases in total family hours worked (an average annual growth rate of a little less than 0.75% from 1979-2002). Moreover, mobility may not necessarily represent the workings of a meritocracy. Indeed, some annual earnings variation may in fact reflect an undesirable degree of volatility in people’s incomes that it is attributable not to meritorious behavior (or the lack thereof), but instead the result of unforeseen financial disruptions. See Jacob Hacker’s The Great Risk Shift.
Perhaps it is fruitless to point out these (somewhat distressingly obvious) errors in reasoning of the WSJ editorial writers, but I do encounter these arguments frequently, and it will be handy for me to have this post on hand to counter them.
Saturday, April 12, 2008
The Final 400
Check this out. "Punishing the rich" my ass. Apparently our substantially (but inadequately) progressive tax regime falls off the map once you get to the very, very top of the economic pyramid.
The top 400 taxpayers in this country paid taxes, on average, equal to 18% of their reported income in 2005. They paid 30% in 1995, and they have gotten much richer since then - they now make on average 235% of what they made in 1992. And in 2005 a third of the top 400 taxpayers actually paid less than 15% of their income in taxes. The comparatively small cut taken from the rich has apparently led Progressive Plutocrat Warren Buffet to extend the offer of a $1 million bet to every Fortune 400 member that they cannot show that members of the Fortune 400 pay, on average, a higher percentage of their income in taxes than their receptionists do.
This reduction in tax burden is largely a result of the steep cuts in the capital gains tax since 1997 (28% before 1997, 20% until 2003, 15% since). About 54% of the income of the top 1% comes from capital gains - the percentage is almost certainly much higher for the richest 400. The dividend tax cut obviously didn't help either. The result of these policies is that, since 1995, the annual tax burden of the very wealthy has decreased by $25 million per filer. That's a federal revenue loss of $10 billion annually. That's even enough to fund the war for 25 minutes.
Raw data here.
Interestingly, according to that bastion of left-wing thought, the Heritage Foundation, total federal tax revenue is just over 18% of GDP. That means the hideously wealthy bear an average federal income tax burden that is slightly less, as a percentage of their average income, than total federal government revenues as a percentage of total national income (GDP). Of course there are other significant federal taxes to consider in evaluating the burden any income group bears in financing the cost of the federal government, like payroll taxes and the estate and gift tax. But including these taxes isn't likely to change much. The extremely rich pay a comparatively miniscule percentage of their income in payroll taxes since so much of their income is not from work and the social security payroll tax exempts any work income over $101,500. And the estate and gift tax is tiny in terms of its effect and the amount of revenue involved. (1% of federal revenues vs. 35% for federal payroll taxes). Not to mention, it can be largely avoided with a modest amount of tax planning.
So it would appear that the average federal tax burden borne by the hyper-wealthy as a percentage of their income isn't much more than the burden borne by the economy overall, and it is almost certainly much lower than the tax burden imposed on most of the middle class. This is because anyone who earns all of their income from work pays 7.65% of their gross income in payroll taxes; so if you don't have any capital income and you pay more than 10.35% of your gross income in income taxes, you will end up paying a higher percentage of your income in federal taxes than people in the top 400. In other words, a single person (or a married person who files separately) who earns all of his or her income from working, makes more than about $61,500 a year, and takes only the standard deduction pays a higher percentage of their income in federal taxes than the average person in the top 400 does.
(Note: My analysis does not include the indirect burden of the corporate tax on the very wealthy. Including this amount in the analysis would increase the percentage burden borne by the very rich, especially since financial wealth is so heavily concentrated among the very wealthy. But I really don't think including it would change my analysis very much, since the corporate tax is only 10-15% of federal revenues and my suspicion is that the very very rich earn a disproportionate amount of their income from investments in exotic hedge funds and private equity funds, which are usually organized as partnerships and therefore not subject to the corporate tax. And I really have no feasible way of including it either.)
The top 400 taxpayers in this country paid taxes, on average, equal to 18% of their reported income in 2005. They paid 30% in 1995, and they have gotten much richer since then - they now make on average 235% of what they made in 1992. And in 2005 a third of the top 400 taxpayers actually paid less than 15% of their income in taxes. The comparatively small cut taken from the rich has apparently led Progressive Plutocrat Warren Buffet to extend the offer of a $1 million bet to every Fortune 400 member that they cannot show that members of the Fortune 400 pay, on average, a higher percentage of their income in taxes than their receptionists do.
This reduction in tax burden is largely a result of the steep cuts in the capital gains tax since 1997 (28% before 1997, 20% until 2003, 15% since). About 54% of the income of the top 1% comes from capital gains - the percentage is almost certainly much higher for the richest 400. The dividend tax cut obviously didn't help either. The result of these policies is that, since 1995, the annual tax burden of the very wealthy has decreased by $25 million per filer. That's a federal revenue loss of $10 billion annually. That's even enough to fund the war for 25 minutes.
Raw data here.
Interestingly, according to that bastion of left-wing thought, the Heritage Foundation, total federal tax revenue is just over 18% of GDP. That means the hideously wealthy bear an average federal income tax burden that is slightly less, as a percentage of their average income, than total federal government revenues as a percentage of total national income (GDP). Of course there are other significant federal taxes to consider in evaluating the burden any income group bears in financing the cost of the federal government, like payroll taxes and the estate and gift tax. But including these taxes isn't likely to change much. The extremely rich pay a comparatively miniscule percentage of their income in payroll taxes since so much of their income is not from work and the social security payroll tax exempts any work income over $101,500. And the estate and gift tax is tiny in terms of its effect and the amount of revenue involved. (1% of federal revenues vs. 35% for federal payroll taxes). Not to mention, it can be largely avoided with a modest amount of tax planning.
So it would appear that the average federal tax burden borne by the hyper-wealthy as a percentage of their income isn't much more than the burden borne by the economy overall, and it is almost certainly much lower than the tax burden imposed on most of the middle class. This is because anyone who earns all of their income from work pays 7.65% of their gross income in payroll taxes; so if you don't have any capital income and you pay more than 10.35% of your gross income in income taxes, you will end up paying a higher percentage of your income in federal taxes than people in the top 400. In other words, a single person (or a married person who files separately) who earns all of his or her income from working, makes more than about $61,500 a year, and takes only the standard deduction pays a higher percentage of their income in federal taxes than the average person in the top 400 does.
(Note: My analysis does not include the indirect burden of the corporate tax on the very wealthy. Including this amount in the analysis would increase the percentage burden borne by the very rich, especially since financial wealth is so heavily concentrated among the very wealthy. But I really don't think including it would change my analysis very much, since the corporate tax is only 10-15% of federal revenues and my suspicion is that the very very rich earn a disproportionate amount of their income from investments in exotic hedge funds and private equity funds, which are usually organized as partnerships and therefore not subject to the corporate tax. And I really have no feasible way of including it either.)
