Posts Tagged ‘fisking’

Charity and the efficiency of Government

Thursday, April 2nd, 2009

I came across an article yesterday touting the grand efficiency of government over that of private charity(!) and thought that it was as eminently fisk-worthy as anything I’ve seen in many moons. Let’s get started, shall we?

A Tax Plan Charities Should Back

By Joel Berg
The Washington Post
Saturday, March 28, 2009; Page A13

Some of the nation’s largest charities — and the lobbyists they pay to represent them — have been hyperventilating over President Obama’s proposal to marginally roll back the amount of the tax deduction that the very wealthiest Americans can take for donating to charity.

So far so good; although already he’s taking some random pot-shots by pointing out the existence of lobbyists, as though hiring someone to represent you to government so that you can spend your time doing your job is somehow corrupt….

Of course, conservatives who oppose any tax hikes for the rich also oppose it.

And again with the suggestion that this is somehow sinister. Allow me to translate this sentence: “People who oppose tax hikes oppose tax hikes.” Well, Duh.

While these voices have created the impression that all nonprofit organizations oppose the plan, the reality is that many charitable organizations, especially ones that serve low-income populations, such as the one I run, strongly support it.

A straw man argument. There is no issue, anywhere, ever, that is universally supported or opposed. (Actually, that’s by definition, as if it were either of those, it would not be an “issue”.) So the grand revelation that some people support something is neither grand, nor a revelation.

According to the Urban Institute-Brookings Institution Tax Policy Center, the proposal would affect only 1.2 percent of U.S. households — those in the top two tax brackets. Nearly 99 percent of households would be unaffected.

Hey, man, we’re just sticking it to the Evil Rich™, so what’s the problem? Just remember, that’s how income taxes got started in the first place — as a 1% tax on the extremely rich. But once the principle was established that such taxes were okay at all, it was easy for the politicians to slowly bump the numbers up.

The plan would merely restore the deduction rate to Reagan-era levels.

This is a lie. Well, okay, it’s a statistic deliberately designed to mislead — same thing.

The top income tax rate at the end of the Reagan years was 28%, and people in that tax bracket could deduct that entire amount — 28% — from their taxes. Today the top tax bracket is 39%, and people can currently deduct the entire amount. Obama wants to change it so people paying 39% income tax can only deduct 28% of charitable giving. He is reducing the deduction for charitable giving from 100% to 72%. Simply put: Obama wants to start taxing that which was previously untaxed.

Both Obama, and Mr. Berg in writing this article, are claiming that Obama is trying to make it the same as it was under Reagan. This would be hysterical if it weren’t so outrageous.

Since the largest donors (such as Bill Gates and Warren Buffett) already give more than they can deduct, and numerous studies show that tax deductions are a relatively minor reason that the wealthiest Americans donate to charities, total charitable contributions are likely to decline by only about 1.3 percent if the proposal is enacted, the Center on Budget and Policy Priorities calculates.

Again, it isn’t the specific amount, it’s the principle. This tax is custom-designed to reduce the amount of charitable giving and put more such “charity” under the thumb of government. The basis of the socialist leftist agenda: Make as many people as possible dependent on government.

Combined with other progressive Obama tax proposals, that change would not only start to redress the inequality gap that has engulfed America in recent decades

Again, if you’re a leftist, the fact that someone might make more that someone else is anathema; and it is up to government to determine what income is “fair”, rather than simply allowing people to earn based on what others are willing to pay them.

but would also help to pay for many effective domestic programs, including efforts that fight hunger and improve nutrition; boost public education; improve health care and make it more affordable; and create jobs for low- and middle-income families. In other words, the funding would greatly reduce struggling families’ need for charitable aid.

…by making them more dependent on government. To Mr. Berg here, this is a priori a good thing. Charity is bad, forcible government redistribution is good… if you’re a socialist.

Well, that and the fact that study after study has shown that conservatives give far more to charity than leftists do. This has been a political black eye that they would love to remedy by reducing conservative giving any way they can.

When the wealthiest Americans donate to charities, they are most likely to give to universities, hospitals and cultural institutions from which they and their families may benefit. Such organizations often have budgets and executive salaries equal to or larger than those of mid-size corporations, stretching the definition of “nonprofit group.”

Translation: “Those mean-ol’ rich people aren’t giving to the charities that I want them to, so let’s have the government take money from them at gunpoint, and give that money to the “right” charities. ‘Cuz we all know that only rich people benefit from libraries and hospitals and museums. And… AND!… the guy running a big city museum that employs hundreds and serves millions makes more money than I do running my organization that you’ve never heard of, and that’s not fair.”

While anti-poverty organizations such as mine do receive some funding from the wealthiest Americans (for which we are extremely grateful), the bulk of our private donations comes from middle-income families.

Translation: “I’m the ‘right’ kind of charity, so this new tax won’t affect me much. I’m cool with that.”

