Tax Ignorance

[Randall]

Found this intersting read at mauledagain.blogspot.com

Tax ignorance is disturbing. Taxation is at the core of maintaining the existence of the nation and its political subdivisions, and yet the extent to which people do not understand taxation is startling. I'm not focusing on the arcane, the computationally complex, and the definitionally intricate. I'm highlighting basics.

Tax ignorance disease afflicts both the general public and politicians. It knows no bounds, and can be curtailed only through reform of high school and undergraduate education, coupled with an effective public service campaign by the apppropriate authorities.

Turning first to the general public, consider this letter to the editor of the Philadelphia Inquirer with respect to taxation:
A letter-writer Wednesday ("Whose taxes to cut?") has a fundamental misunderstanding of what taxation is. Income belongs to those who've earned it. The government doesn't give tax cuts to people; it simply takes away less of their earnings.

The left wing's conception of income and taxation often seems more like the actions of the schoolyard bully who steals $4.50 of your lunch money while leaving 50 cents in your pocket, and then asks for your thanks because you can still buy milk.
The analogy fails, because unlike the writer of the letter to whom the writer in question is responding, the writer in question has a fundamental misunderstanding. The schoolyard bully who steals the lunch money gives nothing in return. In contrast, the government provides something in return for taxes that are paid. Though it is possible to argue about the value of what is taken and given, on both a macro and micro level, the letter writer in question surely cannot think that when he pays taxes he gets nothing in return. He, like most other Americans, don't necessarily see what they are getting in return. Their homes have not been invaded by foreign nationals because the military provides a deterrent. When they fly on an airplane, ride a train, drive a car, or jump into a taxi, tax dollars make it possible. Airplanes don't collide because the FAA supervises and cares for airspace. Trains operate because they receive tax subsidies in the absence of which they would cease running. Tax dollars provide resources to ensure that the gasoline purchased at the pump is unadulterated, that the pumps properly record quantity and price, and that the roads on which the car is driven are maintained. By paying taxes, the citizen funds the commissions that oversee taxi drivers, with the goal of keeping bad drivers from behind the wheel and protecting the rider from being cheated on fares. Taxes fund the CDC's monitoring of sickness outbreaks to fend off epidemics. These are but a few examples of what people are getting for their tax dollar without being conscious of the benefit.

The flaw in the letter writer's reasoning is the notion that "Income belongs to those who've earned it." That statement is correct only if "income" means income net of the cost of producing the income. One reason I support user fees is that it highlights the cost of services, benefits, privileges, and protections that otherwise go uncharged against the person earning income. Without user fees or taxes, a person's income is overstated because the person is shifting costs to the general public. There may be administrative reasons that make it impractical to get the charges measured down to the penny, but the refusal to accept taxation as a cost of civilized society is not so much the cause of the ignorance but a symptom of a deeper culture of self-centeredness. Where in our educational systems do we teach that so many things that are taken for granted indeed have a cost, and that someone will bear that cost?

[Judge Roy Bean]

....

Typical tax and spend mentality. All things mentioned can be, and should be, done by the private sector, in their respective industry sector self-interest. Air travel would instantly close down with a midair, so airlines have the incentive to make sure it never happens. Are you sure you really want to fly with a 50-year old government air traffic system that uses handwritten cards to track planes? I think I'll drive. At least there you're already on the ground... (but on government "post roads" which are in increasingly sad shape)

There's a common assumption in this line of reasoning about things like private-sector control of airspace, airports and navigation. The assumption seems rational - out of concern for safety and avoiding mid-air collisions airlines could and would somehow band together to provide for their own and the public's common good.

As convoluted as a bureaucracy can be (and is), there's a lot more to the FAA than just traffic control. What gets into the air and who flies it can't be left in the hands of a consortium of airlines.

[Prof]

JRB is correct. Whether his more liberterian view or my more traditional liberal view is "correct," he and I both agree that some things just cannot be left to the market/private enterprise.

Historically, after national defense, the new nation thought that postal services were so important in tying the colonies into a new political entity that the postmaster general was made a cabinet officer. Although times have changed, the founders realized in the beginning that defense and communication were jobs that the national government had to perform.

Roads and railroads dominated this issue in the 1900's -- and while railroads, unlike turnpikes (a phrase that recalls an era of private road building and tolls), were never "nationalized," the level of government subsidy of railroads is, in retrospect, stunning. The same is true for the merchant fleet -- the Navy existed, in large part, to protect our shipping interests -- not our shores.

Today, in additon to defense and police functions, education (or much of it), retirement (SSI), medical care (or a significant part of it), transportation (or a very large part of it), and the regulation of food and drugs and pure water, are also or still thought to be too important or too much for the private sector.

The real problem is drawing the line -- the last administration seems to have even forgotten that there were lines, at least in some areas.