Friday, April 4, 2008
Saving, Investment, Economic Growth, and the Capital Gains Preference
Regular readers (all four of us) will recall an earlier post where I mentioned that labor supply is unresponsive to tax rates. This is to say, the whole “if the government taxes me more than X%, then I just won’t bother going to work!” hypothesis is not supported by empirical evidence. The other part of the tax-rates-and-economic-growth equation is saving and investment. Many argue that low rates of tax on capital income in particular (you know, the kind only rich people have to any significant degree) help encourage saving, investment, and therefore higher economic growth. This argument is particularly important to refute because under current law, capital gains are taxed at a special, favorable rate of 15% (compared to a top marginal rate of 35% for “ordinary income”), and many major Republican figures advocate the total elimination of any tax on capital gains at all. Since the argument is demonstrably false, this “capital gains preference” is nothing more that a massive handout (to the tune of ~$92 billion in 2006) to the rich.
The first part of the pro-preference argument is that it encourages saving. By increasing the after-tax reward for deferring current consumption and investing in a capital asset (e.g., corporate stock, a partnership interest, a house, etc.), so the argument goes, the preference provides an incentive for people to save more, making more resources available for investment (we’ll ignore the fact that many forms of saving, such as 401(k) plans, IRA’s, and interest on bonds or saving accounts do not enjoy special capital gains treatment, which seems totally arbitrary). This sounds theoretically plausible. But it overlooks two important wrinkles. For one thing, it ignores the fact that individuals face two countervailing incentives when the rate of return on saving is increased. First, as the preference proponents point out, they have an incentive to save more and consume less, since the relative return of saving has increased (the “substitution effect”). Second, however, they face an incentive to save less because they can get the same level of future consumption for a lower cost in terms of deferred present consumption. As a result, a higher return on saving could theoretically increase or decrease saving, depending on which effect is larger. The question is therefore an empirical one, and the answer cannot be blithely assumed. As it happens, the responsiveness of private saving rates to an increase in the rate of return may be “small or even negative.” (p. 57, “The Labyrinth of Capital Gains Tax Policy,” by Leonard Burman).
(Note: the same competing forces apply to the question of tax rates and labor supply as well. Increasing taxes on work creates a substitution effect that discourages work but an income effect that encourages work, because more work will be necessary to earn the same level of after-tax income. This may be why tax rates have no significant net effect on labor supply.)
Second, this whole analysis recognizes only private saving and ignores the effect of a capital gains tax preference on public saving. The capital gains preference decreases government revenue (p. 2-3). If the resulting increase in the federal deficit (or decrease of the surplus) is greater than the increase in private saving, then the preference will cause a net decrease in total national saving. If it causes a net decrease in national saving, then interest rates will rise (because a larger amount of government debt will drive up the cost of borrowing) and the cost of capital for private business will increase. If the capital gains preference ends up increasing the cost of capital for private business, then it would defeat its whole stated purpose – i.e., to stimulate investment and therefore economic growth. It will not surprise you to learn that under any reasonable set of assumptions, a capital gains tax cut would in fact decrease public saving by more than it would increase private saving. (Id., p. 66)
There is another big reason why we should not be surprised that a capital gains preference would not increase investment: most capital gains are never taxed at all anyway. (Id., p. 51). This is because half of all individual capital assets held by individuals are either held until death or donated to charity. And on top of that, all capital gains attributable to foreign investors, tax exempt institutional investors like endowments and charitable trusts, and corporations, (which between them almost certainly amount to the greater part of U.S. investment) are not subject to the individual capital gains tax.
Since the preference most likely suppresses investment, it makes sense that capital gains tax rates do not have any empirically observable effect on economic growth rates. (Id., Figure 5-1, p. 82). And if this is the case, there is surely no sensible rationale for continuing the preferential treatment of capital gains. After all, any policy that ends up taxing the gains on assets that are so incredibly concentrated (the top 1% own ~40% of all financial assets) is repugnant from a distributive justice standpoint.
Bear in mind, part of the Box-Norquist-Sir Loin agenda is to totally eliminate the taxation of capital income altogether. So this battle is very current and highly significant for anyone who cares about our increasing economic inequality and our decreasing tax progressivity.
The first part of the pro-preference argument is that it encourages saving. By increasing the after-tax reward for deferring current consumption and investing in a capital asset (e.g., corporate stock, a partnership interest, a house, etc.), so the argument goes, the preference provides an incentive for people to save more, making more resources available for investment (we’ll ignore the fact that many forms of saving, such as 401(k) plans, IRA’s, and interest on bonds or saving accounts do not enjoy special capital gains treatment, which seems totally arbitrary). This sounds theoretically plausible. But it overlooks two important wrinkles. For one thing, it ignores the fact that individuals face two countervailing incentives when the rate of return on saving is increased. First, as the preference proponents point out, they have an incentive to save more and consume less, since the relative return of saving has increased (the “substitution effect”). Second, however, they face an incentive to save less because they can get the same level of future consumption for a lower cost in terms of deferred present consumption. As a result, a higher return on saving could theoretically increase or decrease saving, depending on which effect is larger. The question is therefore an empirical one, and the answer cannot be blithely assumed. As it happens, the responsiveness of private saving rates to an increase in the rate of return may be “small or even negative.” (p. 57, “The Labyrinth of Capital Gains Tax Policy,” by Leonard Burman).
(Note: the same competing forces apply to the question of tax rates and labor supply as well. Increasing taxes on work creates a substitution effect that discourages work but an income effect that encourages work, because more work will be necessary to earn the same level of after-tax income. This may be why tax rates have no significant net effect on labor supply.)
Second, this whole analysis recognizes only private saving and ignores the effect of a capital gains tax preference on public saving. The capital gains preference decreases government revenue (p. 2-3). If the resulting increase in the federal deficit (or decrease of the surplus) is greater than the increase in private saving, then the preference will cause a net decrease in total national saving. If it causes a net decrease in national saving, then interest rates will rise (because a larger amount of government debt will drive up the cost of borrowing) and the cost of capital for private business will increase. If the capital gains preference ends up increasing the cost of capital for private business, then it would defeat its whole stated purpose – i.e., to stimulate investment and therefore economic growth. It will not surprise you to learn that under any reasonable set of assumptions, a capital gains tax cut would in fact decrease public saving by more than it would increase private saving. (Id., p. 66)
There is another big reason why we should not be surprised that a capital gains preference would not increase investment: most capital gains are never taxed at all anyway. (Id., p. 51). This is because half of all individual capital assets held by individuals are either held until death or donated to charity. And on top of that, all capital gains attributable to foreign investors, tax exempt institutional investors like endowments and charitable trusts, and corporations, (which between them almost certainly amount to the greater part of U.S. investment) are not subject to the individual capital gains tax.
Since the preference most likely suppresses investment, it makes sense that capital gains tax rates do not have any empirically observable effect on economic growth rates. (Id., Figure 5-1, p. 82). And if this is the case, there is surely no sensible rationale for continuing the preferential treatment of capital gains. After all, any policy that ends up taxing the gains on assets that are so incredibly concentrated (the top 1% own ~40% of all financial assets) is repugnant from a distributive justice standpoint.
Bear in mind, part of the Box-Norquist-Sir Loin agenda is to totally eliminate the taxation of capital income altogether. So this battle is very current and highly significant for anyone who cares about our increasing economic inequality and our decreasing tax progressivity.
