Just a couple of days ago, President Obama excoriated the Republican Congress for wanting to keep tax rates low for “people like me” — that is, people who, like the President, have very high incomes.
Now we learn that on an income of $1.7 million, the Obamas paid $450,773 in taxes, taking full advantage of the Bush tax cuts. I think it is fair to ask: If the President believes that people like him ought to be paying more, then why didn’t he pay more? There is absolutely no rule against sending in more money than you owe.
Now you might say that the Obamas believe it’s important to raise many billions more in taxes, and that sending in an extra hundred thousand or so would make essentially no progress toward that goal. But I don’t think you’d continue to say that if you thought about it. If the Obamas are one of, say, a million families in their financial position, and if the Obamas, and only the Obamas, send in some extra money, that’s only (by Mr Obama’s reckoning) one one-millionth as good as repealing the Bush tax cuts — but at the same time it’s costly to only one one-millionth as many taxpayers. Surely these things should scale.
In fact, since you’d expect the first hundred thousand to go to the most urgent use, the president’s contribution should be worth more than one one-millionth of a million contributions, while still imposing costs on only one one-millionth as many people. If repealing the Bush tax cuts is a good deal, the Obamas’ extra voluntary contribution would be an even better one.
So the Obama position seems to be that a) the rich ought to meet obligations over and above what the current tax code requires; b) the Obamas are rich, and c) the Obamas choose to meet no obligations over and above what the current tax code requires.
It’s almost enough to make you begin to doubt his sincerity.
A few possible retorts :
* You have assumed an asymmetry in where the million contributions are spent, but a symmetry in where they are derived. This is not logical. It is likely that Obama’s contribution would be more or less costly to society than one millionth of a million contributions.
* An important role of taxes is the way they affect economic decisions. Obama’s voluntary contribution would not have one millionth of the effect of the million involuntary contributions. Therefore it doesn’t scale.
* What is the level of Obama’s charitable giving? Did he buy any government bonds? If he spent his contribution in the same way government would have, it makes no difference whether he spent it like that or paid it as extra tax. The same would likely not be true over the full million. Without information about *how* Obama used his extra after-tax income, we can’t be sure he’s being insincere.
* There’s even room for a ‘tragedy of the commons’ type justification here. Many people, quite reasonably, support a Carbon tax or ETS, but equally reasonably don’t offset their emissions in the absence of one. Perhaps Obama’s personal reaction to the Bush Tax Cuts is similar.
* Anyway, I thought you believed it made no difference whether people are taxed or not? Why do you care about whether Obama contributes more to the IRS? ;-)
Off the main point, but–
“There is absolutely no rule against sending in more money than you owe.”
Actually, there is — the IRS can’t legally accept money that it isn’t owed, so if you send in extra, they have to send it back to you. (As I learned from an article about Tim Geithner voluntarily agreeing to pay taxes that the IRS couldn’t audit him for because the 3-year statute of limitations had already run out — http://www.slate.com/id/2210336/ )
There’s nothing insincere or hypocritical about it at all. (Nor is it hypocritical for libertarians to use government services). It’s like saying we’ll all go out to dinner, but only if we split the bill. Or that Obama will contribute to a public good but only if he can be assured that others can’t free-ride.
If Obama (and other rich liberals) have preferences as follows:
Rich Americans have their taxes increased > No Americans have their taxes increased > Only I have my taxes increased
… then what exactly is the problem with fighting for your first preference but settling for your second preference if you cannot achieve it?
You don’t send your extra tax to the IRS, you post it directly to the Treasury http://www.fms.treas.gov/faq/moretopics_gifts.html. It’s a gift so no need for a costly assessment so it should be cheaper revenue to collect. If Secretary Geithner did not do this then I think he was insincere in his repayment offer.
I don’t think what other worthy things Obama would have spent the money on matters, e.g. charity donations, etc. You can’t withhold your taxes by saying you’re going to spend it better than the Government. Loss of control is an essential part of taxation (this applies to other rich liberals more than Obama, but even he does not control every government dollar spent).
As has been pointed out taxes affect decisions, though quite why this is objectionable when applied to an individual but not at a mass level I don’t know. In any case I think a voluntary donation would be less distortionary. Revealed preference suggests that the donor values that bit of his income less than an equivalent person who reluctantly hands over extra tax to the IRS.
This is, I think, the first time I disagree with a post of yours.
I think you can certainly be sincere in thinking everyone should be forced to do X, while not doing X voluntarily if nobody else does it.
Let me see if I can turn this around to you. Assume that everyone in the world could give up all their possesions, and this would mean that the person that was born most immediate after him/her would double his possesions (even if he gave them up). Now, if you could choose that everyone in the world does this, you would surely choose yes. But if noone else does it, I doubt you would do it yourself.
On the face of it, it does seem that he could be incsincere. This is the same way that almost everybody is insincere. It is an interesting obsevation that people often believe they hold genuine beliefs in a cause, and then act in ways that do not promote that cause. We are able to “hive off” certain beliefs, and not examine all our actions in the light of those beliefs.
Obama’s tax issue is probably different from carbon off-setting. Many believe that there will be zero benefit from their own offsets if the global CO2 still rises. There is no benefit unless there is collective action, so why impose a cost on yourself? the key here is the scaleability. Jonatons example does not scale, but I don’t see why Obamas tax shouldn’t.
As mentioned above, we do not know what Obama does with the extra money he feels should be taxed. He may use it charitably, which he believes is even more effective than tax donations. Since he cannot force other wealthy people to make such charitable donations, the next best thing is to tax them.
But I wildly speculate that there is a deeper psychological reason. The perceived cost is much less if it does not alter your position relative to your peers. If the costs are imposed only on you, then drop down the pecking order. You perceive this as a greater penalty than the same absolute drop that does not alter your relative position. You notice and care most about your position relative to those close to you.
What do you mean that my example doesn’t scale? (I assume it’s my post you are referring to.) To make it simpler, we can assume that everyone in the world is equally rich.
I also dislike the psychological aspects. I think it sets a dangerous example of establishing taxes as something you ‘should do’ rather than you ‘are obligated to do’
I think psychology is hugely critical, as apparently do all people who constantly warn that without future reductions in spending, Interest rates will spike, despite current low levels….
Either the psychological aspect must be accounted for, or it can be ignored in all cases.
If it is ‘unworthy’ of being included here, same goes for the so-called ‘Bond Vigilantes’
If it is ‘unworthy’ of being included here, same goes for the so-called ‘Bond Vigilanties’
The argument only holds if the government is spending the tax money on private goods. If all tax dollars are spent on public goods (non-rival, non-excludable), then Obama’s extra contributions would cost him $X, but would only yield a benefit to him of $X (or some function of X). However, if everybody contributes, the personal cost/benefit analysis changes considerably. Obama’s costs have remained the same, but his benefits have been multiplied by a million.
Also (@Bennet), you can’t pay more through the tax system, but you can voluntarily send the government money.
http://www.treasurydirect.gov/govt/reports/pd/gift/gift.htm
@Jonatan. Sorry, I have misunderstood your example. Now I have thought about it again, I see your case is as you state – one where you would agree that everyone should be forced to do it, but you would not unilaterally do it yourself.
However, this may not be quite the same as the tax example because I can explain why you would behave this way, depending on your motives. You may wish to force everyone only so that you would profit. If only you do it, then the motive has disapeared as you have no interest in doubling the next persons assets. With the tax example, your expressed motive is to help others through the tax you pay. Even if no-one else does it, your motive should remain if you think your extra tax would do just as much good if you are the only one paying. I find it harder to explain why you would behave this way.
This is a very interesting case, because I think in the same way Obama apparently does, and I think millions of others do as well. It is hard to pick apart why I think this way, and why it still seems reasonable for Obama (and others) to not pay extra tax voluntarily, whilst supporting higher taxes for all.
@Bennett Haselton
While technically true, that’s pretty misleading. The point is “can you give more money to the government in general?” and this is true. It just goes to the Bureau of Public Debt, not the IRS.
http://www.treasurydirect.gov/govt/reports/pd/gift/gift.htm
I don’t think it is reasonable to compare this with a libertarian using government services. If someone made you pay $40,000 for a car you didn’t want to buy, for instance, then I don’t think it is unreasonable for you to use the car. Using something you were forced to buy is different than showing leadership on an issue that you have proclaimed to be fundamentally about fairness. No one is forcing the President to give an ‘unfair’ amount to the government; he is choosing to do so.
There is a way to pay extra taxes to the federal government:
http://www.treasurydirect.gov/govt/reports/pd/gift/gift.htm
The money must be used to reduce the public debt, but surely that would answer the president’s call for the wealthy to “give back a little more.”
