Kansas Gov. Sam Brownback to cut $45 million in public-school funding

[Fortinbras Armstrong]

13. Conservatives have long embraced crackpot economic theories

Mainstream economists reject the Austrian school, in large part because the Austrians disdain model making (but do it anyway, just very badly). For those of you who speak economics, there is an interesting article, "Why I Am Not an Austrian Economist" at http://econfaculty.gmu.edu/bcaplan/whyaust.htm

Ron Paul has called for a return to the gold standard. The major effect of returning to the gold standard would be to limit the money supply. The total amount of gold that has ever been mined has been estimated at around 142 thousand metric tons. Assuming a gold price of $1000 per ounce, the total value of all the gold ever mined would be around $4.5 trillion. This is less than the value of all the money in the US, where more than $8 trillion is in circulation or on deposit. So returning to the gold standard would cause such a massive contraction of the money supply as to make the depths of the Great Depression look like the Good Old Days.

Gretchen Carlson of Fox News claimed "47 percent of Americans don't pay any taxes". John McCain and Sarah Palin both said similar things during the 2008 campaign about the bottom half of Americans. Ari Fleischer, the former Bush White House spokesman, once said, "50 percent of the country gets benefits without paying for them". Actually, they pay lots of taxes, just not lots of federal income taxes.

Data from the Institute on Taxation and Economic Policy show that in 2008 the average income for the bottom third of taxpayers was $15,300. This year the first $9,350 of income is exempt from taxes for singles and $18,700 for married couples. That means millions of the poor do not make enough to owe income taxes. But they still pay plenty of other taxes, including federal payroll taxes. Between gas taxes, sales taxes, utility taxes and other taxes, no one lives tax free in America.

When it comes to state and local taxes, the poor bear a heavier burden than the rich in every state except Vermont, the Institute on Taxation and Economic Policy calculated from official data. In Alabama, for example, the burden on the poor is more than twice that of the top 1%. The one-fifth of Alabama families making less than $13,000 pay almost 11% of their income in state and local taxes, compared with less than 4% for those who make $229,000 or more.

Rand Paul said that "the wealthy do pay most of the taxes in this country". The Internet is awash with statements that the top 1% pay more than 40%. It's true that the top 1% of wage earners paid 38% of federal income taxes in 2008 (the most recent year for which data are available). But people forget that income tax is less than half of federal taxes and only one-fifth of taxes at all levels of government. Social Security, Medicare and unemployment insurance taxes (known as payroll taxes) are paid mostly by the bottom 90% of wage earners. That's because once you reach $106,800 of income, you pay no more for Social Security, though the much smaller Medicare tax applies to all wages. Warren Buffett pays the same amount of Social Security taxes as someone who earns $106,800.

The IRS issues an annual report on the 400 highest income tax payers. In 1961, there were 398 taxpayers who made $1 million or more, so I compared their income tax burdens from that year to 2008. Despite skyrocketing incomes, the federal tax burden on the richest 400 has been slashed, thanks to a variety of loopholes, allowable deductions and other tools. The actual share of their income paid in taxes, according to the IRS, is 16.6%. Adding payroll taxes barely nudges that number. Compare that to the vast majority of Americans, whose share of their income going to federal taxes increased from 13.1% in 1961 to 22.5% in 2008.

Unlike many conservatives, I have actually read Arthur Laffer's paper introducing the "Laffer Curve". The curve suggests that, as taxes increase from low levels, tax revenue collected by the government also increases. Laffer also says that tax rates increasing after a certain point would cause people not to work as hard or not at all, thereby reducing tax revenue. Eventually, if tax rates reached 100% (the far side of the curve), then all people would choose not to work because everything they earned would go to the government. Thus, there is an argument to be made saying that UP TO A POINT, decreasing taxes will make government income go up. Conservatives ignore the "up to a point", and claim that decreasing taxes will always make government income go up. As Brownback has shown, this doesn't work. To quote H L Mencken, "For every complex problem there is an answer that is clear, simple, and wrong".

Conservatives buy into "trickle down economics". The best comment on that was from the Pope, in his Evangelii Gaudium "The promise was that when the glass was full, it would overflow, benefitting the poor. But what happens instead, is that when the glass is full, it magically gets bigger, nothing ever comes out for the poor."

He also wrote,

Some people continue to defend trickle-down theories which assume that economic growth, encouraged by a free market, will inevitably succeed in bringing about greater justice and inclusiveness in the world. This opinion, which has never been confirmed by the facts, expresses a crude and naïve trust in the goodness of those wielding economic power and in the sacra­lised workings of the prevailing economic system. Meanwhile, the excluded are still waiting.

As John Stuart Mill accurately said, "Conservatives are not necessarily stupid, but most stupid people are conservatives". I agree with the late Phillip K Dick, who wrote, "Reality is that which, when you stop believing in it, doesn't go away".