David Cay Johnston (Syracuse), Book Review: Edward D. Kleinbard, We Are Better Than This: How Government Should Spend Our Money (Oxford University Press, 2014), 144 Tax Notes 1465 (Sept. 22, 2014):
We Are Better Than This: How Government Should Spend Our Money (Oxford University Press, 2014) by Edward D. Kleinbard is a comprehensive, thoughtful, and informed volume on taxation and government spending.
This masterpiece of tax, fiscal, and economic policy is richly endowed with philosophical insights from Adam Smith's Theory of Moral Sentiments and holds the potential to change our often dogmatic and sometimes toxic public debate over how we tax ourselves and spend our tax dollars into a conversation about how to raise more money with less pain and spend in ways that will produce a happier America.
Kleinbard's book is especially useful in proposing a new way to measure capital incomes and a much smarter way to tax corporate profits. ...
The book challenges bedrock tax policy assumptions -- the marginal utility of income theory; the value of progressive taxation; the idea that regressive taxes are bad and should not be used to fund universal services like healthcare, education and infrastructure; the way we tax capital incomes, especially now that most businesses are pass-through entities, which he calls incoherent.
Consider what Kleinbard says he learned about marginal utility, the idea that each added dollar is less important to the recipient's welfare:
In my prior life, when I worked a great deal with affluent clients, I found the declining marginal utility of income theory to be violated at every turn. The affluent clients with whom I worked largely shared the view that they sincerely loved money, that money was attracted to them because it sensed their love, that they knew how to take care of money and give it a good home, and that other less affluent individuals would horribly mistreat that money. I sometimes thought that these fortunate individuals stayed up at night ironing their dollar bills, so they would look neat and tidy. If there is such a thing as the declining marginal utility of income, someone forgot to tell these folks.
In a line targeted at progressives but true for all, Kleinbard says that what we "really should care about is whether government, taken as a whole, enhances the happiness of society by making socially useful investments and by appropriate levels of social insurance. These goods are financed by tax revenues, but the tax revenues are not the point of the system -- the goods are."