Sincerity is not this President’s strength. You might recall his performance in a 2008 debate in which he promised to not use Presidential signage to get his way, belittled President Bush for using signing statements, proclaimed that a bill should be either vetoed or signed, bragged about having taught the constitution for ten years, then concluded with the applause-inducing statement “We’re not gonna use signing statements as an end run around Congress. All
right?”
After the president used a signing statement on the recent budget bill, though, the president’s press secretary informed us that Mr. Obama “never said he was opposed to signing statements. He’s
always said the President must retain the right to use signing statements. … His concern was with what he saw was abuse of the signing statement by the previous administration.”
Nothing that Obama has ever said makes me believe that he believes that the government works perfectly. Given that today’s extra $100 “gift” could easily go to another tax cut for the rich tommorow it doesn’t make any sense to give a gift to the government or pay additional taxes.
If I could allocate on my 1040 where my tax monies should go, then I will be more willing to pay extra.
He simply paid his taxes due. I imagine because people will be scrutinzing his return he probably erred on the side of caution and overpaid. He didn’t take any more advantage of the bush tax cut then you and I would.
In any case he is not insincere about his overall argument that increasing the taxes will reduce the deficit.
@Harold.
I was just arguing that “I think you can certainly be sincere in thinking everyone should be forced to do X, while not doing X voluntarily if nobody else does it.” But I can see your point that this might not be sufficient to refute Steven’s point.
Here is another attempt:
You live in a community with 10 inhabitants. For each dollar up to $500, a dollar spend on improving the road, this will earn each inhabitant 50 cents.
If each inhabitant pays $50, they will all gain $200. If just you pay $50, you will lose $25.
Here I think that you would prefer that everyone pays the $50, but if they don’t, you wouldn’t want to pay the $50 yourself.
Shall those of us who think that tax rates are too high )particularly those like me who think so because we are want to maximize federal tax revenue, not out of ignoble selfishness) also pay what we think should be the most efficient tax rate?
I think if you were to do this, you would have the moral standing to ask the struggling young Obama family to do the same. And the rest of us will follow you in the following tax year, I promise.
Two thoughts:
– If Obama should donate to the Federal Government, how much should he donate? Should he donate up to the level that matches, say, a 32% marginal tax rate? Or should he donate more? Perhaps he should donate all of his income. What limit should he set on his donation?
– While I didn’t make $1.7M last year, I do fall into the highest tax bracket. And I agree that we should raise the highest tax rate. Even though I’m in the highest tax bracket, my effective tax rate for 2010 was 17%. Perhaps as a good citizen I should (or we all should) not itemize our deductions and pay the full rate. Steve, would you volunteer to do that?
I see nothing hypocritical in seeking to minimize our individual taxes while advocating for a more progressive tax structure. Personally, I think we should have a simple tax. Each adult gets, say, a $20,000 personal deduction, and then the Federal Government takes 20% (or 25%, whatever works) of the balance. No deductions. A family earning $40,000 per year would pay no tax; a family earning $200,000 per year would pay an effective rate of 16%; etc.
I’ve always, generally, hated this argument. Specifically, this behavior is not good evidence of duplicity or insincerity. It is perfectly consistent with human nature not to want to pay extra if no one else is. You know humans are status-obsessed [Robin Hanson would say that’s ALL we care about]. Paying extra taxes when your peers aren’t would lower your status (less money for conspicuous consumption, including high-profile charitable donations). It’s normal to want to avoid that. It’s also consistent to want higher taxes for all in a way that maintains the status hierarchy at the top but also decreases the deficit.
In short, this is evidence of Obama’s human nature and status obsession, not of insincerity or dishonesty. [There is plenty of other evidence for the latter two.]
On this one, I agree with Steve 100%. My position is either you have your values or you don’t. Why do you need to forcibly take money from other people in order to give yourself? Its a very serious moral question in my mind, and I’ve not heard answers that make sense.
Jonatan: An interesting scenario. I think this is an issue of consistency. We are wondering if Obama’s behaviour in wanting higher taxes but not volunteering to pay more himself is consistent. Assume your interest is purely financial. In your example, you behave consistently if you refuse to pay $50 on your own, but agree to pay $50 with everyone else. There is no profit if you do it on you own, there is if everyone else chips in, so the behaviour is consistent.
I think your example gets really interesting if 3 people agree to contribute. Then all 10 people will get $75, and you will make a profit of $25. So to be consistent you should agree. However, 7 people will get $75 clear profit with no input, whereas you will only get $25 profit after putting in $50. Many would consider this unfair. Some would find the unfairness a greater cost than the $25 profit, so would not agree to pay. But if we only consider financial gains and losses, it is inconsistent to pay when everyone does, but not pay when 3 people do.
The question here is how does this compare to Obama’s tax issue? The motive for wanting higher taxes is presumably because he believes rich people should contribute more to Governmet costs. Is it inconsistent to agree to pay more towards these costs only if everyone else does? If I can stretch your road example a bit, it is a bit like the total cost of fixing up the road is $500. So if everyone contributes, then everyone gets a perfect road. No profit. However, we assume that for each $50 spent, it adds $50 worth of improvement to the road. Then if you are the only one who pays, you still get the benefit of $50 worth of improvement. And so does everyone else, who didn’t pay anything. Is it consistent to agree to pay $50 when everyone else does, but not to pay on your own?
“How does this compare to Obama’s tax issue?”
Directly. Obama gets some advantages for the country, less poor people, more infrastructure, etc. Overall something that has a value for him more than the fraction he would pay if all rich people paid more, but less than the fraction he would pay if only he paid more.
I would say, unless Steven thinks it is hypocritical not to pay $50 to improve the road in my community example, neither is Obama.
@Henry
Let’s say you go out to dinner with friends. You all decide to split the bill. Then, one friend thinks the waiter did just a Cracker-Jack job and he deserves more money. Your friend says everyone should chip in an extra $5, but he doesn’t want to unless everyone else does. Sound fair?
But wait, what does it matter what President Obama’s income is. He could, after all, be investing the money with the intent of giving it to charity or paying taxes anyway. And as long as he’s not using his income to consume, then he really is paying taxes by keeping goods and services cheaper for the government to purchase.
It seems like a know a smart professor who makes a lot of arguments like that.
Some of the arguments against Steve’s point neglect a critical detail: Obama is a leader. He is trying to convince the American people that it is a morally correct to seize a higher percentage of income from the wealthy. I think it is fair to question his sincerity as a leader if he takes the position that he will only pay higher taxes if other people do too.
Many of the arguments in defense of the president’s actions might apply to common citizens, but I don’t think they apply to leaders. Through his actions President Obama has told us that, unless the federal government forces him to turn over more of his income, he would prefer to manage and spend the money himself than to entrust the government to apply it toward the greater good. Because he is president, I assume he is doing what he believes is best for our nation. By paying only the Bush tax rate on an enormous income, he is sending a message that contradicts the words he used in his speech last week.
This is just silly. This is a tragedy of the commons situation. Steve’s claim is like saying that if you don’t want to the commons grass to get eaten too fast, then stop grazing your cattle. It only works if everyone has to follow the rule.
Also, Obama donated a lot of money to charity. If he had to choose between sending in the additional money he would have to pay if taxes rose to the government or to charity, it seems like charity is clearly the better choice.
@Steve: You have said you are interested in how to explain economic concepts. Let me help. I think you made a big rhetorical blunder here. Had you picked a republican as an example the board would have been full of amens and nodding heads. It is amazing how much more convincing explanations are when they mock conservatives or libertarians.
I thought the point of taxes was to pay for public goods. In the absence of government coercion to pay taxes, markets for public goods would fail, by definition, due in large part to free-riders. I expect people acting as individuals to attempt to get a free ride and think it would be foolish to expect anything different, even of the President. I don’t see it at all insincere to act as a free-rider (minimize your tax bill) on an individual basis and advocate higher taxes to fund public goods that would not exist otherwise.
The President could have shown some leadership, maybe by taking the standard deduction instead of itemizing or contributing money to the public debt to raise his effective tax rate (I do believe any contribution would be tax deductible). He certainly didn’t have to and of course didn’t. Considering he will be worth millions after he is out of office, It would have been a small price to pay to assume the moral high ground.
Paul, aside from smuggling in an odd notion of what a public good really is, has smuggled in the assumption that everything government pays for is a public good. That is just not so.
I thought public goods were non-rival and non-excludable. Maybe I was focusing on the non-excludable part thinking that if you can’t exclude somebody they will try and consume without paying. Trying to smuggle in the assumption that everything governments pay for is a public good was a little silly. I still think it is not insincere to minimize your own tax burden while advocating for higher taxes and commenters above have explained it better than I ever could.