Thursday, March 13, 2008
Executive Pay
Check out this report:
http://www.faireconomy.org/files/ExecutiveExcess2007.pdf
Some highlights:
The average pay of Fortune 500 CEOs ($10.8 million, based on a survey of 386 companies) is 364 times the pay of the average American worker. This ratio was as high as 525 in 2000 during the high-tech boom but was "only" 107 in 1990.
The average pay of the 20 highest paid private equity and hedge fund managers ($657.5 million) is 22,255 times the pay of the average worker.
Over the past decade, inflation-adjusted CEO pay has increased 45%, while inflation-adjusted average worker pay grew just 7% and the hourly minimum wage declined in real value by 7%.
The average pay of the 20 highest paid American CEOs ($36.4 million) is almost 3 times the average pay of the 20 highest paid European CEOs ($12.5 million).
http://www.faireconomy.org/files/ExecutiveExcess2007.pdf
Some highlights:
The average pay of Fortune 500 CEOs ($10.8 million, based on a survey of 386 companies) is 364 times the pay of the average American worker. This ratio was as high as 525 in 2000 during the high-tech boom but was "only" 107 in 1990.
The average pay of the 20 highest paid private equity and hedge fund managers ($657.5 million) is 22,255 times the pay of the average worker.
Over the past decade, inflation-adjusted CEO pay has increased 45%, while inflation-adjusted average worker pay grew just 7% and the hourly minimum wage declined in real value by 7%.
The average pay of the 20 highest paid American CEOs ($36.4 million) is almost 3 times the average pay of the 20 highest paid European CEOs ($12.5 million).
Thursday, February 28, 2008
Work and Effort
There are a couple of specific arguments regarding my proposed labor system that I’d like to address. I’d basically like to defend my proposals against suggestions/criticisms from the radical left and the center-right, both of which concern the murky concept of "effort."
The first thing I’d like to respond to is the idea, which several readers have referred to, that we should use an effort-based reward system (and implicitly, a lack-of-effort based “punishment” system in the sense that the reward given to those who give the appropriate level of effort will be withheld from those who do not). The idea obviously has philosophical appeal. It sounds fair. Ultimately, however, it strikes me as too vague in theory and unworkable in practice.
First of all, what is effort, and does it really form a coherent moral basis for reward? Is effort the amount of subjective pain or hardship one experiences while he or she performs a productive activity? Is it the amount of concentration, focus, or consistency with which someone attends his or her task? Or is it the amount of calories someone burns in the process of doing something? Think of the problem of the talented individual for whom anything is easy – should we deny an effort-based reward to this person who, though he or she meets every reasonable expectation regarding his or her performance, finds the job relatively easy? Or should we just give the effort-based reward to anyone who meets certain minimum standards of diligence and responsibility? I personally have no idea how to answer these questions. Perhaps one of you does.
There is also the abstract problem that the willingness to expend effort, like any personal characteristic, is something that is largely inherited and/or absorbed by social influences over which the individual has little control. So in a sense, society “owns” the amount of effort that an individual is willing to put forth just as much as it “owns” their other inherited/socially acquired abilities. If this is the case, as a purely abstract matter, no individual reward is appropriate for extra effort.
But most fundamentally, the attempt to objectively measure and reward effort strikes me as a utopian undertaking. Whatever we think effort is, it is almost certainly something that is only truly known, if at all, by the specific individual concerned. Until we learn how to, and decide we are willing to, monitor people’s thoughts and feelings, this task strikes me as absolutely impossible.
Second, the use of effort as a basis for reward would totally eliminate the “market” aspect of the labor market. Some people consider this a positive thing, but I don't. My view is that some play for market forces can be a useful way to allocate resources towards making products and providing services that people actually want, and can help, to some extent and in conjunction with a whole lot of equally important factors, motivate additional effort. Perhaps some of you will see this position as “un-socialist.” But I think the philosophical basis of socialism is not the total rejection of any and all private property and market exchange, but the conviction that the “right” to private property is not a right at all. Rather, property rights are a social and economic expediency that society can and should (even “must”) modify to accomplish important social goals. This implies that some market exchange may be tolerable to the extent that it can further general welfare AND to the extent that the fruits of such exchange are equitably redistributed.
So for me, the labor market should represent a kind of revenue sharing agreement between society and the individual with respect to the surplus productivity created, where society’s cut should be generally quite large, and should get progressively larger as a percentage as the individual’s reward increases. Once again, the benefit of this arrangement is not its inherent moral superiority, but its ability to effectively allocate resources and to preserve some incentive (albeit a radically compressed one) for increased productivity, while simultaneously providing the economic means to give everyone a relatively high standard of living. So long as the means to be productive are open to all (through free higher education, etc.) and the economic surplus is redistributed to maintain a radically compressed income and wealth distribution, I think an olde-fashioned labor market can be a good thing.
...
The other concern that I would like to respond to comes from the right. The question/concern is: how can a system of guaranteed employment ensure that certain minimum standards of diligence are met (like just showing up, for instance) by the people who resort to guaranteed government employment? After all, if employment is guaranteed by the government in all cases, someone who works for the government can essentially never be fired. So what do we do with the person who couldn’t find a job anywhere else, works for the government, but just doesn’t show up half the time and doesn’t try to be productive while he or she is there?
Here are the possible solutions I can think of:
a.) suspend the offender, without pay, for a period of time based on the severity of the offense
b.) continue to pay them but assign them to increasingly more distasteful tasks as punishment
c.) provide some kind of other punishment, like a fine
d.) send cops to their house and make them show up, and supervise their work closely to make sure they do it
e.) make them attend some kind of intensive community service work program in order to earn their right to work back
f.) just ignore their misbehavior and pay them anyway
Personally, I am somewhat uncomfortable with the idea that we should use the threat of withdrawing someone’s basic subsistence (in this case, a minimum income), even for a short period, as leverage to get them to be productive. So I have some trouble with a. We could also give them the lousy jobs to do, as in b., but then they really wouldn’t show up. A fine runs into the same problem as a. – it imposes an extra financial burden on someone who is probably on the lower end of our (albeit compressed) income distribution. D. and e. seem somewhat authoritarian. And f. seems kind of like it amounts to an acceptance of failure. In short, I find all of these solutions at least somewhat distasteful.
I would probably accept some judicious combination of a. - e. as necessary, but undesirable, punishments (I realize this is a very mushy answer). But it probably wouldn’t be that big of a problem, really – I think it’s actually a very, very small percentage of the population that really wants to sit at home and do nothing and/or to go to work and accomplish nothing at all. And if we are going to err in one direction I’d rather err in favor of giving everyone a minimum (i.e., higher than the poverty rate) income and letting some people by without really contributing than to run the risk of denying deserving people the necessaries of life. And, after all, all economic systems have some inefficiency. Just look at the current internet-surfing, time-wasting juggernaut that is the capitalist office. Talk about total waste.
So I guess the upshot is I think we should try as hard as possible to get everyone to do their fair share of work by using some sensible combination of a. - e., depending on what works, while taking comfort in the fact that if this system is to suffer some inefficiency because of the employment guarantee, at least that inefficiency is incurred for a good cause. And in a society as rich as ours, we can certainly afford to sacrifice some productivity in order to satisfy overriding moral imperatives.
