The following was posted in the comment section of a diary by Jack_Savage titled “A challenge (and plea) to EPU (and others)”

The following is only a portion from that full comment…

The posters opening began with the following:

“Personally, I’m very puzzled by conservatism in many respects. Whatever your reading list or intellectual underpinnings, I think that answering some difficult questions in light of the conservative philosophy might help to illuminate the issue: Taxes: I’ve never met a conservative that didn’t feel that lower taxes were better. Yet the top marginal rate has steadily decreased over the last 60 years and is currently at its lowest point since the Great Depression.”

Now here is my argument to the posters premise:

Your argument is very narrow in scope. You say that the top marginal tax rate is the lowest in 60 years; however, you fail to discuss the tax burden to the tax payer in its entirety. The top marginal rate is not inclusive, it does not account for the other taxes levied on the income earner. We cannot forget about the payroll taxes, Medicare, property tax, state income tax, personal property tax, utility taxes, travel taxes, gas taxes, energy taxes, and sales tax. Not to mention all of the taxes you have if you are an investor or own a business that makes profit.

I believe the best way to view taxes and their effect on the taxpayer as the number of days a year on average that we have to work to pay for all of the tax obligations before we truly start “earning” our net income. They call the day you finish paying all off your tax obligations as Tax Freedom Day® by the Tax Foundation. I have no right to that term so from here onward I will call it the tax free days.

You will find that for the last 60 years, we as individual income earners have had to work a longer and longer period of time before we truly start earning net income. The shortest duration between the 1st of the CY and the day you fulfill your tax obligations was in 1900 when it was 5 days. The Great Depression started in 1929 or thereabouts and the duration for that year was 40 days.

Now let us look at 1930 to 1952. World War II occurred in the 1st half of the ‘40s which could explain the increase; however, look what happened after WWII.

The followings numbers were derived from the following link which supplies the duration to tax free day for all years from 1900 to present day:
Tax Foundation’s “Special Report: America Celebrates Tax Freedom Day” No. 160 April 2008

‘30, 43 days; ‘31, 46 days; ’32 56 days; ’33, 62 days; ’34, 60 days; ’35, 57 days; ’36, 58 days; ’37, 63 days; ’38, 65 days; ’39, 63 days; ’40, 66 days; ’41, 75 days; ’42, 77 days; ’43, 94 days; ’44, 88 days; ’45, 89 days; ’46, 89 days; ’47, 92 days; ’48, 86 days; ’49, 81 days; ’50, 90 days; ’51, 97 days; ’52, 97 days;

Here is some interesting numbers; in 1993 the income tax free days did not occur for 111 days, 1998 it hit 120 days until a peak in 2000 of 123 days before dropping back down to 106 days in 2003. I believe the market exploded in 2003-2006 and notice that when the duration to tax free days went, back to 116 in 2007 and back to 113 in 2008 because of the stimulus checks. As you can see the stimulus checks have, if any, short term (1 year) of the duration to tax free days.

Next sentence in the post is the following:

“The simple question is – at what point are taxes “low enough”? The bigger question is on what basis does a conservative answer this question?”

Obviously, from my discussion above it can be readily seen that the tax obligation of Americans translates into approximately 30% of the year. Again, 30% of the year we are working for the Government in all of its manifestations; therefore, there should be no question that taxes could be lowered regardless of the posters simple question.

This analysis can even be referenced to historical precedence. We are currently at 114 days from January 1 to tax free days. In 2010, this number will skyrocket when tax rates revert back to the Clinton years’ rates (Bush tax cuts expire). Expect our tax obligation to return to historical highs of 120-130 days; however, tax free days are dependent on Government’s spending, tax increases, programs and ideology. With the liberal ideology of the current administration and Congress, expect the interval to tax free days to reach record long durations. Taxes on investors, capitals gains, and corporate profit are not included in this discussion.

Now I asked the poster to provide an answer to his tax quandary presented in an earlier post excerpted above. The following is what I was given:

“Taxes – too low when the needs of the state cannot be paid for under the revenue provided by the tax base; too high when the state is wasting more money than the lowest basic entropy of a bureaucratic system generates. “Needs of the state” include basic needs of its citizens and basic standards of opportunity for its citizens are being universally met. I don’t think that this point is often found at in a region of the “Laffer Curve” that would see increased tax revenues as a result of decreasing tax rates – should it be found there, then obviously the formulae above would be reversed. I think that taxes on any given group should never be more than they can afford without giving up basic needs and basic opportunities.”

This statement made by the poster is common among idealists and socialists. He begins his argument citing the low end of the “Laffer Curve”, the linear region near zero where the Government cannot afford basic costs of minimal operation due to the lack of revenue. Then the poster shifts to the high end and states that Government becomes wasteful when taxes are too high. He has now moved to the “diseconomy of scale” argument for the Government which is used mainly as an explanation for efficiency of a company based on size. In keeping with good grammar practices, the poster has deviated from parallelism. He should have cited that when taxes are too high, the revenue brought in to the Government begins to reach a point of negative return. High taxes will bring in revenue that can be equated to the same revenue garnered when taxes are too low.

The “Laffer Curve” will be cited by Nobel prize winners James Toblin in his article “Voodoo Curse” from the Harvard International Review, and I will paraphrase him saying the theory deserves the same ridicule as it did when it was first greeted by sober economists. Let us recall that J. Toblin believes in Keynesianism economics that suggests that Governments should intervene to stabilize the economy to prevent recessions. For example, the Government will intervene in the economy through the control of interest rates, funding of public works projects and taxation. We all know how these economic principles turned out in practice. Need I say more?

Now let us move on to what the poster calls the “entropy of a bureaucratic system”. The poster states that the disorder caused by an enormous bureaucratic system is a given only when taxes have become too high; this is not consistent with the ordinate axis of the “Laffer Curve”.

Additionally, in the remaining logic presented by the poster, the tax burden should not exceed the ability of the payer to afford the basic needs and basic opportunities. These “basic” components are considered part of what the poster terms the “Needs of the State”. The problem with the argument is what are basic needs and opportunities and who determines what they are?

Working for the Government in the past, I can tell you, that you do not want Government to determine what are your “basic needs and opportunities”, let alone determine what “States Needs” are. This is Marxism, plain and clear as exemplified in the following phrase, “To each according to his needs, from each according to his abilities”. We have had many examples of this philosophies failure. Communism which is a form of Marxism was a failure.

Once again, working for the Government in the past has given me a firsthand understanding that the U.S. Government is indeed a bloated bureaucracy that is operating well beyond the point of efficiency. If the Government has reached the point of using $10 dollars to spend $1.00, I think it is safe to say that the Government is a bloated bureaucracy.

More of this analysis of the posters misconceptions, (and there are many) are to come in a future diary. The next entry will be the Another Simple Man’s Arguement (Military Spending