Thank you, Ken B. Make this into a public good problem and Obama’s behavior is fine. Gosh, add a provision point (with no return if not met), and he’d be stupid to contribute.
I propose an alternate example. Gross shortages of blood causes Obama to argue that the healthiest Americans should be forced to “donate” a pint per quarter. Yet Obama, one of the healthiest Americans, is willing to wait until the law passes before he “donates.”
David Wallin: GREAT analogy. I wish I’d thought of it myself.
Suppose Obama assigns the following # of utils to a dollar when that dollar is in each of these people’s hands:
his own: 5 utils
another rich person’s: 1 util
a poor person’s: 4 utils
Then, it is quite easy to see why he’d advocate for higher taxes, yet not voluntarily contribute: By voluntarily contributing to poor people he loses utils. Yet if all rich people paid money to poor people, he’d gain utils.
Ken B,
Here I believe that Steve is using the ideas of Mathematics and Economics to answer the big question on whether or not a politician is being sincere in supporting a position that he thinks will get him reelected.
My guess is that if Steve had written this about Warren Buffet’s statements on this issue and called Warren Buffet insincere, there would be much more people defending Warren Buffet’s sincerity.
You can make an argument that Warren Buffet is misguided and doesn’t understand math or economics, but it’s hard to see how he benefits from his taxes being raised. And therefore it is hard to see how he is being insincere.
If the rich should pay more for the common good, shouldn’t those blessed in other ways be required to share their good fortune too? Inequalities in leisure and carnality shame us all; the most idle could be compelled to mow lawns, the most beautiful to sleep around.
Ken B:
Great point. My hope is that Republicans and Fox News see your post and start making your exact same argument as part of their daily talking points.
Will A:
Wouldn’t it be the Democrats that should be making the arguments for sharing “other blessings” as they are analogous to the arguments for sharing “the money”?
I believe the Republicans, to stay consistent, would need to come out against the idle being forced to mow lawns and forcing the beautiful to sleep around.
“I propose an alternate example. Gross shortages of blood causes Obama to argue that the healthiest Americans should be forced to “donate” a pint per quarter. Yet Obama, one of the healthiest Americans, is willing to wait until the law passes before he “donates.” ”
Then Obama is fully right to want to force people to donate. Donating some blood must be of much less negative value, than needing blood that isn’t there. So the forced donation adds huge value to the society. (It would be better to pay money for donations, but then we are back to the original situation, so I assume that isn’t allowed.) He is also not hypocritical in not wanting to donate himself if it isn’t forced. For Obama, his happiness is more important than other arbitrary people’s happiness by some factor. And if this factor multiplied by the cost of donating blood is higher than the happiness gained for other people by just donating his blood, but lower than the happiness gained if there is forced donation for the whole society, then he is not hypocritical at all.
Ad Hominen Tu Quoque
As far as I can tell, Obama sincerely believes that the government needs more revenues, and that the best way to get them is to tax the rich more heavily. Does someone have an alternative thesis that better fits the evidence?
You know, Mr. Landsburg, I believe that if you became less snidely cynical you’d become a happier person. We all need to pay higher taxes, work harder, and restructure our economy to re-encourage the progress in productivity that has historically characterized us. But we need to come together for that to happen. And that means that we can’t focus so extremely on Mr. Obama, whether he be right or wrong. It’s just petty, and largely beside the point. He has led a pretty honorable life compared with presidents of the past as far as we know, and unless you can put forward reason to doubt that, you should be less excoriating. Let go of some of that anger.
So, in a setting in which its easy to define plausible payoffs (already discussed above) that make the problem a prisoner’s dilemma, Obama is a hypocrite for selecting the Nash equilibrium strategy while noting that the cooperative strategy would be preferable if there only were some law to help sustain it. A curious line of attack for an economist to choose.
re blood donating. I feel absolutely sure that Obama would be up there first in line donating if he proposed such a law. Most people would think him callous to wait until the law was passed. In contrast, most people think it reasonable that he waits for the tax law before paying more tax (I believe). There appears to be an inconsistency here.
Is there a fundamental difference between the two scenarios that explains peoples’ different attitudes? For the moment I cannot think of one, but that does mean there is not one. The two situations “feel” different, but is this just a mistake?
Perhaps it is because tax has always been forced, and blood donation has always been voluntary that creates a false separation in our minds. Or perhaps there is a real difference I just can’t put my finger on.
Taking Super Fly’s example of the “extra” tip. I think if the person thinks the service was good enough to deserve an extra tip, then he should pay unilaterally, regardless of what the others do. I am not sure if this is the common view.
Some other examples. Say he proposed a 55 mph speed limit to save fuel. Would he be criticised if he waited until the law was passed before he slowed down?
What if he proposed a 5% wage cut for all public sector employees starting next year. Would he be expected to take less salary regardles of whether the law was actually passed?
Perhaps closer to the tax question, what if he proposed compulsory charity donations for those on higher incomes? Would he be expected to be making those donations before he proposed such a law?
The sole effect of blood donations is that blood may be provided to those who need it. Is the sole effect of tax the provision of welfare? If not, the analogy breaks down.
Besides the fact that the government has other forms of spending/saving/etc, there is the fact that taxes are distortionary. An individual donation by a president is not.
In fact, I think Steve might be persuaded to argue – it’s not the taxes that are distortionary, it’s the government spending – since “tax” = “govt debt” (by his arguments elsewhere). However, even if govt spending is the source of distortion, the structure of the tax system nonetheless determines whose decisions are distorted (it breaks the equivalence between tax and govt debt, anyway)
If the rich are taxed more highly, they have less incentive to be economically productive. If the rich are taxed less, then given the same level of government spending, it is the poor and middle class who have less incentive to be economically productive.
Which is worse?
Perhaps Obama believes it is worse if the poor and middle class have their economic decisions distorted by the burden of taxes and/or government debt. Hence, he supports higher taxes on the rich, including himself. However, his own personal contribution would have no effect on where the distortionary effects fell. How could they?
Perhaps it’s not about the money, it’s about what people do to try to maximise their share of it. An individual donation has no effect on this.
Hence, the argument given is no proof of any insincerity in the president.
Harold,
The blood question is an interesting one. Something feels more visceral about it, blood is immediate in a way that taxes on the wealthy really aren’t, but it’s hard to put my finger on it. But as you say just because a difference is difficult to identify doesn’t mean it isn’t different. The flip side illustrates something too.
What if President Obama were a smoker (he is or at least was) and he tells his daughters he doesn’t want them to smoke? Would that cause doubts about his sincerity? Would his daughters really have a good argument if they came back and said: “Why not dad? You started smoking when you were my age.” I think most of us recognize the problems with that sort of argument.
To your compulsory charity donation question, I can share with you that this wealthy-people-should-pay-more-if-they-feel-strongly-about-it argument has been making the rounds in recent days. This article in Reuters also appeared today. It reports that the Obama’s gave 14% of their income, $245K, to charity, but they also took the tax deduction for it (something that apparently is on the table to be closed). It concludes with: “Until those who advocate for higher taxes for the well off practice what they preach, the national debt situation may only get worse.” I don’t exactly draw that conclusion from the argument.
http://blogs.reuters.com/gregg-easterbrook/2011/04/20/why-obama-should-pay-more-in-taxes/
DividedLine: I think your smoking analogy fails badly. Obama is (presumably) somewhat addicted, so it’s harder for him not to smoke than for his daughters not to smoke. If you wanted to make this analogy work, you’d have to argue that it’s harder for Obama to pay higher taxes than for others in his income bracket. I think that would be a hard argument to make.
Steve,
Fair point, and I figured someone might make the addiction argument which is why I both pointed out the president may have quit, and I had his daughter argue not ‘you do it,’ but rather ‘you started when you were my age.’ But a perfect analogy isn’t quite what I was after. I was more trying to illustrate that the President made an argument “rich people like me should pay more taxes,” to which you wrote that what the President said was inconsistent with his actions (which may or may not be true depending on both how you want to interpret his considerable charitable donations and how you interpret what the President was arguing). What the president actually does, does not validate or invalidate his initial argument that the well off should pay more taxes — the way you interpreted his actions is just an ad homininem, not a refutation of the premise.
The President is not arguing the rich should pay over and above what the tax code requires, he’s arguing that the tax code should be changed to require more from the rich going forward. If that is indeed what he’s arguing, then his actions could be interpreted as entirely consistent.
Whether we agree with his original premise or not is a different discussion.