The first thing I’d like to respond to is the idea, which several readers have referred to, that we should use an effort-based reward system (and implicitly, a lack-of-effort based “punishment” system in the sense that the reward given to those who give the appropriate level of effort will be withheld from those who do not). The idea obviously has philosophical appeal. It sounds fair. Ultimately, however, it strikes me as too vague in theory and unworkable in practice.
First of all, what is effort, and does it really form a coherent moral basis for reward? Is effort the amount of subjective pain or hardship one experiences while he or she performs a productive activity? Is it the amount of concentration, focus, or consistency with which someone attends his or her task? Or is it the amount of calories someone burns in the process of doing something? Think of the problem of the talented individual for whom anything is easy – should we deny an effort-based reward to this person who, though he or she meets every reasonable expectation regarding his or her performance, finds the job relatively easy? Or should we just give the effort-based reward to anyone who meets certain minimum standards of diligence and responsibility? I personally have no idea how to answer these questions. Perhaps one of you does.
There is also the abstract problem that the willingness to expend effort, like any personal characteristic, is something that is largely inherited and/or absorbed by social influences over which the individual has little control. So in a sense, society “owns” the amount of effort that an individual is willing to put forth just as much as it “owns” their other inherited/socially acquired abilities. If this is the case, as a purely abstract matter, no individual reward is appropriate for extra effort.
But most fundamentally, the attempt to objectively measure and reward effort strikes me as a utopian undertaking. Whatever we think effort is, it is almost certainly something that is only truly known, if at all, by the specific individual concerned. Until we learn how to, and decide we are willing to, monitor people’s thoughts and feelings, this task strikes me as absolutely impossible.
Second, the use of effort as a basis for reward would totally eliminate the “market” aspect of the labor market. Some people consider this a positive thing, but I don't. My view is that some play for market forces can be a useful way to allocate resources towards making products and providing services that people actually want, and can help, to some extent and in conjunction with a whole lot of equally important factors, motivate additional effort. Perhaps some of you will see this position as “un-socialist.” But I think the philosophical basis of socialism is not the total rejection of any and all private property and market exchange, but the conviction that the “right” to private property is not a right at all. Rather, property rights are a social and economic expediency that society can and should (even “must”) modify to accomplish important social goals. This implies that some market exchange may be tolerable to the extent that it can further general welfare AND to the extent that the fruits of such exchange are equitably redistributed.
So for me, the labor market should represent a kind of revenue sharing agreement between society and the individual with respect to the surplus productivity created, where society’s cut should be generally quite large, and should get progressively larger as a percentage as the individual’s reward increases. Once again, the benefit of this arrangement is not its inherent moral superiority, but its ability to effectively allocate resources and to preserve some incentive (albeit a radically compressed one) for increased productivity, while simultaneously providing the economic means to give everyone a relatively high standard of living. So long as the means to be productive are open to all (through free higher education, etc.) and the economic surplus is redistributed to maintain a radically compressed income and wealth distribution, I think an olde-fashioned labor market can be a good thing.
...
The other concern that I would like to respond to comes from the right. The question/concern is: how can a system of guaranteed employment ensure that certain minimum standards of diligence are met (like just showing up, for instance) by the people who resort to guaranteed government employment? After all, if employment is guaranteed by the government in all cases, someone who works for the government can essentially never be fired. So what do we do with the person who couldn’t find a job anywhere else, works for the government, but just doesn’t show up half the time and doesn’t try to be productive while he or she is there?
Here are the possible solutions I can think of:
a.) suspend the offender, without pay, for a period of time based on the severity of the offense
b.) continue to pay them but assign them to increasingly more distasteful tasks as punishment
c.) provide some kind of other punishment, like a fine
d.) send cops to their house and make them show up, and supervise their work closely to make sure they do it
e.) make them attend some kind of intensive community service work program in order to earn their right to work back
f.) just ignore their misbehavior and pay them anyway
Personally, I am somewhat uncomfortable with the idea that we should use the threat of withdrawing someone’s basic subsistence (in this case, a minimum income), even for a short period, as leverage to get them to be productive. So I have some trouble with a. We could also give them the lousy jobs to do, as in b., but then they really wouldn’t show up. A fine runs into the same problem as a. – it imposes an extra financial burden on someone who is probably on the lower end of our (albeit compressed) income distribution. D. and e. seem somewhat authoritarian. And f. seems kind of like it amounts to an acceptance of failure. In short, I find all of these solutions at least somewhat distasteful.
I would probably accept some judicious combination of a. - e. as necessary, but undesirable, punishments (I realize this is a very mushy answer). But it probably wouldn’t be that big of a problem, really – I think it’s actually a very, very small percentage of the population that really wants to sit at home and do nothing and/or to go to work and accomplish nothing at all. And if we are going to err in one direction I’d rather err in favor of giving everyone a minimum (i.e., higher than the poverty rate) income and letting some people by without really contributing than to run the risk of denying deserving people the necessaries of life. And, after all, all economic systems have some inefficiency. Just look at the current internet-surfing, time-wasting juggernaut that is the capitalist office. Talk about total waste.
So I guess the upshot is I think we should try as hard as possible to get everyone to do their fair share of work by using some sensible combination of a. - e., depending on what works, while taking comfort in the fact that if this system is to suffer some inefficiency because of the employment guarantee, at least that inefficiency is incurred for a good cause. And in a society as rich as ours, we can certainly afford to sacrifice some productivity in order to satisfy overriding moral imperatives.
Friday, February 22, 2008
Olde Hat
I know I'm preaching to the choir on this, but my mom asked be to respond to the right-wing parable below. Since I had to write is out anyway, I figured I might as well post it. I would like it if anyone can come up with any additional barbs to make the retort more effective:
"Subject: READ AND TELL ME HOW TO DEBATE THIS CRAP
I've seen this before, but I still think it's worth sending. A young woman was about to finish he first year of college. Like so many others her age, she considered herself to be a very liberal Democrat, and among other liberal ideals, was very much in favor of higher taxes to support more government programs, in other words redistribution of wealth.
She was deeply ashamed that her father was a rather staunch Republican, a feeling she openly expressed. Based on the lectures that she had participated in, and the occasional chat with a professor, she felt that her father had for years harbored an evil, selfish desire to keep what he thought should be his.
One day she was challenging her father on his opposition to higher taxes on the rich and the need for more government programs. The self-professed objectivity proclaimed by her professors had to be the truth and she indicated so to her father. He responded by asking how she was doing in school.
Taken aback, she answered rather haughtily that she had a 4.0 GPA, and let him know that it was tough to maintain, insisting that she was taking a very difficult course load and was constantly studying, which left her no time to go out and party like other people she knew. She didn't even have time for a boyfriend, and didn't really have many college friends because she spent all her time studying.
Her father listened and then asked, How is your friend Audrey doing?
She replied, Audrey is barely getting by. All she takes are easy classes, she never studies, and she barely has a 2.0 GPA. She is so popular on campus; college for her is a blast. She's always invited to all the parties, and lots of times she doesn't even show up for classes because she's too hung over.