[Mr. Mephistopheles]

....

Typical tax and spend mentality. All things mentioned can be, and should be, done by the private sector, in their respective industry sector self-interest. Air travel would instantly close down with a midair, so airlines have the incentive to make sure it never happens. Are you sure you really want to fly with a 50-year old government air traffic system that uses handwritten cards to track planes? I think I'll drive. At least there you're already on the ground... (but on government "post roads" which are in increasingly sad shape)

There's a common assumption in this line of reasoning about things like private-sector control of airspace, airports and navigation. The assumption seems rational - out of concern for safety and avoiding mid-air collisions airlines could and would somehow band together to provide for their own and the public's common good.

As convoluted as a bureaucracy can be (and is), there's a lot more to the FAA than just traffic control. What gets into the air and who flies it can't be left in the hands of a consortium of airlines.

Here's one more issue with privatization. Private companies (for the most part) exist for the purpose of making money. Government organizations could certainly stand to be less wasteful, but I'll take a federal agency, e.g. the FAA, that has some waste, over a privately run organization that will potentially place profit over safety.

[Mr. Mephistopheles]

Private inspections of food companies seen as weak
By RICARDO ALONSO-ZALDIVAR, Associated Press Writer Ricardo Alonso-zaldivar, Associated Press Writer Fri Mar 20, 8:01 am ET

WASHINGTON – The mortgage meltdown exposed the weakness of self-regulation in financial markets. Now the salmonella outbreak is doing the same for the food industry.

A House subcommittee Thursday released new documents that showed how private inspectors contracted by Peanut Corp. of America failed to find long-standing sanitary problems at company facilities. Peanut Corp. is at the center of a nationwide outbreak that has sickened nearly 700 people and is blamed for at least nine deaths.

Lawmakers said the food industry's private inspection system failed to catch filthy conditions because the company itself hired the inspectors.

"There is an obvious and inherent conflict of interest when an auditor works for the same supplier it is evaluating," said Rep. Bart Stupak, D-Mich., chairman of the House Energy and Commerce investigations subcommittee. He termed it a "cozy relationship."

Last summer, Peanut Corp.'s private inspector, a company called AIB, awarded the peanut processor a certificate in 2008 for "superior" quality at its Plainview, Texas, plant. This year, salmonella was discovered there.

The outbreak was initially traced to a Peanut Corp. facility in Blakely, Ga. Later, contamination was found at the Texas plant. Peanut Corp. is under criminal investigation for allegedly shipping products it knew to be tainted.

Owner Stewart Parnell has refused to answer questions from lawmakers, citing constitutional protections against self-incrimination. On Thursday, Parnell told The Associated Press he couldn't comment on the allegations and referred questions to his attorney, who was not immediately available.

Federal law does not require food companies to pay for their own inspections of suppliers. Nor are industry labs and inspectors required to tell the government about any problems they find.

At least one food company that used its own inspectors, Nestle USA, ultimately decided not to do business with Peanut Corp. Nestle USA had no recalls. But a Nestle affiliate in Puerto Rico recalled some ice cream products, and Nestle HealthCare Nutrition — another affiliate — recalled a nutritional bar.

The committee released a 2002 Nestle USA inspection report of Peanut Corp.'s Blakely plant. "They found that the place was filthy," said Rep. Henry Waxman, D-Calif.

A second audit by Nestle USA of Peanut Corp.'s Texas facility in 2006 also found major pest control and other problems. The audit said that would disqualify the plant from supplying chopped peanut pieces to sprinkle atop Drumstick ice-cream cones.

Auditors found at least 50 mouse carcasses in and around the plant and also a dead pigeon "lying on the ground near the peanut-receiving door."

The audit also said the plant had no pathogen-monitoring plan and noted that one needed to be developed for the plant to be in compliance with audit standards.

Companies that bought ingredients from Peanut Corp. said they had no way of defending themselves against a supplier they accuse of deliberately breaking the rules and covering up.

"I think we did everything we could do," Kellogg Co. chief executive David Mackay told the committee.

"The issue was that (Peanut Corp.) acted in a dishonest and unethical way," he added.

Lawmakers and the Obama administration say the problem goes beyond a rogue company, and major reforms are needed. Legislation has been introduced in Congress to take food safety oversight away from the Food and Drug Administration and give it to a new agency with stronger legal powers and more funding.

Peanut Corp. produced not only peanut butter, but peanut paste, an ingredient found in foods from granola bars and dog biscuits to ice cream and cake. More than 3,490 products have been recalled, including some millions of Kellogg's Austin and Keebler peanut butter sandwich crackers. http://news.yahoo.com/s/ap/20090320/ap_ ... a_outbreak

(bolding added)

Another example of the failure of private organizations performing a government function.