@Ken B
It would be hard to find a Republican to use in a similar illustration, because Republicans do not tend to favor higher taxes for the wealthy.
@Steve
Of your conclusions, point (a) does not prove that President Obama is a hypocrite. At what point did President Obama argue that the wealthy should meet obligations over and above what the tax code requires? Can you point me to a specific speech or memo?
What President Obama advocates is for a change in the tax code, and for this new tax code to place a larger burden on the wealthy. I am sure you are going to tell me that these two points have the same effect, but, in fact, they don’t. One requires the wealthy to pay more in taxes, the other expects that if they feel it is right, then they SHOULD pay more (even though, as others have noted, this is a legal impossibility. If President Obama had given a voluntary donation to the Treasury, which I doubt, it would not appear on his tax form anyway).
@ Scott H:
Democrats wouldn’t make the argument that those with leisure time should be forced to mow other people lawns or that beautiful people should be force to sleep with other people because Democrats don’t see these as being analogous.
Apparently though Republicans think that making a person sleep with other people is just as egregious as raising the tax rate on a millionaire by several percentage points.
This is the point that I think that Republicans should emphasize:
As Republicans we strongly feel that raising the marginal tax rate by 3 percentage point is as abhorrent as forcing attractive men and women sleep with multiple people who are unattractive.
I see it being a great way for Republicans to win the independent vote.
“What the president actually does, does not validate or invalidate his initial argument that the well off should pay more taxes — the way you interpreted his actions is just an ad homininem, not a refutation of the premise. “
True. And even the ad hominem is not well established.
Why is it people believe that raising taxes on cigarettes will reduce smoking, but they don’t believe that raising taxes on income will reduce income producing activities. It just defies common sense, but when to try to explain the failures of our secondary education system despite the ever increasing streams of tax revenue spent on it a reasonable conclusion is that common sense is really in short supply.
For a guy who thought the rich should have limited tax deductions for charitable donations, Obama sure claimed a lot of them.
@Peter “So, in a setting in which its [sic] easy to define plausible payoffs (already discussed above) that make the problem a prisoner’s dilemma, Obama is a hypocrite for selecting the Nash equilibrium strategy while noting that the cooperative strategy would be preferable if there only were some law to help sustain it. A curious line of attack for an economist to choose.”
Wow, it’s easy to define the payoffs, and you’ve arrived at a prisoners’ dilemma. Might you offer the less intelligent of us an explanation of why it is so?
DividedLine:
the President made an argument “rich people like me should pay more taxes,” to which you wrote that what the President said was inconsistent with his actions (which may or may not be true depending on both how you want to interpret his considerable charitable donations and how you interpret what the President was arguing). What the president actually does, does not validate or invalidate his initial argument that the well off should pay more taxes — the way you interpreted his actions is just an ad homininem, not a refutation of the premise.
I wasn’t attempting to refute the premise; I was attempting to argue that the President is choosing not to do that which he claims to believe is the right thing. Whether or not it *is* the right thing is a whole separate discussion.
Jonathan Campbell: You are arguing that the president’s actions are rational. I never doubted that. But you seem to want to conclude that because they are rational, they cannot be hypocritical. Surely rational and hypocritical have different meanings, no?
@Bennett Haselton
You can send it to a special voluntary fund. You can’t send it as part of your normal taxes.
Remarkable really. 60 comments debating whether “do as I say not as I do” is hypocritical.
Professor Landsburg,
I (sincerely!) wonder what you think about arguments in reverse? Is Paul Ryan also a hypocrite for taking in social-security benefits as a young boy after his fathers death? What about those who oppose medicare, should they refuse to get on medicare, given the option? Does that make them hypocrites? Social-security? What about roads, and public transportation?
This has been the most common rebuttal to the argument above and I’d be very curious to hear your thoughts.
@Ken B: Come on, as you must be aware, this isn’t at all a case of “do as I say, not as I do.”
Do as I say, not as I do, would be, “All of you pay 33% tax, but I’m going to pay 25% in tax.”
What this is, is, “I really think we should agree to pay 33% in tax. But since we agreed on 25% instead, I’ll pay my 25%.”
HispanicPundit: Well, I think there is an important difference when it comes to social security. With social security, I could take the position that “nobody should be required to participate”. But if I’m forced to participate at the paying-in stage, then I will also choose to participate at the receiving-benefits stage, and I think I can do this without being hypocritical.
With roads and public transport it’s a slightly different issue: I don’t think you should have built this road, but since it’s there, and since my using it doesn’t raise the cost substantially, I might as well use it — I’m not hurting anyone.
I’m sure there are good examples of this sort, but I’m not sure you’ve hit on them.
@DavidK: No it’s a case of saying “rich people *should* pay more” when the rich person in question, who could, doesn’t.
Steve:
I believe that, strictly speaking (if that is possible with a word like “hypocritical”), Obama’s actions would only be hypocritical if he demanded that a single other rich person donated money to the government outside the context of a broad-based tax-cut.
Obama is not hypocritical because his position is totally symmetric with respect to himself vs. other rich people: he, just like others, have no obligation to donate money to the govt. given the current tax laws. However he’d prefer higher taxes, in which case both he and others would have that obligation.
Obama’s position is no more hypocritical than that of a person who takes the position that every person in a 10-person house should clean the bathroom once a week, but who refuses to do so given that nobody else does so. That’s just called fairness.
Professor Landsburg,
Okay, I have a better one that was sent to me. How about this response made by Kevin Drum:
The point of laws is to provide a level playing field, and no one is a hypocrite for following existing law even if they think it should be changed. That goes for congressmen who accept earmarks even though they think earmarks should be banned, it goes for drivers who park for free on city streets even though they think parking meters should be installed, and it goes for rich people who pay taxes at the current rate even though they think that rate is too low.
Your thoughts?
HispanicPundit: I think it’s important to distinguish between a) situations where the fact that others aren’t contributing makes my contribution worth less, b) situations where the fact that others aren’t contributing makes my contribution worth more, and c) situations where the fact that others aren’t contributing doesn’t change the value of my contribution. I would absolve people of the hypocrisy charge in case a). For example, if I think all 100 of us should push on this rock so we can move it out of here, but none of you guys are pushing, it would be silly for me to push, since the rock won’t move anyway. The problem is to decide what are examples of type a), what are of type b) and what are of type c).
I am inclined to think that all of the examples in your new post are of types b) or c), hence arguably hypocritical.
@HP
I don’t consider one a hypocrite if (s)he:
uses for free a road they thought should be a toll road
takes SS payments even if they believe (s)he should never have been forced to participate
deducts IRA contributions from his/her taxes if (s)he believes that shouldn’t be allowed
I do consider one a hypocrite if (s)he:
doesn’t give 10% to charity if (s)he believes a law requiring that should be enacted
carries a gun into a bar into Ohio if (s)he believes the new law allowing that is wrong
smokes a cigarette in an Indianapolis restaurant while contend Indiana should ban smoking in restaurants
I think President Obama’s use of tax rates lower than he supports is in the latter group.
Motivated reasoning here. Despite the (dubious) utility calculation (of little relevance anyway since few apart from the more geekish of your profession attempt to make personal decisions according to a utilitarian calculus), you’re implicitly assuming Obama is a deontologist with respect to taxation. To wit:
“I was attempting to argue that the President is choosing not to do that which he claims to believe is the right thing.”
If you deem parking for free on city streets while at the same time advocating for parking meters to be hypocritical, then you are emptying the word “hypocritical” of the negative moral implication that we usually associate with it. Thus the fact that Obama is acting “hypocritically” is a mere technicality, and no ethical judgment can be made based on it.
Doesn’t the problem with that logic lie in the concept of economies of scale. By this, I mean that a $100m will build a bunch of schools or hospitals which benefit a huge number of people once you get that whole hospital or whole school in operation whereas a few hundred thousand may well build a toilet block but it won’t achieve the same scale of social good as a far larger tax income would?
James P: As you’ll see if you give it a second look, your question was directly addressed in the blog post.
I think you’re missing the distinction between optimizing individually and optimizing for the whole country. If you ask me to maximize the Social Welfare Function, I will specify a level of taxation that I think is best for the country. If you ask me to pick a tax burden to maximize my own utility function, I will likely want to pay very little. Its two different problems.
@David Wallin: Henry suggested in an earlier comment that there is a sequence of preferences for Obama that would explain why he is being rational:
Rich Americans have their taxes increased > No Americans have their taxes increased > Only I have my taxes increased.
This set of preferences seems plausible to me, if only for the solipsistic reason that it is the same as my set of preferences. The first and third preferences make this a prisoner’s dilemma.
