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The Missing Word

With a computer mouse, you can precisely position the cursor wherever you want. The motion of the cursor exactly mimics the motion of the mouse in your hand. It is a positional controller.

But in many computer games, you have no direct control over position. The joystick controller only controls the rate of motion. You have to provide a direction, and speed, and hope that it will get to the desired location at the desired time. As anyone who has played such games knows, position control using a rate controller is much less precise, and often not even accurate if you're not a good judge of such things.

In last night's political debate (as in almost all discussions of this topic), there was a lot of talk about "cutting taxes," and "raising taxes." Not to pick on him in particular, but as an example, here's the reporting by Jim Geraghty:

Hillary laughs heartily at McCain's comment about "they're going to raise your taxes, and they have the aud-ic-i-ty, the audacity, to hope you don't mind!"

With her laugh, she triggered a thousand primal screams on liberal blogs.

Steph asks if she'll make a pledge to never raise taxes for those making under $200,000 per year. She says she's "absolutely committed to not raising taxes on those making less than $200,000."

Obama echoes the pledge, and says he'll cut taxes for those folks.

I don't trust either, but I'm rather surprised that they both were willing to be pinned down in the equivalent of "read my lips, no new taxes."

Wow. Charlie Gibson notes that when the capital gains taxes were cut under both Clinton and Bush, revenues went up.


Wow. Hillary: "I would not raise the capital gains tax above 20 percent, if I would raise it at all... I don't want to raise taxes on everyone." She rips Obama's plan to raise payroll taxes.

Emphasis mine, in all cases. Every one of these statements is absurd. No one, not the mighty Hillary, not the saintly Obama, has the power to raise or cut taxes. They don't have a tax revenue controller. All they can do is increase or decrease tax rates. And they can't predict with certainty whether or not this will increase, or decrease "taxes" (that is, tax revenues). The absurdity of leaving out this key word is demonstrated starkly in Charlie Gibson's statement: "when the capital gains taxes were cut, revenues went up." How can that be? If taxes are cut, by definition, revenues have to go down. But if he had said that when capital gains tax rates are cut, revenues go up, this is perfectly sensible (though counterintuitive to people who don't understand that tax rates modify behavior).

I expect Democrats (and journalists, who are generally Democrats) to play such word games, but I'm always disappointed when Republicans and so-called conservatives go along with it. People who want lower tax rates (and a more vibrant economy) have to demand them, and stop talking about lower taxes. Yes, it would be nice to cut off funding to the federal government (at least if we could get spending under control), but that's a separate issue. By conflating tax revenues with tax rates, we grant far too much power to the big government types, when we should instead be pointing out their powerlessness. There are many unintended consequences of government action, and it is always useful to point out that this is just one more--that the federal government cannot directly control how much it taxes people (that is, how much money it actually confiscates)--it can only control the the rate at which it does so.

This is just one more example of how we small-government types have to start taking back the language.


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Mark wrote:

Isn't this just harping over terminology? Is there anyone who doesn't understand that when politicians and pundits speak of "cutting taxes" or "raising taxes" they mean what you're calling "tax rates", and that when they want to refer to what you mean by "taxes" they say "tax revenues"?

Rand Simberg wrote:

That's the problem. They think that when they "raise taxes," they really are raising taxes, when they may in fact be cutting them, because of this semantic confusion.

Jeff Mauldin wrote:

The underlying thinking, of course, is that the government needs more money to do things that need to be done--save the children, force healthy 25-year-olds into insurance to cover their big toe stubs, whatever. Therefore the democrats want to raise tax rates on "the rich" expecting to get more tax revenue for the government to do these things.

Rand's point is dead on. The politicians aren't in control of the people. Raising tax rates might get more tax revenue, lowering tax rates might get more tax revenue. It's not a simple linear equation. Either one has unintended consequences, and the unintended consequences of raising tax rates are pretty much all bad.

A perfect example of this was the luxury tax on yachts a few years back. The idea was to get more revenue for the government from rich people who could afford to buy yachts. What actually happened was it killed the industry building yachts and brought in no extra revenue to the government.

The best way to help everybody (the poor, the people without health care) is to have a strong economy. The best way to do that is with lower tax rates, which incidentally often result in greater tax revenue.

But how do we change the way many people think?

Paul Milenkovic wrote:

OK, I did not get to view the debate. But what is this thing about Senator Clinton laughing when it was suggested her policies would raise taxes?

When I am confronted with a challenge -- such as someone telling me I support something that I oppose -- I might scowl or knit my brow as an affective reaction. If it is an egregious challenge, I might roll my eyes or sigh, but I hope that if I am in the public eye I can maintain enough control over my emotions and affective response to avoid anything that condenscending.