Even if the largest tax deductions are kept in place only for anti-poverty organizations, a compromise that would directly benefit groups such as mine, there are at least two reasons I still don’t think that would be wise public policy:

First, such tax deductions are a highly inefficient way to fund social programs. It is far more cost-effective for the government to simply increase supplemental nutrition benefits (formerly food stamps) that are immediately redeemed at for-profit food stores than it is to give massive tax deductions that only marginally increase donations to feeding charities, which then have to split such donated money between administrative costs and food purchases.

Because of course the government is not bureaucratic at all, and spends money far more efficiently than private charities do. Right? Hello? I’m pretty sure whatever this guy is smoking is illegal in all 50 states.

Let’s look at government “efficiency” for a moment: Let’s say that I donate $1,000 to Charity A. Charity A will have some overhead, but X% of that money will go directly to the cause that Charity A supports.

Now let’s suppose that the government steps in and takes that $1,000 from me taxes. They, in their infinite wisdom, determine that Charity A is, in fact, a worthwhile program, and gives that money to Charity A — the exact same charity I was going to give to in the first place. It’s a wash, right? Because Charity A got the same money? Well, no it isn’t. See, somebody has to pay the government bureaucrats who collected the money from me, and the ones who decided to give it to whatever program, and the ones who actual did the transfer to that program. Let’s call those expenses Y. Instead of the cause receiving X% of my $1,000, they now receive X% minus Y — government always gets its cut. This is not “more efficient”.

Then again, it’s not really about efficiency — it’s about control.

Second, voluntary private charity is a less equitable way to solve community problems.

According to whose definition? Like much of leftist theory, this is one of those things that only works out “if the right people are in charge” It seems to me that the people in a community have a better idea of how to solve that community’s problems than some bureaucrat in Washington DC.

Oh wait, Mr. Berg did not say it was more effective, he said it was more equitable. Equality of outcome is more important than an effective society. It’s okay if we fail, so long as everyone fails equally.

While many people assume that the rich amass their wealth on their own, the truth is that their business interests are almost always aided by public efforts such as roads, bridges and ports through which they ship their goods or public schools that educate their workforces.

And they pay for it asshole! Gaaaahhh!!! Why are you acting like the rich don’t pay taxes? Charitable giving has absolutely nothing to do with roads and bridges, and you damned well know it. Property taxes pay for schools. In Illinois the tolls alone more than pay for the roads.

Given that even the wealthiest benefit greatly from this modern “public commons,” it is wrong to give them unilateral power to decide whether their taxpayer-subsidized donations should go to, say, well-heeled operas or lavish care of pets rather than to organizations that meet more pressing communal needs.

This doesn’t even need translation: Mr. Berg believes it is wrong to “give” people the power to decide where they want to spend their own money. To a leftist, it’s never, ever your money — anything you have is “given” to you, and government merely “allows” you to keep it. To a socialist, this is good and proper.

It is fashionable these days to say that “the community,” not government, should solve social problems. Yet no nonprofit leader, myself included, was elected by the community as a whole. Elected officials, whether we like them or not, are picked by voting citizens.

Unless your name is Saddam Hussein* no elected official is elected by the community as a whole. The difference is that government is all-or nothing; whereas with charity, you can give to the charity you like, and I can give to the charity I like. It’s called “the free market” — a concept with which you are apparently unacquainted.

In America, the government is the most legitimate voice of the entire community.

HAHAHAHAHAHAHAHAHAHAHAHAHAHA! *snort* The most legi…. aheh. Pull the other one, Comrade, it has bells!

The Obama administration should stick to its guns in fighting for tax equity, and Congress should support the effort.

Again, you seem to have a funny understanding of the word “equity”. Tax “equity” would mean that everyone pays the same rate. What you are looking for is “income equity”, where everyone is taxed to a point where they effectively all make the same — where the CEO makes the same “fair” rate as the street sweeper. It’s not even socialism at that point; that’s communism.

If charities want to prove that they value the public interest over their self-interest, they, too, should get on board.

Why? If charities value serve the public interest, the public will value them, and those will be the charities that get the voluntary donations. If your organization can only get good donations from the government, that is a sure sign that it is not valued by the public. Charities that are effective get donations, spend them effectively, and thrive. Charities that are *not* effective do not get as many donations, do not spend them as wisely, and fail. This is why organizations such as The March of Dimes have survived for decades — because individual people see the value in what they do, see the effectiveness of their organization, and donate to that cause.

[Hat Tip: Steve B.]

*: Saddam received 100% of the “vote” in the last election before the USA invaded. I suspect that the election might have been just a teensy bit slanted.