I fail to understand why you are willing to buy Steven’s assertion of linearity (“surely these things should scale”) but not other payoff structures. Steven’s assertion doesn’t imply hypocrisy so much as irrationality, which he only does on when he is taking the day off from being an economist.
One more question:
What about those who oppose the mortgage interest deduction? Are they morally required to not deduct for such a deduction…and if they do, does that make them a hypocrite?
Your take?
Hispanic Pundit:
Re the mortgage interest deduction, I think you can oppose the deduction, take the deduction, and still not be a hypocrite. Because in this case, the reason for opposing the deduction might very well be that you think it screws up the housing market, which is something that your deduction has no effect on.
Now if you *bought a house because of the mortgage interest deduction* while still opposing it, that, I think, would arguably be hypocrisy. Your argument is that the deduction causes too many people to buy houses, and then you go and buy a house because of it….
To me, a humble game theorist, Peter’s comment above is totally devastating: “[Landsburg argues that in] a prisoner’s dilemma, Obama is a hypocrite for selecting the Nash equilibrium strategy while noting that the cooperative strategy would be preferable if there only were some law to help sustain it. A curious line of attack for an economist to choose.”
I believe the same argument refutes the disappointing anti-environmentalist chapter of “The Armchair Economist” (a book I otherwise enjoyed very much.) I would like to hear Prof. Landsburg’s response to this.
Sincerely,
J. Weinstein, Northwestern University
Jonahthan Weinstein:
Suppose I say that sex outside of marriage is sinful, and that there should be a law to prohbit such terrible sinful behavior. On the other hand, until there is such a law, I plan to continue having affairs.
We an certainly model that as a prisoners’ dilemma, where I and my fellow prudes each get negative utility from the existence of a sin (including our own) but also get positive utility from our own affairs. Assign the right numbers to those utilities and it becomes perfectly rational for me to go on having affairs, while continuing to lobby for a law that will punish them.
But I think it’s fair to say that most people would, in that situation, consider me a hypocrite.
There are certain cases where purely rational maximizing behavior comes under the rubric of what we call hypocrisy. (If it didn’t, we wouldn’t need the word “hypocrisy”; we could just replace it with “irrationality”.)
I don’t have a full formal theory of what counts as hypocritical and what doesn’t, but I do think that I (at least sometimes) know it when I see it. I think the sex example above is a clearcut case of hypocrisy and I think almost everyone would agree. And the tax example seems to me to be formally equivalent to that one. (Now of course the right definition of “hypocrisy” might not be invariant under that sort of formal equivalence. But I suspect it should be.)
Steve:
You argue:
1) Obama is choosing not to “cooperate” in a prisoner’s dilemma-type situation, while at the same time advocating for the other prisoners to cooperate
2) Such behavior can be described as hypocritical
3) Hypocritical behavior is unethical
I think people are taking issue with step 3 here rather than step 2, which is just a matter of the definition of “hypocritical.” Step 3 is implied by your post rather than explicitly stated — e.g. “why didn’t he pay more” and “It’s almost enough to make you begin to doubt his sincerity.”
If we define “hypocrisy” as you have, to include analogous situations of the city driver who parks on the un-metered streets as you have, then you have all your work ahead of you if you want your readers to believe that hypocritical behavior is unethical.
Jonathan Campbell: “Unethical” was your inference, not my implication.
Then what do you mean by saying “why didn’t he pay more” and “It’s almost enough to make your begin to doubt his sincerity”? Those quotes suggest that you think Obama is not acting as he should, not simply that he is acting in a way which is technically hypocritical and that you are happy to have him keep acting that way.
Jonathan Campbell: The behavior does strike me as hypocritical. I don’t think, though, that we have to classify all behavior as either totally acceptable or totally unacceptable. When something is hypocritical, that makes it a bit less palatable to us. I think we can say that without equating the behavior to a major ethical lapse.
Isn’t this the economic equivalent of the very weak “chickenhawk” argument, i.e. if Sean Hannity or William Kristol supports a war, they should enlist? The fact that Obama is a hypocrite doesn’t mean he’s wrong. He extended the Bush tax cuts, so it doesn’t seem that strange he is taking advantage of legislation–the extension of Bush tax cuts–that he signed into law.
Jack Davis: I don’t think it’s anything like the chickenhawk argument.
Some people have comparative advantages at providing military service; others at being political commentators. It makes sense for people to specialize in their areas of comparative advantage.
In other words, Hannity’s military service has less net social value than someone else’s, both because that someone else is a better soldier and because Hannity is providing more valuable services elsewhere.
But when it comes to sending a dollar to the government, there’s no such thing as a comparative advantage. Obama’s dollar is as good as anyone else’s.
1. If Obama’s objective is to maximize the expected value of the taxes paid by rich people, he can probably do so more effectively by contributing to political campaigns (his own, in particular) that seek to raise taxes on all rich people than by raising his own individual taxes unilaterally. There’s nothing insincere about making the most effective choice for how to use ones assets.
2. Political considerations aside, Obama can (and, from his own point of view, will) do better things with his money than pay extra taxes, but other rich people, on average (from Obama’s point of view) won’t. This follows provided that Obama’s values are sufficiently different from those of the average rich person, which seems likely, given that that values in general are fairly diverse. If Obama is perfectly sincere in his values, he will choose (1) to do the best thing he can do with his own money and (2) to induce others to do the best thing he can induce them to do with theirs. Paying taxes may fit the latter category but not the former.
3. Anyhow, he’s not saying that paying higher taxes is an individual moral duty; he’s saying that, collectively, given that we need more revenue, it’s better to get it from rich people. He’s not (explicitly or implicitly) criticizing anyone else for refusing to pay taxes that aren’t legally required; he’s making an argument about what the rules should be, not what is morally required of individuals. It’s not comparable to the sex example, because sexual morality is an inherently a matter of individual moral choice.
No, because you say: “If the Obamas are one of, say, a million families in their financial position, and if the Obamas, and only the Obamas, send in some extra money, that’s only (by Mr Obama’s reckoning) one one-millionth as good as repealing the Bush tax cuts — but at the same time it’s costly to only one one-millionth as many taxpayers. Surely these things should scale.”
What I am saying is that the Obamas’ contribution is not ‘one one-millionth as good as repealing the Bush tax cuts’ due to the reasons I stated earlier.
Steve Landsburg,
The obvious hole in your logic is that some minimal scale of incremental revenues would be needed to have even an effect proportionate to the individual’s sacrifice. Would one person at Obama’s income level paying that much more in taxes have ANY effect on the interest rates the market will demand from U.S. Treasuries at any point? Of course not. It would not have even “one-millionth” of an effect on interest rates, nor “one-millionth” of an effect on any fiscal policy decision or the impact thereof.
I’d add that another argument could be that if many “rich” folks voluntarily gave more — enough to significantly mitigate our fiscal imbalance problem and related threats and costs — such a phenomenon would likely result in more “free riders” who don’t make that sacrifice. Therefore, one could argue that it wouldn’t even be hypocritical for a rich person to advocate higher top tax rates while opposing even an effective level of such voluntary tax-paying, if he felt that the former were achievable and provided greater equity by avoiding the “free rider” dynamic.
But the greater point is that of my first paragraph. Your argument is based on an invalid premise of proportional benefit.
This really is a Kantian argument, isn’t it? If you are going to argue Kant, shouldn’t you also accept John Rawl’s argument: if you are going to be born into a society where you don’t know what your station in life will be, wouldn’t an egalitarian society be preferable to one where there are huge disparities in income.
Thus, if we accept your logic, it also follows that the wealth of the rich should be redistributed to the poor. Isn’t this the only true way of applying Kant’s categorical imperative: act as you would have the world be. But somehow, I don’t think you really beleive what you are posting.
Doug:
if you are going to be born into a society where you don’t know what your station in life will be, wouldn’t an egalitarian society be preferable to one where there are huge disparities in income.
There is a vast literature on this, and I’ve written some of it. It’s not enough simply to assert that this is the society we’d prefer to be born into; you’ve got to do some hard work to *figure out* what society we’d rather be born into, using what we know about observed rates of risk aversion, etc. Those calculations don’t imply anything like what Rawls suggests.
@Johnatan
“Directly. Obama gets some advantages for the country, less poor people, more infrastructure, etc. Overall something that has a value for him more than the fraction he would pay if all rich people paid more, but less than the fraction he would pay if only he paid more.
I would say, unless Steven thinks it is hypocritical not to pay $50 to improve the road in my community example, neither is Obama.”