Her wise father asked his daughter, Why don't you go to the Dean's office and ask him to deduct a 1.0 off your GPA and give it to your friend who only has a 2.0. That way you will both have a 3.0 GPA and certainly that would be a fair and equal distribution of GPA.
The daughter, visibly shocked by her father's suggestion, angrily fired back, 'That's a crazy idea. How would that be fair? I've worked really hard for my grades! I've invested a lot of time, and a lot of hard work! Audrey has done next to nothing toward her degree. She played while I worked my tail off!
The father slowly smiled, winked and said gently, 'Welcome to the Republican Party'"
This disingenuous parable is based on the familiar conservative maxim that hard work, diligence, and "merit," distinguish the rich from the poor. This is total nonsense. The extremely wealthy, the demographic whose interests the Republican Party serves, often earn their income in "lazy" ways (for example, from selling financial assets, trust income and jobs their rich parents got them). Even the upper middle class, whose success may well be attributable to hard work and diligence, face higher taxes than the very rich (who get taxed at 15% on dividends and capital gains, which are not subject to payroll taxes) and could suffer total financial ruin if they face an unexpected medical catastrophe (due to our lack of universal health insurance). And like all of us who "work," they are subject to the whims of their employers, and could be fired at any time for any reason. Anyone who has had a boss knows that not all bosses mean well or know what they're doing.
A closely related idea is that success is open to anyone who "applies themselves." This is bullshit. Many poor people work their asses off at crummy retail jobs with no prospect of advancement, no educational opportunities, no union representation, no (or inadequate) health coverage or retirement provisions, and no means by which to pay for their children's education. Many rich people, like G.W. Bush, have the benefit of many, many, many second chances, can live off the income from their parents' outsized incomes, and gain accolades by going to elite universities that their parents got them into or corporate director jobs their parents "handed out" to them.
In short, there is no meaningful, consistent connection between "merit" and economic success. Moreover, studies consistently show that the
The sort of "government programs" I, and to a lesser extent mainstream Democrats, advocate make success radically more accessible across the board by protecting people from financial ruin from medical and retirement expenses. This will make people more likely to take entrepreneurial risks and start businesses, because the risks of failure are less disastrous. They would also allow people to more affordably gain the benefit of education to make them more successful. And in some cases, government programs in some countries (like free child day care or good public transportation) actually enable them to join the workforce where they would otherwise be unable to do so.
It is also the case that even the upper middle class benefit greatly from government programs and subsidies, like Medicare, Social Security, the home mortgage interest deduction, the exclusion of $500,000 of capital gains from income tax on the sale of a primary residence, the benefit of still somewhat publicly funded higher education, the federally funded national transportation system that lets them travel to work their good jobs, the protection of property by law enforcement and a system of law, and the general government support and protection of the capitalist system that served them so well. The kind of radical free market state that Republicans advocate benefits only the very, very rich who have no need to, and may very well not, work at all.
Moreover, there is much more at stake in having enough to get by on, and access to basic economic rights (like health care and education) than in your college GPA. People deserve whatever symbolic prizes and token awards they get. For instance, I would not ask the local league bowling champion to "redistribute" his fairly won title. But then, no one remains mired in poverty forever and unable to gain needed health treatments because they only got a 2.0 in college or because they were not bowling champs. This may well be the case, however, when it comes to the redistribution of wealth and broad-based access to basic economic rights and government services.
Finally, it bears mentioning that income and wealth inequality have absolutely exploded in recent years. They top 1% now own somewhere around 40% of all the wealth in our country, and the average CEO of a publicly traded corporation makes over 300 times what the average employee at their company makes. Do you really think that these people have "earned" such a towering advantage over the rest of us, such that it is so unfair to ask them to kick in proportionately more to the public treasuries so that others can have a chance in life? I sure don't.
...
Since I posted this it occurred to me that the bit about how she "didn't even have time for a boyfriend" was interesting. Apparently Republicans think it's a good thing to work so hard that you don't even have time to have a basic social life. That is warped.
Friday, February 15, 2008
Consolidated 40 Theses: If You Read Nothing Else, Read This
Introduction
"Socialism" means different things to different people. I take socialism to mean an economic system that puts economic and social rights, due to everyone, above individual rights and privileges. This is not, of course, to say that individual rights are unimportant. Some of the basic values I propose are:
(i.) Economic egalitarianism, full employment.
(ii.) Free access to social mobility-enabling services (like education).
(iii) Observation of basic economic rights (like health care).
(iv.) Strong organized labor institutions.
(v.) Observation of basic civil rights (like free speech).
(vi.) Limited market operation, subject to public regulation and egalitarian redistribution of the proceeds.
(vii.) Work and economic productivity should not be elevated above other important social and moral priorities.
(viii.) Implementation of all practical policies necessary to achieve these goals.
In contrast with some socialists, I believe that some degree of market operation may be perfectly compatible with an overall socialist system, so long as those who make outsized returns on their services or investments contribute their fair share to the public coffers and the income/wealth distribution is radically compressed. A 5:1 ratio from the highest paid person to the lowest paid person (after tax) strikes me as a sensible starting point. But more about that later...
So below I list 40 changes that some friends and I have come up with. I will explain, as briefly as possible, any proposal that requires some elaboration. Anyone who has proposed a change that I've forgotten or who has a new idea, please post it in the comments section. And if anyone would like to expand or suggest alterations to any of these proposals, please post that in the comments section as well.
As a general matter, if fellow bloggers would like to take issue with or expand upon some of these suggestions, please do so in the comments section. Create a new blog entry for affirmative suggestions.
1. Implement a Social Dividend Fund
The concept of the SDF is like Social Security with Teeth. We would allow the SDF to use its funds to purchase interests in private businesses (on a mandatory basis, i.e., the SDF could force corporations to issue to it new shares), fund it out of general revenues (instead of a regressive payroll tax like FICA), and pay out a dividend of equal amount to every citizen (on a monthly basis) who is (a) employed, (b) retired, (c) disabled, or (d) pregnant/raising young children. This would guarantee nearly everyone a minimum income, would allow for a higher rate of return, and would put public representatives on the Board of any business that the SDF chooses. This could be a force to encourage socially responsible business practices and could police corporate misconduct. It goes without saying that the SDF would have to have highly qualified investment managers and would require serious ethical safeguards to guard against corruption.
What about people who do not fall under categories (a)-(d)? How much would the dividend be? Keep reading...
2. Mandatory Unionization
One of the most disconcerting recent trends is the precipitous decline in private sector unionization rates. On the theory that all workers should have a collective voice in their organizations, we would require all workers to belong to unions (whether they think they need it or not, they ultimately will). Unions could compete for the right to represent workers by establishing records of successful representation. The strictest controls would be required to guarantee the integrity of union bargaining and elections.
For those who are concerned about running roughshod over workers' preferences, workers who do not feel that they would benefit from aggressive union representation could theoretically elect a "Do Nothing Union." This union would interfere minimally with management decisions and would presumably charge minimal fees. Maybe it could organize happy hour outings to further justify its existence.
Owners and management would be exempt from this requirement.