But laugh? I am not saying I am so serious I could never laugh or crack a smile in public. I have known people who smile, not as in expressing joy but reacting to a challenge to their authority, and I have always regarded that response as a minor affective disorder and have had trouble trusting people who do that.

The President of the United States is a person whose emotional response is very much part of that person's leadership and ceremonial role. Is this an appropriate response to give one of those dismissive you-are-an-idiot laughs to a question about raising or lowering tax (rates). I am not saying a President has to be stone-faced all of the time, but to laugh at a question about taxes suggests a profound lack of gravitas, or as I have suggested, some kind of affective disorder (i.e. an inappropriate response to a social interaction).

Anonymous wrote:

Paul, Clinton was laughing at McCain's use of the words "audacity" and "hope" - a reference to the title of Obama's book. She laughing with McCain at Obama's expense. Taxes weren't the focus of the laugh.

Steve wrote:

Hey, that's a neat trick, the Anon troll boo boo is a mind reader!!

Anonymous wrote:

Steve, did you watch the debate? Paul said he didn't. I was trying to be helpful. Stop and think: why would the laugh trigger "a thousand primal screams on liberal blogs." Or go look at what liberal bloggers are saying.

Leland wrote:

Speaking of yachts, did anyone see Roger L Simons discussion about David Geffen's 454' yacht? The one Arianna Huffington was using while visiting Tahiti? It goes a little beyond being a limousine liberal.

philw1776 wrote:

Obama wants to raise cap gain tax rates even in the face of established historical fact that lowering such rates stimulates new business (new JOBS) and raises the revenue to the Federal govt. He simply wants to punish what he perceives as the rich. Look at his now public tax returns, lots of income but he's not an investor. No capital gains for him. No stake (stock, mutual funds) in American business. He simply cannot relate to those Americans who work, save and invest. He wants to villify and punish those far below his income level.

Jonathan wrote:

Obama wants to raise cap gain tax rates even in the face of established historical fact that lowering such rates stimulates new business (new JOBS) and raises the revenue to the Federal govt.

Why not? He's talking to people who have been taught by the press and leftist pols that we're experiencing the worst economy in decades. What's one more lie in that context?

The issue of Hillary's laugh is interesting. I wonder if she was coached to laugh as displacement for other, less appealing behavior (e.g., hostile sneering). She's had an annoying laugh for a long time -- Rush Limbaugh used to make fun of it, back in the '90s -- but it seems to have become more pronounced in this campaign.

Wince and Nod wrote:

Well, you could actually do something that is closer to raising taxes, rather than raising tax rates. The method is a capitation tax.

To make it work, though, you would have to forbid people from leaving the country or sending their money out of the country.


ArtD0dger wrote:

This is a good point. A similar distinction come into play when, er -- certain people -- claim they only want to tax "the wealthy," when in fact we only have the capability to tax those with a high income, or "wealth rate." Seems to make for a lot of sloppy thinking.

Ashley wrote:

I can't imagine working less because my taxes went up, or more if my taxes went down. I have a job I trained for because I like engineering, and I don't think I'd change that. I suppose that if I was making more money, I might retire earlier, all else being equal (like the cost of living).

I can imagine changing my behavior if the government cut services. If I didn't have universal health care (I'm Canadian) I would be more desperate for work and would probably be willing to work for less money if I had to, to stay healthy. Or I might let my health decline to save money. If my education hadn't been heavily subsidized, I might not have gone to university, so I would be doing less-skilled work and generating less revenue. Maybe I'd even be a laborer, if grade school wasn't subsidized. I would "keep" more of my income in the sense that it would be tax-free, but less of my income would be disposable because more of it would go to things like health care and saving for retirement. This effect is amplified by the fact that private insurance is less efficient than a single-payer system. Other privatized services, like utilities, would also hit me in the pocketbook because of their inefficiency.

Rand Simberg wrote:

I can't imagine working less because my taxes went up, or more if my taxes went down.

So, if your taxes went to a hundred percent, you'd keep going in to work for the government?

Steve wrote:

her laughing, and dis-ingenuous laughing at that, was NOT the image of what I want my Fearless Leader doing in time of crisis! She laughs like a bad actress in a high school production of "The Importance of Being Earnest".

"Madam President, the Joint Chiefs just sent us a message...there are incoming missiles launched from southern Russia or northern China!! We need to retaliate, but which country would have the AUDACITY to do this, who do we fire on?"

" ah ha ha ha ha, audacity, that word always reminds me of the debates, remember when John McCain said that, he was..."

And why is it that anyone who thought that her laugh was out of place is met with,

"...did you watch the debate?"

I got that same comment two other places I haunt. Was that in the Anon Trolls Weekly Book of Talking Points? And YES, I did see it.

And might I also say, she's just not the liar Bill was. He left you wondering whether he was telling the truth or not. He WAS slick when he lied. When Hitlary spins one, I keep waiting for little sparkles around her face and for her nose to grow. She is a piker in the realm of prevarication.