You realize this is really only a good argument if Obama’s point about taxes is something like “The rich should pay more in taxes, because its in their OWN best interests!” It is a completely useless argument if he is suggesting that there is some actual OBLIGATION to pay taxes. Those in favor of higher taxes will often try to subtly use this bait-and-switch tactic, where sometimes it seems like they are arguing that you “should” pay higher taxes but really its in your own best interest, so here, let me help you make this decision the correct way! But then, when their argument fails to convince people to voluntarily pay more, then all of a sudden the language changes to one of moral obligation.
@Andy Harless
“1. If Obama’s objective is to maximize the expected value of the taxes paid by rich people, he can probably do so more effectively by contributing to political campaigns (his own, in particular) that seek to raise taxes on all rich people than by raising his own individual taxes unilaterally. There’s nothing insincere about making the most effective choice for how to use ones assets.”
Right, and if my goal were to help the needy or fund schools, I could certainly do so in more effective ways than simply by paying more in taxes. And yet, we arent discussing why I dont choose to go that route. We are discussing whether I should be obligated or forced to pay taxes, merely one of many possible ways that I could impact society, and hardly the best.
It doesnt actually help the argument that Obama could be more effective by using his money rather than paying extra taxes: in fact, it essentially destroys the argument.
This whole discussion is fascinating and well-argued but much of the pro-Obama side is premised on Andy Harless’s assertion of fact that “Anyhow, he’s not saying that paying higher taxes is an individual moral duty; he’s saying that, collectively, given that we need more revenue, it’s better to get it from rich people. He’s not (explicitly or implicitly) criticizing anyone else for refusing to pay taxes that aren’t legally required; he’s making an argument about what the rules should be, not what is morally required of individuals.” In such a hypothetical fact pattern, I would find the pro-Obama argument compelling.
In the real world, however, I think the President’s semi-hysterical attacks on “fat cats” excoriate “rich people” (defined to include couples with joint income in excess of $250k)
who oppose being taxed at higher than current rates, and do so squarely on ethical grounds of “fair shares.” If this perception of the facts is accurate, then I think the charge of hypocrisy is obviously well placed.
I fervently wish that Mr. Obama were the thoughtful analyst and compromiser that he promised to be during the 2008 campaign, and wish that he would take the statesmanlike approach outlined in Andy Harless’s post and argue in terms of utility and rational public policy; but his choice has been, at a time when others are conducting a rational policy discussion, to launch a sanctimoneous William Jennings Bryan/Social Gospel crusade against the ethics of “billionaires and millionaires” (defined to include couples with joint income in excess of $250k).
It’s the smug, preachy tone of the President’s rhetoric that reminds me of Disraeli’s remark that Gladstone annoyed him not so much for always having the ace of trumps hidden in his sleeve as Gladstone’s implication that God had put it there.
Real moral behavior would be the opposite:
Being rich and advocating lower taxes for the rich because you sincerely believe, that lower taxes from the rich is what an indebted state needs to solve its problems. Now because you don’t want to be an hypocrite you start already paying lower taxes via tax evasion. btw thanks tax havens for making moral behavior possible. ;)
@Chad G.
“We are discussing whether I should be obligated or forced to pay taxes.
From my reading of the original post, that’s not what we’re discussing. We’re discussing whether Obama’s failure to pay extra taxes indicates insincerity. I contend that it does not, and I think my arguments establish that.
If you want to debate the substantive merits of higher taxes on the rich (or the ethics of taxation in general), we can have a separate discussion, but that’s not what this thread is about.
For the record, though, I don’t think the observation that Obama can find better things to do with his money makes the case that raising taxes on the rich is a bad idea or that taxation in general is a bad thing. As a utilitarian, I am at least open to the idea that the government will use the money in a better way than the average rich person would and that the advantage will be sufficient to offset any damage to incentives as a result. (We could go even further afield and discuss whether utilitarianism is a coherent philosophical position, but at least it’s one that most economists take seriously.)
It also occurs to me (and I think others have said this approximately earlier in the thread, but I don’t think anyone has quite spelled it out this way) that there is nothing morally inconsistent in the following position:
1. I believe that I should pay higher taxes.
2. I believe that free riders should be punished.
3. In the absence of a legal mandate, the only way I have to punish free riders is to withhold my own additional taxes.
4. Therefore I face a conflict between the moral imperatives in points 1 and 2.
5. Choosing between points 1 and 2, I consider point 2 to be the greater moral imperative.
6. Therefore I choose not to pay higher taxes until and unless it becomes a legal mandate.
The way I’ve stated this, I think it rather blunts the force of the “sex” example that Steve Landsburg uses in an earlier comment. It’s hypocritical to do something you believe is wrong just because other people are doing it, but it’s not hypocritical to do something that would otherwise be wrong if the reason you’re doing it is to punish someone. (Generally, we would say, maybe, that punishment is “bad” but “necessary” or that it’s “the lesser evil” compared to allowing bad acts to go unpunished. Surely that is not a hypocritical point of view. Similarly, withholding additional tax payments is “bad” but “necessary,” or it’s “the lesser evil” compared to allowing free riding to go unpunished. There is no analogous argument you can make about sex.)
Pondering my previous comment, it occurs to me that the philosophy implied by the original post effectively condemns as hypocritical the mechanisms for enforcing cooperation among non-altruists in a very large class of situations. If this be hypocrisy, let us make the most of it!
Andy:
If you want to debate the substantive merits of higher taxes on the rich (or the ethics of taxation in general), we can have a separate discussion, but that’s not what this thread is about.
Thanks for this. One thing I’ve been very grateful for since I started blogging is that for most part, commenters tend to stay on topic here — which is not something I’ve noticed on a lot of other blogs. I appreciate the help maintaining standards! :)
The debate seems to lack context. What does the average 1.7 million earner/family pay in taxes? Media reports regularly make claims that the wealthiest citizens pay less than scheduled rates. For example, “The average tax rate paid by the richest 400 Americans fell by a third to 17.2 percent through the first six years of the Bush administration and their average income doubled to $263.3 million” So my question is simple: Did the Obama’s pay more than comparative families or individuals? Did they take fewer deductions, etc.? I fail to understand how individuals who billions (i.e. the top 400) can pay 17.2% whereas the Obamas pay nearly 30%
Steve Landsburg,
Just trying again to get you to respond to what I point out upthread as the hole in your logic http://www.thebigquestions.com/2011/04/20/the-presidents-taxes/#comment-26284
One would think you’d like to either refute my argument or acknowledge that I’ve pointed out a fatal flaw in your argument.
Gordon: Your argument is addressed in the post, which says: In fact, since you’d expect the first hundred thousand to go to the most urgent use, the president’s contribution should be worth more than one one-millionth of a million contributions
If you graph social benefit as a function of tax revenue, you seem to be claiming that it’s very flat for a long time and then suddenly turns sharply upward. a) What makes you think it’s shaped like this? b) What makes you think we’re currently on the flat part and not the upward slope?
I’ve been out of pocket for a few days, but I’ve been thinking about this question quite a bit: Is president Obama a hypocrite? I’m grateful there is a place to discuss this question and the thread is still active. I’ve come to realize just how thin the veneer of my own thinking is on this. I need to think about it a lot more.
I think the question of a person’s hypocrisy is essentially a moral one. The president pays his taxes according to the prevailing laws. The president advocates for higher taxes for the wealthy. But we come to find he did not pay any extra himself, took advantage of tax breaks etc. It seems, that in order to avoid the charge of hypocrisy here, the president is expected to exceed the prevailing tax standard (although strangely he would not be labeled a hypocrite if he advocated for legislation mandating the rich pay ~10% after tax to charity, but that is a different question). To take the position he has taken, the president has an extra moral duty to “do as he says…”
I’m actually not as opposed to this requirement for extra moral duty as I initially thought I might be. After all, most of the great moral examples in human history involve personal sacrifice in support of a higher principle.
The idea of extra moral duty does go a long way toward explaining why the presumably married congressmen who is going to womanize until legislation prohibiting it is passed, doesn’t feel like a good analogy. The congressman is not only not performing any extra moral duty, he’s failing to even perform at the level of the prevailing standard of moral duty.
So, maybe president Obama is a hypocrite, but only if extra moral duty is required. Without the idea of extra duty, there is an unresolved asymmetry to claim of hypocrisy. So far, as presented, only a person advocating for the wealthy to pay more taxes is expected to sacrifice more than the current prevailing standard. No such sacrifice has been demanded of those who advocate for lower taxes. But, if extra duty is required, then we should revisit the question of the person who is against the interstate highway system but still uses it. Moral equivalency would require some personal sacrifice. That personal sacrifice might come in the form of not using interstate highways. Yes he has paid into them, but by continuing to use them he’s the last, most damaging car on the road, providing both wear and tear as well as congestion which only leads to more maintenance and more interstate highways. His extra moral duty is to not rationalize using the roads. His moral duty is to do “as he says…” and stop using them.