3. Universal, Single Payer Health care
Anyone who is paying any attention knows that our health care system is an international embarrassment. We spend between 2 and 3 times what any other country does on health care, yet our system ranks a pitiful 37th in the most recent WHO ranking. System costs skyrocket in the absence of drug price controls and collective price negotiation. Private insurers spend as much as $.30 of every dollar on duplicative overhead. People are at the mercy of arcane insurer restrictions and limitations on coverage, and often avoid medical attention until their condition becomes catastrophic. And even upper-middle income earners face the risk of total financial ruin if they need serious medical attention.
The solution to all this is for the government to operate a single-payer insurance mechanism. It would provide coverage, analogous to Medicare, for everyone and would cover all medically justified procedures and medications. Healthcare providers and pharmaceutical companies could continue to be private, but they would have to operate under the requirements of the government system.
4. Implement a More Aggressively Progressive Tax System
Along side raising revenue, the most important social function of the tax system should be to radically compress the income and wealth distribution, which has gotten out of hand since the Regan era (encouraging economic growth is a distant third in this era of material abundance). 5:1 (after tax) strikes me as a reasonable point to start the debate. This would require a drastically different tax system than our current one. Notwithstanding its graduated income tax rates, our current tax system hands out a massive tax subsidy in the form of far lower rates of tax for capital income, which is naturally concentrated at the very very top of the wealth/income pyramid. The result is that, as Warren Buffett observed, he pays a lower tax rate than his secretary. This is not fair and is not supported by any empirically established economic justification.
The basic characteristics of a socialist tax system should include high, graduated income tax rates, and should show no preference for capital income. Even more important, it should involve a small but significant and graduated wealth tax (or tax on net worth), and higher/stricter gift and estate taxes. Perhaps most important of all, the brackets should continue to increase to account for the explosion of the income of the highest earners. As it stands now, the highest marginal income tax brackets tap out at about $350,000 (for an individual) of annual income. The rates should continue to rise, significantly, for the private equity and hedge fund managers who take home >$100 million a year. The role of the Earned Income Tax Credit (EITC) would be replaced by the SDF explained above.
There is nothing inconsistent about imposing a significant consumption tax as part of an overall progressive schema. Such a tax could put a check on American overconsumption and could ease the environmental strains and macroeconomic imbalances that such overconsumption creates. It could also offset any disincentive to save created by the wealth tax. However, the rate would have to be carefully set in relation to the other tax rates to ensure that those with more resources pay a significantly proportion of those resources in tax.
Finally, businesses should not be able to deduct compensation past a certain amount from their tax liability as a compensation expense. The tax code currently has a provision that superficially looks like this, but the exceptions swallow up the rule. Let's get rid of the exceptions and give this some teeth.
5. Mandatory National Service
All citizens should be required to serve the public interest through a national service program. While a suitable program could take many forms, it should allow people to choose from many areas of service and should last somewhere in the vicinity of 3-5 years during young adulthood. I'm open to specific suggestions on what this should look like.
6. "Open Door" National Employment Service
Remember how I said that only the employed, retired, pregnant/childrearing or disabled should be eligible to receive the SDF? This is because every citizen should have the right to secure employment with the national service if they cannot find employment elsewhere (or even if they could but would rather not). They could not necessarily be given their choice of what to do, but they could always get a job with the national service.
This way anyone who is able to work can work, and those with little or no job skills could, in most cases, be trained to be able to work in the private sector if they would like to. The (regionally adjusted for cost of living) minimum salary would be set such that, when added to the SDF payment, it would exceed the poverty threshold of a family of average size. As a result, poverty would be almost eliminated.
In the unlikely case that someone is poor (i.e., no personal savings), is not disabled, but refuses to work, according to these rules he or she would not receive a dividend and therefore would not have any income. As I see it now, I would advocate some form of court supervision where such an individual would have to establish how they would subsist without breaking the law, and could be forced to join the national employment service even if they would rather not. But I may be convinced otherwise...
As a practical matter, the minimum salary in the public sector would probably force private sector salaries to observe that floor as well.
7. Free Higher Education; Free (and Better) Trade Education
This is pretty clear. Everyone should be able to get an education for which they are qualified free of charge. A well educated and highly skilled workforce benefits everyone. The educational system should also provide ample opportunities for those who do not wish to pursue academic studies, and would prefer to develop trade skills.
8. Abolish the Federalist System
Since the Civil War, social and economic conservatives have aligned themselves with the belief that states should have greater rights vis-a-vis the federal government. And for good reason. Even beyond our nation's ugly history of "states' rights" in the Jim Crow era, arbitrarily breaking up governmental units puts in place a jurisdictional competition dynamic for states competing for ever more mobile capital, leading to what many call the "race to the bottom." This leads to massive tax subsidies for large, mobile corporations and declining regulatory standards in other areas.
Federalism subjects smaller governmental units to corruption, interest-group takeover, and the politics of "good-old-boy" networks. It also creates a needless and largely duplicative second layer of government. How much cheaper would it be to simply have one IRS responsible for one federal tax code than to have an IRS plus fifty departments of revenue administering fifty different tax codes? The same goes for environmental and other regulatory bodies. Not to mention, the feds are almost always more competent, on the whole, than state regulatory agencies.
Federalism and the belief that the states, in and of themselves, represent something above and beyond a mere administrative unit also forms the basis of the current, demented, system of federal political representation. The result is that more populous states are underrepresented in the Senate and the Electoral College gives disproportionate votes to small states, and therefore some people's votes count for more than others'. This is fundamentally antidemocratic.
Moreover, federalism as it stands now is simply arbitrary. Just because the borders of
9. Unilateral City Annexation Rights
Notwithstanding #8, some administrative subdivisions will be necessary as a practical matter. There is nothing wrong with cities and towns having some say in inherently local matters (like deciding how much to charge for parking tickets or how much to set fines for letting your dog defecate on the sidewalk). And once most matters of policy of economic significance are set at the central level, much less is stake. Even so (and particularly if #8 is not completely implements), it makes sense for cities to have the unilateral right to annex their suburbs into their administrative unit, subject to certain standards regarding the economic interconnection of city and a particular suburb. For instance, if >35% of
Note: perhaps a more democratic and practical way of doing this is just by having an election in the city and the particular suburb, where all votes count equally. This would usually amount to a unilateral annexation right, unless the city itself is indifferent. But it has a more democratic feel to it.
10. Institute a Proportional Parliamentary System
This follows from #8 as well. If we are eliminating federalism because of its antidemocratic properties, the natural choice is a proportional parliamentary system (which is not subject to any unelected court review). In this scenario, parties would take up seats in the legislature in accord with their percentage of the national vote. This way additional parties that enjoy significant but minority support can play a meaningful role and Nader fans could stop helping Republicans.
11. Phase Out the Automobile, Radically Expand Public Transit
Cars are extremely dangerous to their drivers (car accidents are the #1 cause of death among people under 30), cause enormous amounts of pollution, encourage the segregation and geographic sprawl of residential communities, and are fundamentally inefficient in high volume situations. So it goes way beyond just pollution, and the electric car doesn't solve all the problems. With respect to the inefficiency of cars in high volume situations, think of a traffic jam and compare it to a crowded train. High volume causes logjams with automobiles because of the delay between when one car moves forward and when the next car follows it. The result is an inchworm effect that cascades over distance and leads to massive delays. In contrast, a crowded train does not move any slower than it ordinarily does.