"Hi diddle dee dee
You sleep till after two
You promenade a big cigar
You tour the world in a private car
You dine on chicken and caviar
An actor's life for me!"

It's an act anon, she is a fraud, a sham and a fake. The laugh shows what a stuffed blouse she truly is. Yeah I know 'stuffed blouse' sounds sexist, but 'stuffed shirt' just sounded too butch.

Anonymous wrote:

Steve, I thought everyone agreed that the laugh was out of place. Hence the expectation of primal screams. I'm glad we now agree that she was laughing at the word "audacity".

I really liked the rest of your comment. I think that, in the future, whenever possible, you should strive to combine your particularly incisive political commentary with imagery and lyrics from the wonderful world of Disney!

David wrote:

I can't imagine working less because my taxes went up

OK, let me put this into perspective for you:

I pay 50% of my income to taxes. What percentage of my time should I commit to coming up with ways to lower my tax bill? Of course, instead of committing my own time I hire really smart people to study accounting their entire lives so they can lower my tax bill. That is a true, dead weight loss to society - these incredibly smart guys (that could be designing rockets, for example) have to spend there entire lives keeping up with the tax code, and finding the loopholes to save guys like me money. That is the income tax situation.

Think about this: Payroll companies exist only to satisfy the laws regarding taxation - without taxes, they have no reason to exist. Just the top two companies have a $35B market cap - so $35B of resources/people is tied up in payroll taxes on the company's side (and they do not even service the majority of the market)! H&R Block has a $7B market cap - and they are a franchise where the individual owners have most of the value! We are spending hundreds of billions of dollars in effort in order to pay the government their money - all of which is dead loss, and with lower taxes rational actors automatically expend less effort on it.

In addition, the taxes we are mainly talking about are the "capital gain" taxes. These taxes are tied to a transaction (the sale of assets), and so there is an even larger link. When deciding if you should sell your company / house / stock, you have to consider the tax ramifications. If you decide not to sell because the after taxes gain is not worth it: 1) the government gets less money, 2) you do not capture the potential benefit of the transaction, and 3) neither does the other party of the potential transaction.

Taxes really are bad for the economy. Particularly to us start-up folks, because our incomes are so variable. (Think about this - you make zero or negative income for on average 3-5 years, then you make lots of income. Your time-average income may be middle class, but your taxes are in the highest bracket.)

Ashley wrote:

Ashley> > I can't imagine working less because my taxes went up, or more if my taxes went down.

Rand> So, if your taxes went to a hundred percent, you'd keep going in to work for the government?

Sure. Sergei Korolev went to work every day, didn't he? I like what I do. If I were taken care of by the state, I might take more vacation days, or retire earlier, but it's hard to say. I'm only 27 so I'm not in the retirement mindset yet.

I suppose that if I were a garbageman or a fast-food worker, I would try a lot harder to avoid unpaid work, so I can see your point.

Rand Simberg wrote:

Sergei Korolev went to work every day, didn't he?

I would assume that he still got a salary.

I like what I do. If I were taken care of by the state, I might take more vacation days, or retire earlier, but it's hard to say.

Who said anything about being taken care of by the state?

Do you really have no interests in life other than going to work every day? Do you go in on weekends, too?

Ivan wrote:

If taxes were 100%, the state would be wise to take care of you. The state would also be wise to at least try to make life pretty pleasant. Someone who agrees with Jonah Goldberg and understands the nature of the smiley face should not be surprised by Ashley's position. It shouldn't be hard to imagine that some individuals will actually have goals (including leisure goals) that align with the State's goals, and so, they truly will be happy in under a confiscatory regime. Their only unhappiness might be that their knowledge that other individuals are very unhappy but can't opt out. If you do allow people to opt-out, the community will shrink to the size of a kibbutz, only last for one or two generations at most, and then diffuse into vapor as goals vary.

Fletcher Christian wrote:

This sounds at least plausible, but I have admittedly seen no studies on it:

One of the attractions of raising the tax rate is much the same attraction as the one for asset-stripping and aggressive downsizing of a company you've taken over. In the short term, revenue (or profit in the commercial case) goes up. And by the time the long-term negative effects happen? You're not there any more - you've moved on, or in the political case the other lot is in, and it is no longer your problem.

In the commercial case, the reward for the people actually taking the decisions is that they get bigger bonuses. In the political case, the real decisions are taken by bureaucrats - and if public spending goes up, they can build their own little empire, go up a pay grade or two and "earn" more money.

One solution to the political case might be to demote, or better fire, anyone in government service that takes on more staff.

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This page contains a single entry by Rand Simberg published on April 17, 2008 6:43 AM.

Remembering Slim Chipley was the previous entry in this blog.

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