Wednesday, August 22, 2012
Of all the wrongheaded claims in Niall Ferguson’s much-mocked effusion of trite right-wing talking points, this is my favorite:
Welcome to Obama’s America: nearly half the population is not represented on a taxable return—almost exactly the same proportion that lives in a household where at least one member receives some type of government benefit. We are becoming the 50–50 nation—half of us paying the taxes, the other half receiving the benefits.
In fact, America has a barely progressive tax system, in which rich, poor and middle-class people all pay roughly comparable percentages of their income in taxes. As this study illustrates, last year people who had an average income of nearly $1.4 million (the blessed 1%) paid almost the same percentage of their income in taxes as the bottom 99% of the population. ...
[W]hat can be done to combat the constant barrage of nonsense people like Ferguson emit on the subject of taxes? I have a modest proposal, which draws on insights from what in behavioral economics is known as prospect theory. Prospect theory reveals that people are far more averse to giving up what they think of as something they already own than they are to not getting something they think of as not yet theirs. This is known as the “endowment effect.” ...
[W]e should have a system in which, to the extent possible, Americans pay no “taxes” at all; instead, our wages should simply be lower, while a portion of what we previously thought of (rather absurdly) as “our” money goes directly to the government.