Moreover, cars are not cost justified. I read that it costs twice as much to build a mag-lev train track as it costs to build an interstate highway (I'll look up the citation if anyone wants to call me on this). Only twice as much! The costs of car travel obviously also include the cost to individuals of cars, maintenance of the highway, gasoline, and accidents. Mag-lev trains move way faster, require little maintenance, are extremely fuel efficient, and almost never lead to accidents. We could travel way more efficiently for a fraction of the total cost.
12. Legalize Marijuana and Decriminalize Nonviolent Drug Use
It is just silly that in this day and age marijuana is illegal and alcohol is not. There is nothing wrong with reasonable marijuana use just like there is nothing wrong with reasonable alcohol use. And slapping it with a good-sized vice tax could raise some nice revenue.
With respect to all nonviolent drug use, imprisonment is an overly harsh and counterproductive penalty. On the other hand, in appropriate cases I would still advocate the use of court orders to require treatment. And I would still prosecute the dealers who exploit their customers by giving them substances that could seriously jeopardize their health and their livelihood. But I'm sure some of us will disagree on this.
13. Convert All Armed Services into a (i) a Peacekeeping/Humanitarian Force and (ii) a Counterterrorism/Law Enforcement Force
There is simply no need for the very most advanced line of stealth bombers or fighter jets. Who cares if another country develops a better fighter jet? We have the so-called "Atomical Bomb." No one will mess with us. We could save gobs of money by just abandoning the military's anachronistic desire to accumulate new toys. Note: the fact that anyone at all has nuclear weapons is itself a problem. We can tackle that later on.
On the other hand, there is still a lot of need for a force that can go in and help restore public order and peace in war-torn countries like the
14. Public Education Reform
The current system that funds education out of local property tax revenues is absurd. Funding should be set at an equal level per capita for every school district and every school should follow a set national curriculum. As to what that curriculum should be, I invite suggestions from people who have more knowledge about education. Maybe I'll invite my mom to blog...
15. Earned "Open Door" Immigration
Obviously, immigration is a big issue right now. The best solution (I think) to the current immigration problem is to funnel all immigration through the national service program. Everyone and anyone who wants to immigrate to the
In effect this program only officially recognizes the current system under which immigrants work low paid jobs. However, it guarantees that at the end of a long term of low-paid labor, the immigrant gains the full rights and privileges of citizenship. This is only fair.
16. Capital Controls
It is of fundamental importance that the massive, global, and largely unproductive flows of capital be reigned in. Such capital flows exert a conservative "discipline" on governments and can destabilize third world economies. It is also very important, in the effort to implement a wealth tax, that countries keep track of each others citizens’ investments, so that people cannot avoid the tax simply by investing in a country that does not implement a wealth tax.
Note: the above is not particularly clear. I will elaborate in a later post.
As Keynes argued long ago, capital should be national. Controlling the circumstances under which people may invest in other countries will allow us to better tax and control capital flows, and will allow countries to pursue their own economic policies without fear of a currency crisis.
17. Drastic Expansion of Basic Research Funding
This is self-explanatory. We have the technology. The time is now.
18. Drastic Expansion of the Peace Corps
You get the idea. We need to recognize and act on our obligation to encourage economic and social development in the third world. It's morally required and would just be good politics.
19.
Markets can have certain useful functions in allocating resources. Within reason, these tendencies should be harnessed (i.e., as long as it doesn't put the income/wealth distribution out of whack). However, under the traditional laws of business entities, their only obligation is to maximize their profits for equity owners. This means not only do they not have to, but they legally may not consider the interests of workers and the community at large, unless of course management can argue that somehow just policies would manifest themselves in higher profits. We have little reason to trust that business executives will consistently take this far-sighted view.
Once enterprises reach a certain size, they should be required to sell out significant, but not necessarily controlling, equity interests to their work force and to the SDF. (Note: but maybe labor plus SDF interests should >50%. Maybe not. What does everybody think?) This lets mom and pop entrepreneurs and start ups do their thing (subject to dealing with a union, of course) until they become, if they ever do, a large public corporation in which the workers and the community have a legitimate interest.
This would spread the benefits of business profitability widely and would encourage a more symbiotic relationship between business and society.
20. Strengthen Multilateral International Institutions
Our country should be a better global citizen. We should take a more cooperative posture with the international agencies that do exist. But beyond that, in this global economy we need to expand the scope of national coordination in cracking down on tax shelters, regulatory havens, organized crime, and terrorism. I personally like the Olde Vision of the IMF, under which an international agency coordinates currency fluctuations to ease the effects of volatile capital flows and to maintain systemic stability. I think we need more of this.
21. 30 Hour Work Week; Mandatory Paid Leave
Work is good. But so is free time. The key is balance, and we are singularly lacking in balance right now. People should have the time to hang out with friends and family, exercise, volunteer for charity.
I would exempt managers, entrepreneurs, emergency personnel, and youth/immigrant national servants.
22. Ban All Handguns
No one needs a handgun. Legal gun sales often end up in the underground economy, and are used to threaten and kill people. Urban violence has reached epidemic levels in some places, and we routinely see (comparatively rare but still jarring) school massacres.
The Second Amendment is based on the notion that an armed citizenry should act as a surrogate police force and should act as a check against government tyranny. These purposes should no longer be taken seriously. The social costs of widespread gun ownership are immense and there is no sensible countervailing interest. Its time to join the 21st century on this one.
23. Impose a High Tariff on Imported Gasoline
This merely backstops the public transit policy. We should make car use prohibitively expensive, so long as reasonable alternatives are in place.
As my undergrad international trade professor once said, "there's nothing wrong with the
24. Moratorium on New Suburban Construction; Stronger Urban Planning
Sprawling suburbs impose serious costs on society. It exacerbates socio-economic and racial segregation, creates duplicative infrastructure costs, helps maintain a disinterested and atomistic society, and eats up free land that could be used more productively.
It probably also makes sense to end the mortgage interest deduction for residential homes. This "ownership society" subsidy looks pretty silly now that the real estate market has crashed.
25. Eliminate Cash
This has nothing to do with socialism per se, but I think it could help practically implement and enforce a lot of socialist policies. It would be way easier to track and appropriately control and tax economic transactions if there is no cash economy, and it would make criminal transactions way more expensive and difficult. Every criminal operation would have to run through a front business, which would be more expensive for them and would make them easier to prosecute, and it would reduce corner drug transactions to a barter economy.
26. North American Union, Creation of a
I think it makes sense to forge a union between the U.S,
27. Wealth Tax and Valuation Issues
Some people voice concern that a wealth tax, while a good idea in theory, may be an administrative nightmare, especially in the case of closely held corporations and partnerships. I don't think so. After all, we already go through the messy business of valuing real estate for property tax purposes. And it wouldn't have to be every year for these hard-to-value assets (there's no reason why we could put a value on marketable securities every year), it could be every three years or so. This business doesn't have to be 100% exact. And with the savings from eliminating 50-odd tax codes from the states, overall tax enforcement and administration costs would almost certainly be lower than they are now. Tax valuation officers would set a value on hard-to-value assets, and taxpayers could challenge those valuations through an administrative hearing, and, ultimately, in court. We will also need multilateral treaties to make sure any investments our citizens have abroad are properly reported to our tax authorities, and that we do the same for their citizens.