Unfair to FairTax

Thursday, December 20th, 2007

Pundit Jay Bookman, writing for The Atlanta Journal-Constitution, has penned an article entitled Huckabee’s fantasy FairTax feeds on workers’ frustration. I should note that his column is named, simply, “My Opinion”. That name, at least, is honesty in journalism; as the article is heavy on opinion, and sadly short on facts.

You know what? This calls for a good hard fisking!

There is indeed a cult member among the frontrunners for the GOP presidential nomination. But it isn’t Mitt Romney, the Mormon from Massachusetts, despite what some in the evangelical community might tell you.

Ooh, hey! Nice twofer there. Let’s start in with the name calling while simultaneously name calling by proxy1 a different Republican candidate. Is every group you don’t like a “cult”?

It’s Mike Huckabee, the Baptist preacher, former Arkansas governor and fervent believer in the cult of the FairTax.

“Cult” Counter: 2

For those unfamiliar with the FairTax creed, it goes something like this: Let us go forth and abolish the federal income tax, the estate tax, corporate taxes, capital gains taxes and payroll taxes, as well as the IRS. Let us then replace all those taxes with a 30 percent national sales tax collected on all services and goods, from a new house to chemotherapy treatments to a gallon of milk.

If we do that, economic heaven is within our reach.

“Creed”? “Go forth”? “Heaven”? You, Sir, are mixing your metaphors. Is it a cult or a religion? (Or are those the same thing to you?)

Beyond that, we also have our first factual inaccuracies: “…a 30 percent national sales tax collected on all services and goods…” First, as this is a replacement for the Income Tax, which is measured as an inclusive, not exclusive, tax, the only fair “apples to apples” comparison is to also measure the FairTax as an inclusive tax. As such it is 23%, not 30%.

That is: If I earn $100,000, and pay 25% income tax, the government takes $25,000 and I keep $75,000. $25,000 is 25% of $100,000 (inclusive tax), but 33% of $75,000 (exclusive tax). The FairTax works like this: if I spend $100,000 for something, the government takes $23,000 in taxes, and the retail seller keeps $77,000. Measured in the same way as today’s existing income tax, $23,000 is 23% of $100,000. Apples to apples, the FairTax is a 23% inclusive tax. Calling it a 30% tax is a distortion of the plan, and just a way to spread some FUD.

Second, it is not a tax on “all services and goods”, but all new, retail goods and services. Used or resale goods (from clothing to houses) are not taxed. Environmentalists should love this plan, as there is a strong incentive to buy (and thus re-use) used goods.

Or, as Huckabee says, “when the FairTax becomes law, it will be like waving a magic wand releasing us from pain and unfairness.”

That does sound wonderful. Don’t we all want to be released from pain and unfairness? Don’t we all yearn for a magic wand that would bring such a glorious day to pass?

Sadly, though, there’s this little matter of reality. Reality says taxes are going to hurt, and no magic wand will ever change that. For time immemorial, taxes have been perceived as unjust, and nothing will change that either.

So… what, your “reality based” outlook insists that taxes must remain as painful as possible, or they’re no good? You’re right — there’s no such thing as “no taxes” if you’re going to have any government at all, but there is a lot of room for a lower tax burden. A huge part of the current tax burden is the cost of simply figuring out how much you owe. Billions of dollars are lost to the sheer bureaucracy of the IRS and it’s 100,000-plus page long tax code.

According to Huckabee and other proponents, the FairTax will raise just as much revenue as the current system. They also believe that, somehow, almost everyone will pay less in taxes.

At the least, they will not have to pay those aforementioned billions of dollars in compliance costs. Retail businesses will be the only ones filling out federal income tax returns.

They believe that under the FairTax, the economy will grow at double-digit rates, interest rates will fall, exports will boom and the Falcons will win the Super Bowl.

OK, they don’t really mention the Falcons. Even the FairTax magic wand has its limitations.

Yes, Yes, Yes, and… Hey Look! A monkey!

In effect, the FairTax is the tax equivalent of those automobile engines designed to run on water. It sounds great, but it doesn’t have a chance of working.

“Don’t sell the bike shop, Orville! It’ll never work!”

The proposed 30 percent sales tax, for example, wouldn’t come close to being revenue neutral. A tax commission convened by the Bush administration found that eliminating just the federal income tax ? leaving all other federal taxes intact ? would require a sales tax of at least 34 percent, a finding backed by other economists.

Here’s I’ll just quote Neal Boortz, who (literally) wrote the book on the FairTax:

What Bookman either doesn’t realize, or doesn’t want you to know, is that the president’s tax reform commission was not permitted to consider the FairTax as it was written. They first were compelled by their own rules to rewrite H.R. 25, and then they considered the idea as reformulated by them!

Back to Bookman’s article:

To a cult, of course

“Cult” Counter: 3

the scorn of nonbelievers is transformed into proof that their cause is righteous; likewise, outside criticism is typically dismissed as the work of conspiracy. In this case, the FairTax cultists

“Cult” Counter: 4

dismiss the findings of the Bush tax panel on grounds that it was stacked with liberals.

