Friday, December 30, 2011

The Flaw of the Flat Tax

Paying both federal and state income taxes can be an exasperating and depressing experience. It is easy to understand this dissatisfaction, especially because individuals do not know the precise destination of their tax dollars, instead watching the money vanish into a black hole riddled with waste and misappropriation. Unfortunately the black hole is not even the worst part of the tax system, yet few people seem to either realize the real problems in the tax system or care enough to do something about it.

One of the more popular suggested tax reforms is the elimination of the progressive tax system in favor of a flat tax system where all taxpayers would pay the same percentage of income. Proponents of the flat tax system sing its praises for its simplicity, what they believe as fairness and its ability to acquire more revenue for the federal government than the current progressive system due to a perceived elimination of a vast number of deductions and tax shelter tricks. However, proponents of the flat tax are either misinformed or trying to create a greater advantage for themselves with little concern for others.

Despite numerous studies concluding that flat taxes provide insufficient funds relative to the existing progressive tax system from a methodological standpoint comparing revenue gains from a flat tax system to the current progressive system is silly because the current system is so riddled with immorality and waste that almost any reform will give the appearance of a short-term increase in revenue with favorable assumptions. Therefore, if one were to be reasonable the flat tax system would need to be compared to other reforms in the progressive system and other new systems to gauge the legitimacy of its revenue collection superiority. Simply comparing one reform against the current system without comparing it against other possible reforms diminishes the authenticity of such an analysis. Such a mindset is also questionable in that it is irrational to conclude that there is only one possible alternative to an existing system or solution without careful analysis.

With regards to fairness it is easy to see why proponents of a flat tax system believe such a system is fairer to all parties than the current progressive system. The common flat tax and tax cut battle cry has frequently been ‘why should those that make more money be penalized?’ under the typically bias mindset that those who make a lot of money work harder than those who make less money. Most flat tax supporters appear to believe that the progressive tax system punishes ambition and success, which in turn may discourage individuals from being successful because the more successful they are the less they get. Of course any practical analysis instantly characterizes that complaint as complete and utter bull because first it is irrational to believe that an individual will be less motivated to acquire financial resources simply because they will have to pay more in taxes. Anyone given a choice between pursuing a career where he/she would make 25,000 dollars a year and pay 4,500 in taxes versus make 100,000 dollars and pay 34,000 dollars, would obviously selection the latter option. No reasonable person would elect to only make 20,500 dollars a year instead of 66,000 dollars a year to either ‘stick it to the man’ or because paying 34,000 dollars instead of 4,500 dollars to the government is so distressing that making a net of 45,500 dollars more is immaterial.

Proponents of a flat tax would contend that the above statement misses the point. The very fact that the disparity exists in the tax system at all is what is unfair. If these individuals feel so strongly about ‘rooting’ out unfairness then they should start promoting a communistic economic system. Capitalism is fraught with inequalities and unfairness for gone are the days where individuals can consistently achieve financial success by simply studying hard and working hard. There is indeed still the rare case where an individual pulls him/herself out of poverty to make it big, but in the modernized capitalistic system who you know and what resources you possess have a much more pronounced effect on your success than any drive to work hard. A majority of the individuals that have wealth today definitely took advantage of some of the unfair elements of capitalism to amass their fortunes. How funny it is that most individuals complain about unfair elements that are to their disadvantage, yet say nothing about unfair elements that are to their advantage.

Unfairness in capitalism and the role of the progressive and flat tax is best illustrated in an example. Consider two participants running a 400-meter dash, Runner A and Runner B where Runner A gets to start 100 meters ahead of Runner B (think of this as better connections and greater access to resources largely due to parental connections). The gun is fired, the participants run the race to the best of their ability and Runner A wins easily. Suppose then the timers elect to remove 5 seconds off of Runner B’s time closing the difference between the two times, yet still maintaining an easy victory for Runner A. Those that support a flat tax would cry foul about removing 5 seconds from Runner B’s time, but would remain silent about Runner A’s 100 meter head-start. Replacing the progressive tax with a flat tax would simply be removing one unfair element that favors the poor further stacking the deck in favor of the rich and well connected.

A more conspiracy theorist view of the flat tax could label the system itself as a fiendish negotiating tactic by the super rich. Perhaps one day the masses will realize the actual disparity in the tax rate between those who make 35,000 dollars a year versus those who make 1,000,000 dollars a year is not in their favor, but the favor of the million dollar earner due to government neutering of the IRS and tax loopholes for the rich. Such realization will result in a demand to close tax loopholes for both the individual and corporations reestablishing the genuine rate as outlined in the progressive system.