Just as a ballpark, I'd put the highest wealth tax rate at about 6-8%, and it wouldn't even kick in until someone had more than like $500,000 in net worth. But this is very tentative. I need to do a lot more work before I know what rates to set.
Note: within my whole tax schema, I would eliminate business entity level (i.e., corporate) income taxes. They would be unnecessary in a hyper-progressive individual-based tax system and they cause artificial market distortions in favor of unincorporated business (partnerships are not subject to any entity level tax; their income "flows through" to partners and is only taxed at the individual income level ) and in favor of debt financing and earnings retention. Its just not the best way to implement a consistent system of taxation, and can cause nightmares in practical administration.
28. Vice Taxes and Liquor Licensing
I think every "vice" should raise enough revenue, in the aggregate, to offset the social costs of its use. So if smoking costs society $X trillion, we should raise $X trillion (+ a bit for the administrative costs and enough to turn a small surplus) from cigarette excise taxes. These estimates are necessarily, estimates. But again, we don't have to be 100% precise. That said, I think this system makes the vast array of other laws regulating liquor licensing and liquor stores and bars and how much food bars have to serve, etc., etc. totally unnecessary. We impose the regulatory burden at one level and that's that.
29. Civil Unions
It is unjust that gays and lesbians don't have the basic legal and equitable rights, protections, and obligations that married couples get. The government should acknowledge any and all unions between consenting adults as having the same effect. On the other side, I see no reason why government should be in the business of acknowledging "marriages" at all. The term "marriage" has a religious, sacramental significance. If individual churches want to bestow a blessing on a civil union, they should be free to do so. But the government should stick to the business of defining legal rights and obligations.
30. Crack Down on Hate Speech
I, personally, think we get carried away with our First Amendment fundamentalism. Yes, basic free expression rights are of great importance to a liberal democracy. But some forms of expression are clearly noxious and of no social value to any but small groups of freaks.
31. Free Child Daycare and Paid Family Leave
Daycare can be a huge burden for women who would otherwise want to work. The government should provide this service free of charge, preferably, or at least at a heavily subsidized nominal fee. New mothers should get about 18-24 months paid time off from work and new fathers should get about 6 months.
Leave of an appropriate amount (which I can't say off the top of my head) should also be available for sickness, tending to sick relatives, and for other really important family obligations.
32. End Charitable Contribution Deduction for All But "True Charity."
Right now, the charitable deduction is handed out liberally to wealthy people who donate money to things like art museums and orchestras (i.e., entertainment for rick people). There should be no deduction for this. Nor should the government underwrite religious organizations by granting making contributions to them tax deductible. Only direct donations to organizations that demonstrably help the needy should receive tax deductible treatment. And hopefully, we won't have any needy people, so these will only be organizations that operate overseas.
33. Trade
It’s true, trade can be efficient and mutually helpful. But as it stands now it only gives income gains in exchange for exacerbated economic inequality. As I said in an earlier point, income gains are not worth it if they come at the expense of distributive justice.
We are wealthy enough now that moral considerations should be the primary considerations, and massive income inequality is immoral. So, two main things should be a part of any free trade agreement. First, an organized re-training and redeployment program. This could be done under the auspices of the national service, or at one of the (free) universities or trade schools, or both. This would make sure that income losses to our employees are only transitory. Second, we should require that some minimum wage be observed by our trading partners (not our minimum wage, because that would make trade totally impossible, just a basic amount enough to insure subsistence according to local customs and with local price levels), and that basic workers' human rights be respected (i.e., no child labor, quasi-slavery, 16-hour shifts, the right to organize, etc.). I think this should allow us and our trading partners to enjoy income gains from trade without significantly hurting anyone in either country.
34. National Economic Plan Targets
We should strive for the following targets:
(i.) 1:1 hour-adjusted ratio of men's income to women's income
(ii.) 1:1 ratio of white income and net worth to nonwhite income and net worth
(iii.) 5:1 ratio of aftertax income of the richest person to aftertax income of the poorest person
-no more than 60% of work force employed by the public sector (we'd have to lower wages in the public sector to achieve this, but we could offset this income hit by corresponding increasing the SDF.) The last two ratios are subject to discussion and revision. Like any quantitative cutoff I propose, they are ballpark estimates and require way more study to say for sure.
35. Sports Reform
Sports franchises should be owned by the cities they play for. As it stands now, cities and states already extend huge subsidies to local sports franchises. So if they're paying the costs, they might as well get the upside too. The central government should own the league, and should subsidize teams to the extent that they draw from local talent. The players, like everyone else, should be represented by a union to safeguard their interests.
36. SDF & Retirement
This wasn't clear from my previous post about the SDF. People who are retired should not just receive the normal SDF payment (which will be set such that, the payment plus the minimum salary > the poverty level for a family of average size), but should receive a payment equal to the normal SDF plus the minimum salary. They are not working so they need a payment of this sized to ensure that they are not in poverty.
37. "Good Samaritan" Laws
Under Anglo-American tort law, there is no liability for a person who could easily (without harm to him or herself), but does not help someone who is subject to imminent harm. A classic example is of the "baby drowning in a puddle." Anyone could easily, without any risk, pull the baby out of the puddle. Liability should attach to the person who decides it would be more fun not to. Of course, letting someone die or suffer easily preventable harm is not the same thing as killing them or harming them directly. But there should be some liability in these situations. On the other hand, as it stands now, a "good samaritan" could be sued for negligently trying to rescue someone. So someone has no liability to help, but if they do so and they act negligently, they are subject to liability. That's ridiculous. There should be no liability for the guy/gal who tries to help but just messes up at it.
38. "The Basics"
Everyone should get certain basic things, like cell phone and at least a cheap computer, for a heavily subsidized nominal fee.
39. Agriculture Reform
Animal abuse may not be as big of a problem as human suffering, but it is a problem. Not to mention, when animals live clustered together in cages, eating their own feces and euthanized pets, its not too healthy for the food supply. The thing is, we have pretty good laws in this area, we just don't have the resources to enforce them. That should change.
40. Free National Exercise Program, Mandatory Annual Check-ups
And finally, for now, we should have a free national exercise program for anyone who wants to join. It should offer different programs for people according to their tastes, like organized sports, running groups, and weight training. The medical costs saved would almost certainly make up for the expense. Similarly, we should save the medical system some expense (and people the trouble of suffering from preventable disease) by forcing people to have routine check-ups. It's not so oppressive to have to go to the doctor once a year, and it could save us as individuals and as a society a lot of trouble.
...
907. Mandatory Uniforms
Everyone should, at all times, wear black sunglasses, black corduroys, black turtlenecks, and carry black blackberries and black suitcases (even if, and especially when, there's nothing in them). Everyone should also dye their hair black, and men should slick their hair back while women should have hair exactly like Uma Thurman's character in Pulp Fiction. This is only sensible.
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