The classic moral example of a person not paying his taxes and performing his extra moral duty was Thoreau. He believed the Mexican American War was immoral. He made his feelings well known, he told people exactly why he wasn’t going to pay taxes, and he went to jail. When Emerson came to visit him, Emerson is reported to have asked ‘why are you continuing to stay in there,’ to which Thoreau is reported to have replied ‘why are YOU continuing to stay out there?” (not exact quotes)
Of course, the requirement for extra moral duty is a very high standard fraught with other problems. The least of which is that I’m not going to hold my breath waiting for politicians and opinion shapers to live up to the standard of extra moral duty. Heck, these days I’m so worn down that I’ll settle for one that pays his/her fair share and isn’t boinking the help.
An interesting fact to mention, considering that there is popular support to raise taxes for the wealthiest one percent of Americans. Their wealth combined is approximately 1.3 trillion, meaning that even if you forget about raising their taxes, but rather take all of their assets you will barely make a dent on the national debt. In this, taxes alone will not be the answer to the federal budget deficit of almost 15 trillion.
Steve Landsburg,
Thank you for your reply at http://www.thebigquestions.com/2011/04/20/the-presidents-taxes/#comment-26430
Indeed, I am asserting that the benefit “curve” is stepped (flat until some critical mass of incremental revenue is reached, then straight up for a bit, then flat again for another increment, etc.).
The reason is as I explained: The Treasury receiving from a single individual (e.g., Obama) an extra $100,000 will not affect the amount Congress appropriates for any type of spending (it wouldn’t even amount to a rounding error relative to the magnitudes involved). Therefore, it’s impact would be that our deficit and debt would be $100,000 lower (leaving aside dynamic effects). And what would be the impact of our deficit and debt being $100,000 lower? It surely wouldn’t be decisive in a change in interest rates the market demands of U.S. Treasury debt, nor would it impact private sector interest rates by lowering the “crowding out” effect, and those are our main concerns.
The most that could be said is that we would save a bit on interest expense, albeit at low rates today, and it would make more sense to for the individual to save that $100,000 each year, wait however many years until the market demands much higher rates for our debt, then pay all the extra taxes at that time.
Theoretically, we could add that taxpayers as a whole would have $100,000 less to pay eventually (to repay our debt). But practically, again we fall short of a necessary critical mass: tax policy will not be affected one bit as a direct result of the Treasury receiving that incremental $100,000 today. So still, we are left simply carrying $100,000 less in debt, an in turn a bit lower interest expense, as the only benefit of the individual paying that extra amount.
Contrast that with the size of the benefit if many/all high income-earners were taxed at higher rates, such that the magnitude of incremental funds reached critical mass that were decisive in lowering the interest rate the Treasury has to pay on our debt, or the critical mass for appropriating more for particular types of spending, or the critical mass leading to a tax cut of some sort. The benefit-to-cost ratio would be far greater if such a critical mass is reached than if an individual incurs some fraction (e.g., one-millionth) of that would-be critical mass cost. Thus it isn’t hypocritical to support the former and choose not to do the latter.
Do you disagree with any of my premises or with my logic?
Gordon: Your assumptions imply that there is some level of new tax revenue, call it X, such that if we raised another $X in tax revenue, Congress would pass a vast new
spending program, but if we raised one cent less, they would not pass it at all (as opposed to passing a slightly smaller version of it). There’s nothing illogical about that, but
I do find it implausible.
Steve Landsburg,
Thanks for replying.
With all due respect, your reply seems to be an (inadvertent, I assume) straw man.
I am indeed saying that there is no new spending program that would be created as a result of that incremental $100k that would not otherwise be created, but you mischaracterize my premise as implying all-or-none on some “vast” new spending program. What I’m actually saying is that not even a “small” new program would be created with that $100k that would not be created otherwise. $100k simply doesn’t register on the fiscal policy radar for the decision-makers in Congress (or the White House). Whatever the critical mass dollar amount is to have such an impact (causing a program to be created that would not be created otherwise), it is surely far greater than $100k. Where in the appropriations process do you imagine Congress choosing to create even a “small” (by Congressional appropriations standards) program with that $100k that they would not otherwise? Can you paint this scenario in terms of where in the process it would happen and how (via what thinking and actions this $100k would have that decisive impact)?
Furthermore, I’m also saying the same about funding of existing programs. $100k isn’t enough to register on the revenues radar such that Congress appropriates any different amount than they would anyway. And I’ll add that nor would it be sufficient to be decisive in changes in entitlements law. And again, nor would it be decisive in changes to tax law. It simply isn’t a sufficient change in revenues to affect fiscal policy decision.
Perhaps my point will be clearer if we make it $1 (just one dollar) instead. Would you think that $1 of incremental Treasury revenues would have a proportionate impact on any fiscal policy decisions? Would you just assume it would mean Congress would allocate $1 more to some spending program?
I assume you would NOT make that assumption, but instead you’d say that $1 of incremental revenues is simply too small to register on the budgetary radar of members of Congress, so surely it’s too little to affect whether or not a new program is created or even how much is allocated for any type of spending, much less to affect tax law or entitlements law. Correct?
Well, that’s exactly what I’m saying about $100k. See what I mean re: critical mass for affecting fiscal policy?
Steve Landsburg,
Just to follow up on my one-dollar illustration above, if we consider the following hypothetical (simplified) scenarios for federal revenue in 2012:
Scenario A: $2,412,942,183,943
Scenario B: $2,412,942,183,944
Your argument would imply that, in Scenario B, Congress would appropriate $1 more in spending or change entitlement law such that $1 more is spent or change tax law such that $1 less is taxed.
I think it’s far more realistic to say that no such difference would occur because the $1 difference would be far from sufficient to affect anything passed by (or even proposed in) Congress. An incremental $1 is simply way below the radar of the decision-makers.
Therefore, the only result of that incremental $1 would be $1 lower deficit and debt.
And of course that $1 lower deficit and debt won’t bring down the interest rate on any Treasuries by even some very tiny fraction of a basis point. The only benefit would be the bit of savings on interest expense that results.
Andy: You’ve made the best counter arguments so far, but they haven’t convinced me. Your point about Obama being able to lever his tax savings from charitable contributions only applies if he spends all of those savings to promote his proposed tax increases. If he decides instead to splurge on an xbox or a trip to Spain let alone a pack of cigarettes, well…
Punishing free riders seems to me a better argument, but fails to address Steve’s original assertion that the first money spent to close the gap or provide more services is the most productive money. This point resonates with me. Surely providing food or medicine is more important and urgent than providing education or a whole cascade of services. Withholding that extra voluntary contribution may punish “rich” (how I’ve come to hate that equivalence of high income and wealth) free riders, but it also disproportionately punishes the low income and poor. Those very same defenseless people that Obama claims need, no deserve, our help.
Finally, your claim of:
Pondering my previous comment, it occurs to me that the philosophy implied by the original post effectively condemns as hypocritical the mechanisms for enforcing cooperation among non-altruists in a very large class of situations. If this be hypocrisy, let us make the most of it!
Well, how does one ensure that such coerced cooperation is indeed altruistic and good? Neglecting the gray area of defining what constitutes good, surely it could just as easily be used for destructive purposes like those associated with any number of totalitarian states. If that be true, then let us have the least of it!
Gordon:
But at what threshold do you achieve critical mass? My recollection is that repealing the tax cuts on top earners would net $200billion/yr in additional revenue. Please correct me if that’s wrong as I’m too lazy to search for it right now. This year’s deficit alone will be about $1.6trillion. Is 1/8 the magic threshold? Why?
Sure, $200billion is a lot more money to spend that $1 or even $100k, but if Obama’s contention is that the federal government can better spend that money than a high earner, why doesn’t he treat the treasury as his metacharity? You can read my response to Andy on the notion of leveraging or on punishing high earners. I maintain that Obama is hypocritical because he is punishing those that he claims need the money and having no real impact on those he claims should provide it.
Gordon: You seem to be commiting what I think of as the “epsilon fallacy”. That is, that very small changes will make zero difference, as opposed to a very small difference.
This fails to reconcile how big changes can make big differences, despite the fact they could be broken down into lots of very small changes. I think you would agree that while there may be no difference in spending between government revenue of $2,412,942,183,943 and government revenue of $2,412,942,183,944, there would surely be a difference if government revenue was $3,412,942,183,943.
