Needs vs. Wants and Belated Commentary, Re: Tax Protests

I was sitting in a cafe yesterday, and I couldn’t help but overhear a conversation between two women in their mid 30’s. They were discussing the economy, and were being a bit over-dramatic about the impact it’s having on their families.

My favorite quote: “Bill and I decided that we should have the maid come every other week, and we’re reducing the nanny to 30 hours a week.”

So sad… I almost shed a tear. We often forget how stupid we sound when we say things like this—I have a page from the back of an old Time Magazine issue on my wall as a reminder to myself of just how great we have it.

Pew research does a study every year of what people in this country consider “necessities” vs. “luxuries.” As you can see, we’ve crossed the line where roughly HALF of people consider a television set and a microwave to be luxuries, down significantly year over year. In a curious oversight, nannies and maids were not listed—perhaps next year.

Bottom line, we need to stop whining. As I mentioned in my “Markets and Chaos Theory” posts (and to paraphrase Bill Maher) in America, even our poor people are fat. If the worst thing that comes out of this economic downturn is that people begin to be able to differentiate from needs and wants, we’ve taken a material step forward. Maybe people will start living within their means instead of running deficits like an idiot or a congressman (but I repeat myself.)Pew Research chart

There are some indicators that point towards a decline in the rate of slowdown. (How’s that for a difficult to parse sentence?) Hopefully, things won’t turn around too quickly for these paradigm shifts to really permeate our culture.

It’s been a while since I posted, and one of the things that’s been sticking in my craw of late has been the hypocritical, manufactured outrage by the right wing.For example, while I to a great extent agree politically with the tax protests that took place (the “tea parties” earlier this month) I have to say that the theatrics fell on deaf ears with me. I can’t get too worked up about paying 39% instead of 36%. Being fortunate enough to be in that tax bracket kind of makes it difficult to be taken seriously whining about kicking an extra 3% in taxes. (Incidentally, this is MORE than offset in my case by some of the new write-offs that are available—it will be a net decrease in tax rate in 2009 for me.) Jon Stuart says it best when he asks “at exactly what point between 36 and 39 does socialism begin?”

In the spirit of mixing tax law with economic models (you got chocolate in my peanut butter!) I’ll close with a snippet from an email debate I had with a family member recently…

*…**the public's lack of understanding of economic and political models is a pet peeve of mine**, as I think it makes it difficult to have a productive discussion, and makes it easier for the government and media to misrepresent reality and polarize people's views.* *I think [many] are misattributing the taxation principles [they are] criticizing as “socialist.” Though I haven't read everything he wrote, I have read Marx's seminal works. He does not talk about taxation at all-- indeed, things like nationalization of banks (which could be described as the modern equivalent of the "means of production" that factories and the like represented in Marx's time) areMarxist, but progressive taxation and inheritance tax is not. If you re-read the Communist Manifesto,**a pure communist model would have no taxation at all**, since the government would own and operate the mechanisms of commerce (ostensibly) "on behalf of the people" and would be paying salaries rather than taxing income. Income tax is, to a great degree, mutually exclusive from Marxism, Leninism, or even Trotsky.*

My issue is that the value of the Austrian school’s debate with Marxist theorists around economic calculation is lost in the minutia of largely unrelated taxation models. Marxism is interesting in theory, but breaks down in practice because it does not take into account opportunity cost, and does not have a methodology of accurately valuing assets and production output because no market exists to set these values. Hence, it is inherently inefficient. It also ignores human nature and provides insufficient incentive for people to work harder and innovate. (Innovation is seen by Marx as a tool by the Bourgeoisie to constantly push “petit bourgeoisie” back to proletariat status by reinventing the means of production.) This is orthogonal from any kind of progressive taxationthat also results in the indirect redistribution of wealth.

A couple of great related Daily Show clips:

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