Uh huh.

See above. If you’re going to examine a plan, don’t change the plan first. Study it as written.

The FairTax cult also boasts its own holy manuscript, in this case “The FairTax Book: Saying Goodbye to the Income Tax and the IRS,” by radio talk show host Neal Boortz and his congressional sidekick, U.S. Rep. John Linder (R-Ga.). Cultists

“Cult” Counter: 5

insist that the book, like the Bible, is inerrant and answers all doubts, and that all who read it will earn enlightenment.

I don’t think the book is infallible, but I do advise actually reading it before writing at great length about how the author doesn’t know what the hell he’s talking about.

The fantasy nature of the FairTax is perhaps most glaring in its approach to enforcement. Advocates believe that under their system, tax fraud would essentially cease to be a problem and that the new system would almost enforce itself, allowing the IRS to fade away.

Again, did you read the book? Tax fraud would not disappear, but it is a lot easier to police several thousand retail businesses than three hundred million individuals. Also, the IRS becomes obsolete not because enforcement is unnecessary, but because the states would be doing the enforcement.

But we all know human nature. Ask yourself how many people would be lured into the black-market economy to avoid paying a sales tax of 30, 40, 50 or even 60 percent on expensive items? The FairTax cult says very few ? maybe they’re counting on that magic wand again.

The fiipside of that is that drug dealers and foreign visitors would enter the tax system. When a drug dealer buys a fancy new car, he pays taxes on it. When a Japanese tourist buys a camcorder in New York, he pays taxes on it. Currently, neither of these people pay into the income tax system.

As for black market sellers, well… you’re right. There will always be people trying to buck the system. But again it is a lot easier to police retailers than individuals. Police will somewhere along the line notice that so-and-so is buying a bunch of wholesale goods and never officially selling them. This kind of market already exists on products with prohibitively high sales taxes.

By comparison, do you, Mr. Bookman, believe that nobody cheats on their income taxes?

The grassroots fervor for the FairTax is fed by a growing and all-too-legitimate frustration among working-class and middle-class Americans, a sense that they’re working harder than ever yet losing ground every year.

You forgot to mention upper-class Americans, who are most certainly frustrated with taxes. Lessee… “working” (i.e. “lower”) class, middle class, and upper class. That would be “All Americans” are frustrated with the current system… and rightly so.

Huckabee isn’t shy about appealing to that frustration, not just with the FairTax but with other rhetoric as well.

Oh my God! A politician who promises to do what people want! The Horror! My Eyes!

However, under the FairTax, those folks would end up paying significantly more in taxes, while the tax burden for the wealthy would fall dramatically. It would victimize the very people who look to it for salvation.

People at or below the poverty line would pay nothing under the FairTax. You conveniently forgot to mention the prebate, did you? Simply put: every single American citizen (and legal alien) would receive a rebate once a month for the amount of taxes on spending at the poverty level. Thus poor people pay nothing. Don’t worry, those eeeevil rich people will still pay the FairTax every time they buy caviar or a new yacht. They’ll get the prebate too, but it will be pocket change compared to a yacht! Heck, they spend that much in a week lighting their cigars with hundred-dollar bills.

Let us not forget that the removal of multiple layers of embedded taxes (that is, layers of income tax that hit at all levels of manufacture and distribution of goods) will lower prices, as, again, the FairTax only applies at the retail level, on new goods and services. Price drops will effectively balance out the increase caused by the tax itself. Thus prices will remain much the same as they are, but everyone’s buying power will increase because we’ll all be taking home our entire paycheck.

The real reason leftists don’t like this plan is because it would represent the single biggest return of power from the Federal Government to The People since the Declaration of Independence. Lack of government power means it’s harder to institute socialist schemes. When the country’s citizens no longer have to submit detailed financial information to the government, that makes it a lot harder for politicians to engineer their multitude of social experiments in the form of social programs. When the IRS and its thousands of exceptions and loopholes are eliminated, it’s far more difficult for politicians to buy votes by passing new loopholes that even further complicated the current bloated system.

The FairTax, like other cults, plays its followers for suckers.

You’re projecting, man. It is you playing your readers for suckers.

Power to the People!

[Update: Missed it at the end there… Cult Counter: 6]

1: “name calling by proxy”: v. the act of indirectly voicing a negative statement about another person (name calling), generally while feigning that you are not doing so, by referring pointedly to name calling by others. Ex: “Some people say he’s a criminal.” The “playing innocent” aspect of this is often enhanced by an explicit statement that you are not name calling, but simply pointing out that of others. This can be detected when there is no reason to mention the negative portrayal in the first place, except for the sake of it being mentioned. Ex: “I don’t actually know, but many people say that my opponent is a drunk.”