But your logic that Scenario A would have no difference in spending to Scenario B applies equally well to the comparison between Scenario B and C (with government revenue of $2,412,942,183,945) and so forth for each dollar. Yet at some point new spending programs are getting approved. There exists a Scenario N where spending programs are the same as Scenario A, but then a Scenario N+1 where a new program is approved.
It is true that it is unlikely that any particular dollar will make the difference, but when it does, it will be significant. Since we can’t tell ex ante which dollar it will be, we can safely assume that that all of them in a given range have the same probability.
Frozen / Henry,
It is EXCEEDINGLY unlikely that any given PARTICULAR one dollar of incremental revenue would cause a new spending program to be created, or cause appropriation by Congress of any additional funds to an existing program, or pass new entitlement law increasing spending, or pass tax cut legislation. H
Henry asserts that at some point SOME one dollar will be the marginal dollar that, following some large number of incremental dollars, would enable the whole increment to reach the critical mass necessary to cause such a difference. That assertion is irrelevant, because we are talking about the effect of the PARTICULAR incremental contribution of one individual, independent of any other people (we are assuming that whether or not a given individual pays extra in taxes has no effect on whether or not some significant number of others do so to a significant degree).
Henry seems to acknowledge this refutation of his own argument when he writes:
“It is true that it is unlikely that any particular dollar will make the difference, but when it does, it will be significant. Since we can’t tell ex ante which dollar it will be, we can safely assume that that all of them in a given range have the same probability.”
Exactly. And that probability is, practically speaking, infinitesimal. So it’s not that one incremental dollar of revenue translates into one incremental dollar of spending, as Steve Landsburg seems to assume. Rather, that incremental dollar — at best, applying Henry’s argument — causes an EXTREMELY, EXTREEEEMELY tiny increase in the probability that many more dollars will be spent (if that one dollar happens to be the dollar that brings the total incremental revenue to some critical mass, I suppose by causing rounding up to another billion or hundred million or whatever that members of Congress are looking at and that registers as enough of a difference to them).
My vote in a presidential election doesn’t elect 1/130,000,000 of a president. It increases the chances of my candidate winning by a practically infinitesimal amount. Again, applying Henry’s argument, the same would apply to my my sending an extra dollar to the Treasury.
Frozen — to answer your question, I don’t know what amount represents the “critical mass” to cause such a change, but the first question is: Is there some critical mass necessary, or should we just assume, as Steve Landsburg seems to, that an incremental dollar — or penny, for that matter — translates into that much more spending? I say no, that is not a plausible premise. I also think $100k is below a plausible threshold (although as I acknowledge, there is a probability element, and the $100k increases that a bit, but not enough to making it anywhere close to likely). I know I would not say the same about $10 billion. I probably wouldn’t even be so bold to say so about $1 billion. Somewhere between $100k and $10 billion I’d say that such an incremental amount is more likely than not to cause an increment in spending, for whatever that’s worth. But we need not know exactly what that point is to consider $1 as extremely unlikely to affect spending level, and I’d say the same about $100k.
I’d add to my comment above that I suppose one could make an “expected value” argument: Magnitude X probability.
An individual sends $1 extra and, applying Henry’s argument, there’s an EXTREMELY tiny chance it will cause perhaps millions (even billions) of dollars in incremental spending, akin to his buying a lottery ticket (assuming we’re talking about someone who wants that spending).
But that is quite different from assuming that $1 in incremental revenue will (or is even likely to) cause $1 of incremental spending, which again, is apparently the basis of Steve Landsburg’s argument.
Frozen:
“Surely providing food or medicine is more important and urgent than providing education or a whole cascade of services.”
But Obama can do this through non-government channels. And he can support his own highest priorities this way rather than the ones agreed upon by the majority. At least he can punish free riders by directing his spending at his own priorities rather than compromised priorities that take their preferences into account.
“how does one ensure that such coerced cooperation is indeed altruistic and good?”
You can’t ensure it absolutely, but when there are externalities involved, neither can you ensure that individuals acting independently will act for good. At least democracy ensures that coercion won’t support the exclusive agenda of a small minority. And democracy generally has limits on the power of the majority. It’s a compromise. It’s not perfect, but I think it’s a lot better than complete individualism, which makes it very hard to address certain kinds of externalities.
And the point of my allusion to Patrick Henry is that, ultimately, I’m a utilitarian. I’m only willing to condemn hypocrisy as a bad thing if you can define it in such a way that, from a utilitarian point of view, it really is a bad thing. Otherwise, it’s just a label that I don’t find very useful.
Gordon:
It is EXCEEDINGLY unlikely that any given PARTICULAR one dollar of incremental revenue would cause a new spending program to be created,
But according to your story, there is at least some chance that one PARTICULAR dollar will trigger a whole new multi-billion dollar spending program — so that in expectation, that dollar has, well, just about a dollar’s worth of effect.
Steve Landsburg,
I don’t know if you saw my follow-up comment at http://www.thebigquestions.com/2011/04/20/the-presidents-taxes/#comment-26537 where I acknowledge the “expected value” argument.
As I said, this is quite different from your assumption that $1 of incremental revenue WILL (or is even likely to) cause $1 more spending, and it is playing quite fast & loose with magnitudes and probabilities to simply assume that this lottery-type situation nets out to expected value of $1 of incremental spending (that could be way off, because the magnitude at which the rounding of a revenue figure effects incremental spending is not necessarily related to the magnitude OF incremental spending).
Moreover, expected value of $1 is not the same thing as a sure thing or even a likelihood, and your argument (your accusation of the individual of hypocrisy) is based on the individual seeing such certainty or at least likelihood that his additional dollar will yield equivalent benefit, not the individual buying a fiscal policy lottery ticket.
If Joe Taxpayer (or Obama) favors a higher top tax rate to fund higher spending, he should (your argument goes) be willing to volunteer individually to pay $1 more or $100k more in taxes if it WILL be used for equivalent incremental spending, but even if one accepts that argument, it is not the same to call Joe a hypocrite for not wanting to buy a lottery ticket with overwhelming likelihood of no benefit, and extremely small probability of causing a vastly disproportionate increment in spending. Joe may not be the gambling type. That doesn’t make him a hypocrite.
Gordon: Standard consumer theory predicts that when the amounts at stake are small, people maximize expected value without regard to risk. So this suggests that Obama should at least be making a *small* additional contribution to the government, no?
Steve Landsburg,
Your original argument would have it that Obama is a hypocrite if he is unwilling to send an extra $100k to the Treasury because that incremental $100k would cause $100k of incremental spending, presumably worthwhile in his view.
But again, that doesn’t mean he’s a hypocrite even IF (and we don’t know this would be the case) his assumption were, say, that there is a 1/10,000 chance that his $100k would cause $1 billion in incremental spending. I don’t know if your premise re: “standard consumer theory” is valid, but even assuming that it is valid, and even making that prior assumption re: probability and magnitude, I think it’s presumptuous to maintain that he’d be a hypocrite for not wanting to gamble in that way. That would be risk aversion, not hypocrisy.
I should have mentioned that the same applies to Obama sending an extra $1,000 or $1, etc.
And for what it’s worth:
1. If I had a chance to gamble $100 with a 1/1000 chance of winning $150,000, I still wouldn’t do it. (Obviously some people would.)
2. But I’d surely give you $100 if I knew you’d immediately give me $150 or even just $101.
So if I say that everyone should hand over $100 each because the aggregate benefit would be worth more than the aggregate contribution, my unwillingness to take the gamble (#1) doesn’t make me a hypocrite in the way I arguably would be if I were unwilling to do #2.
My apologies if someone has already made this point – I didn’t feel like reading all 122 responses.
The problem with the talk about “taxing the millionaires and the billionaires” is that Obama et al. are comparing the proverbial apples to oranges. The term “millionaire” and its bigger brother whose name begins with a “b” imply “wealth”, our tax code taxes income. Something altogether different. I suspect that many of those m/billionaires made a big chunk of their wealth through long term capital gains, which are taxed at a lower rate than ordinary income. The President and his m/billionaire buddies can talk about raising tax rates, but as long as it only taxes income their fortunes are safe. Let’s see how they like it if Obama and Congress were to start talking about taxing the m/billionaires wealth. After all, how tough is it to get by having a net worth of, say, $10 million. Tax 100% of all wealth over $10 million and see who squawks.
http://philanthropy.com/article/BarackMichelle-Obama/62804/
The Obamas did donate a large percentage of their income. What Obama is saying is that the nation’s wealthiest don’t typically give back to social programs. Since we cannot trust the nation’s wealthiest to actually provide for the rest of the country on their own, we should raise their taxes
Ben: A fair point. Thanks for sharing it.