Sunday, January 30, 2011

Modest proposals on taxing the rich

The U.S. is broke. The hole is too big to plug with cost cutting or economic growth alone. Rich people have money. No one else does. Rich people have enough clout to block higher taxes on themselves, and they will.

I spent some time working in the television industry, and I learned a technique that writers use. It's called "the bad version." When you feel that a plot solution exists, but you can't yet imagine it, you describe instead a bad version that has no purpose other than stimulating the other writers to imagine a better version. ...

It's useful to keep in mind how the rich are different. When you are poor, you are willing to trade your time to earn money. When you are rich, you trade your money to get more time. For example, the rich hire people to clean their homes, and they don't waste time shopping for bargains. ...

Suppose we change the tax code so that in return for higher taxes on the rich, we figure out a way to give the rich some form of extra time. The bad version is that anyone who pays taxes at a rate above some set amount gets to use the car pool lane without a passenger. Or perhaps the rich are allowed to park in handicapped-only spaces.

Ridiculous, you cry! Remember, this is the bad version. And if the rich are only a tiny percentage of the population, they would have almost no impact on the traffic in car pool lanes or the availability of parking spaces for the handicapped. You wouldn't even notice the difference. ...

As a bonus, what happens to the economy when the people who are most skilled at making money suddenly have extra time? My bet is that they stimulate the economy by spending more or by earning more. ...

I doubt that the rich will agree to higher taxes until some serious budget cutting is happening at the same time. That makes the sacrifice seem shared. ...

The bad idea here is to change the debate from arguing about which programs and how much to cut, and instead to do what the private sector has been doing for decades: Pull a random yet round number out of your ear, let's say a 10% cut, just for argument's sake, and apply it across the board. No exceptions. ... Managers in the private sector have been handling budget cuts this way for years. They know that their subordinates are all professional liars, so there is no reliable information for making cuts in a more reasoned way. They also know that any project can get by with 10% less money if there is no alternative. ...

If you think that solving the nation's fiscal problems is the job of elected officials, you have to ask yourself how that's working so far. The solution, if it exists, won't be anything that looks like normal business. The rich have the money, and they aren't going to give it up for nothing. I know because I am one, and yes, we do hold meetings.
--Scott Adams, WSJ, on how to solve our fiscal problems. HT: Franklin Shaddy

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