With this eventual understanding that some perceive to be inevitable, one could believe that the flat tax is just a preemptive strike to neutralize progressive tax reform. In essence although the flat tax would result in an increase in tax payment from net effective rate of the mid-teen (what most well-connected wealthy individuals pay) to something like 20% it would dramatically reduce the probability of reform within the progressive system itself that could result in a rate increase from mid-teens to 39% or even higher. So by giving up something like 4-5 percent points, the biggest benefactors of a flat tax save themselves a 20-30 percent point increase at some point in the future.

Finally the importance of the assigned tax rate in the flat tax itself deserves analysis. If the rate is too low, then the government will not be able to recoup the necessary capital required to effectively run programs for the benefit of its citizens, which would lead to the loss of certain programs or increased national debt either element would negatively affect the economy. If the rate is too high, then those in the lower portion of tax bracket in the progressive system will end up paying more and those in the higher portions of the tax bracket may end up paying less and that hardly seems to emulate the ‘fairness’ of the system, the less you make the more you pay. This single statement has deduced the reality behind the flat tax. Inherently in its purest ‘on paper’ form the flat tax is fair, but the current practice of capitalism is not. The insertion of a flat tax into an unfair system of much greater magnitude corrupts any authenticity in the flat tax. So while a flat tax may be fair in isolation, in the current economic system of the United States, it is unfair and unwarranted.

Death Penalty Logic?

Since 1973 the death penalty has regained its previously controversial place in society. The controversial nature of the death penalty is somewhat confusing in light of looking at the benefits of death penalty opposed to its detriments. A critical first question when evaluating the merits of the death penalty involves defining the purpose of the death penalty. One commonly citied goal for the death penalty is that of a deterrent, a means to prevent future actions which would warrant the death of the perpetrator. Although in theory this goal may seem logical and noble as preventing crime is always preferable to reacting to crime, no hard proof has ever been produced demonstrating a long-term reduction in homicides directly associated with the reemergence of the death penalty. So the goal of using the death penalty as a deterrent does not appear to be working,

If validating the death penalty through its use as a deterrent is not applicable in reality altering its goal to that of a tool for vengeance seems like the next logical step. The question of whether the death penalty actually serves as a positive psychological tool for the families of the victim is essential to judging the validity of this death penalty goal and purpose. Overall it is a troubling thought to think that families actually receive some level of satisfaction when the criminal is put to death over sentencing the criminal to permanent incarceration, but for the sake of argument consider for a moment that this reaction is indeed the case.

Why is it that the ‘vengeance’ mentality demands the ‘eye for an eye’ treatment in this situation? Although ‘ an eye for an eye’ can be regarded as an appropriate reaction, the concern is that some have come to believe that it is the only appropriate response available, which is not correct. Clearly a single action has many different reactions of differing severities. It is unrealistic to believe that only one specific response among a multitude of possible responses is appropriate instead there are a number of different options for redress and justice.

Why do some individuals look upon a lifetime of imprisonment as inappropriate? One of the worst things you can do to an individual is restrict or remove freedom. Although one could argue that the worst thing that can happen to an individual is the loss of his/her life, with suicide rates greater than zero clearly other individuals believe that living in certain circumstances are worse than death. From a psychological perspective restricting the freedom of an individual for the rest of his/her life appears to be an appropriate response for the vengeance seeking individual set on inflicting a significant level of suffering to the criminal as redress for the crime. For certain individuals one could regard life imprisonment as a worse punishment than death for certain individuals.

In regards to what comforts death offers a family over life imprisonment, any significant difference seems rare as both death and life imprisonment remove the ability of the individual to repeat the action against an individual that the family would regard as important or even society in general. The death itself may not be as tragic an event for the criminal as desired because of acceptance of the inevitable.

Also the numerous appeals and legal hurdles rightly involved in an execution typically provides delays of multiple years, which could inflict undue psychological damage on those who want to see a particular individual die, a case of deferred justice. In the end realistically very little is gained when electing to execute an individual over the punishment of life imprisonment for the sake of vengeance alone. Instead by electing to utilize an unnecessary and potentially savage response over one that is appropriate in its own right society could lose another shred of its humanity.

If deterrence and vengeance as reasonable motivating factors for utilizing the death penalty are eliminated, what makes the death penalty useful? Despite its flaws, the death penalty is remarkably effective as a bargaining chip for prosecutors when negotiating plea agreements with eligible criminals in question. The fear provided by the death penalty may not work as an effective deterrent in the prevention of certain crimes, but is effective in neutralizing the vigor in which a criminal may desire a trial. Whether or not this is actually a good thing is debatable. In a logical and perfect world one would conclude that only an individual that is actually guilty of a crime would plead guilty, but unfortunately due to fear and psychological trauma that ideal is not always achieved as individuals not guilty of the crimes they are accused of have pled guilty to lesser offenses or been found guilty by a jury.

So the death penalty may be a great negotiating tool only because of its greatest flaw, its finality. Clearly individuals in the past and more than likely in the present have been killed for crimes in which they have later been exonerated. Therefore, an individual that is not guilty may believe that pleading guilty to avoid the death penalty might be the only way to eventually prove his/her innocence of the accused crime and still have a life to live when this innocence is recognized. The fact that this psychological belief even exists demonstrates a great failure of the criminal justice system.

By stripping the death penalty of a worthy and significant purpose, the proverbial ‘death penalty horse’ has been shot and killed, but just to be thorough it is time to pick up a stick and commence wailing on it. Even if the death penalty did have a worthwhile purpose there would still exist multiple fronts in which opponents could attack both its philosophical existence (even when excluding moral arguments) and its execution (no pun intended). The primary goal of the prison system in general seems to be rehabilitation not punishment. The use of the death penalty displaces that goal for it is impossible for one to become a productive member of society if one is dead. It could be argued that the same failure occurs when an individual is sentenced to life without parole, but such a belief is in error.

Although an individual sentenced to life without parole will never be able to reemerge into society as a changed individual, if the individual is indeed rehabilitated he/she can instruct other individuals within jail and in society on what mistakes to avoid and provide other information and experiences that could better both the prison society and non-prison society. In response to those that believe certain individuals cannot be rehabilitated, the only way to be sure of such a position is to never give those individuals a chance.

Also when looking at life in prison versus the death penalty from a simple economic argument, the death penalty losses out as in every state that has studied the economic differences between death and life in prison has concluded that executions cost significantly more money mostly due to the required appeals that come with a death sentence to limit the possibility that a not-guilty individual is being put to death. Finally with regards to individuals who are deemed too violent for general population, solitary confinement is always available.

Overall opposition to the death penalty could be driven by any underlying concern for the sanctity of human life, but elements of practicality, efficiency and accuracy also play important roles.

Wednesday, December 14, 2011

Progress at Durban?

The two sides of contrast in the COP-17 agreement at Durban seem to divide on the perspective of goal advancement. Assume for a moment that the necessary emission reductions and other necessary strategies (leaning more towards various geo-engineering applications) can be akin to society collecting 10 fireflies in a jar. Suppose the consequence to not collecting these fireflies in a certain time frame is death.

The group who believes that Durban is a success could argue that Durban captured one firefly, finally the ‘developing’ nations like China and India acknowledge that they will need to cut emissions in consort with the developed nations not after. These individuals could also argue that those who view Durban as a failure are being unreasonable, assuming that a vast majority, if not all, of the fireflies could be captured in a single swipe of the jar. The ‘Durban was a success’ crowd believes that the best strategy for capturing all ten fireflies is to capture one firefly at a time and because Durban seems to have done just that it should be considered a success.

The ‘Durban was a failure’ crowd believes this mindset is foolish. This criticism flows one of two ways. First, society has not collected 10 fireflies yet and until that happens nothing else should be viewed as a success. Overall while understandable, this mindset is rather counterproductive and unrealistic because no rational person would conclude that such a dramatic shift in human society could occur in a single element short-time frame.

Second, even if you could argue that Durban was a success based on both the U.S., China, India, etc. actually agreeing, despite no binding elements, to reduce emissions within a global carbon scheme the problem is timing. Assume that both China and the U.S. actually live up to this pledge, a critic could state that why should people be happy about capturing one firefly, a firefly that has been evading the jar for over ten years since Kyoto. Does society really have the luxury of spending an average of ten years capturing each one of the remaining nine fireflies?

A critic could argue that perhaps it is time for a new strategy to capture these fireflies, one that does not involve aimlessly running around wildly swinging a jar (global climate conferences). Recall that a number of individuals believed that this ‘Durban’ firefly was captured in Bali in 2007 and the final details from Bali were supposed to be addressed in Copenhagen in 2009, all interested parties know how that turned out.

The biggest telling point in the above criticism is that with no binding elements in the agreement the proverbial can has simply been kicked down the street until the next conference, something society has been doing for the last decade. Without binding elements that could penalize non-participating or non-complying countries such emission agreements are equal to having a sizable hole in the jar where whether or not any fireflies remain captive is at the discretion of the firefly not society. When it is in the interest of the firefly to be free it is difficult to consider the possibility that it will voluntarily restrict itself for the sake of others.