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In the previous issue of Atlantic Business Magazine, my fellow columnist — Stephen Kimber — attempted to explain the Occupy movement. Unfortunately he got it all wrong. Rather, he completely missed the point, as do most ‘occupiers’ I suspect. I will give Mr Kimber credit for some valid observations. There is disenchantment with the system and a lot of folks are upset because it allows some to become very rich. There are a host of other grievances as well, like the tax system (the rich should pay more, or as President Obama likes to say, “their fair share”).
No one can, or should, argue capitalism is a perfect system. However, it has been responsible for more wealth creation, more robust and effective social programs and support than any other system yet devised by man. It offers freedom and opportunity to all, whatever your background or status. That being said, it is entirely appropriate that society should always be examining its shortcomings with a view to ensuring a constantly improving standard of living for all.
Changes to the tax system should be undertaken. But be careful. In the United States, 51 per cent of the population pays no income tax and 70 per cent receive more in benefits and payments from their federal government than they pay in. The top one per cent pay 40 per cent of all income tax collected. My point is this: at what point does the tax system stop imposing such a huge responsibility on the ranks of its top income generators? Where is the line between encouraging more risk-takers and entrepreneurs to come to Canada, invest and create jobs versus driving them away with an uncompetitive tax burden?
We need to ensure the incentive system is alive and well. That, coupled with a strong work ethic, is at the heart of capitalism and wealth creation. It has been the introduction of incentives that has driven the growth of China in the last 20 years and it was the lack of incentives that broke the back of communism. Ah, communism, that system conceived to ensure everyone was equal. What a joke. You want disparity in incomes, in standards of living? Look no further than communism at its best, a system which ensured that 99 per cent of the population had no prospects and no opportunity. Those privileges were reserved for the one per cent.
It is well worth reflecting on the fact that John D. Rockefeller, Henry Ford, Steve Jobs and many others like them came from the ranks of the 99 per cent and in so doing grew the size of the pie for everyone.
Capitalism respects the fact that many are quite happy to work a conventional eight-hour day and enjoy maximum leisure and family time. It also provides the opportunity for those who want to take huge personal risks, subjugate their personal lives to their business and spend virtually all their conscious time thinking and worrying about their job responsibilities. Society needs folks in both categories and in between.
People must take responsibility for their choices. If you choose to pursue an education in a field for which there is little market opportunity you frankly have little right to complain that upon graduation you are saddled with both student loan debt and limited prospects. The market is filled with rewarding career opportunities. These range from pipe fitters to plumbers to software writers to engineers. The list of virtual guarantees of good jobs for those committed to acquiring the requisite skills is extensive. No one is saying you can’t pursue what you like, just that society can’t be expected to guarantee you a rewarding career.
Mr. Kimber laments the fact that many rich Canadians determine what sort of charitable gifts they might like to make. Damn right. It’s their money, not yours.
Such a claim simply exposes ignorance of the tax system. That many wealthy Canadians decide to give money to causes which in their view will help stimulate the economy, help the country grow and our society become richer is a very appropriate use of their money. On another foot, many also give generously to the country’s health care system and its infrastructure. That child care and social work are not direct beneficiaries misses the point. Government is better able to provide such services because the economy, as it grows, can afford it.
Figures from the Urban-Brookings Tax Policy Center show that since 2004, the percentage of no-liability tax units has been as low as 39.9 percent in 2007. In fact, 2009 may prove to be a high point. The center’s projections suggest that the rate could fall to 49.5 percent for tax year 2010 and 46.4 percent in 2011.
Care is taken to refer to households that pay no “income tax,” rather than suggesting that they paid no taxes at all. Many Americans who pay no income tax pay other federal taxes, most notably the payroll tax, which funds Social Security and Medicare and is deducted from every working American’s paycheck.
Estimates by the Urban-Brookings Tax Policy Center project that for tax year 2011, 46.4 percent of households won’t have any income tax liability. However, of this number, 28.3 percent will pay payroll taxes, the center projects. Of the remaining 18.1 percent with neither income nor payroll tax liability, 10.3 percent are elderly and 6.9 percent are not elderly but have incomes lower than $20,000. In other words, all but a tiny sliver of Americans without either income tax or payroll tax liability are either elderly or poor.
Source http://www.politifact.com/truth-o-meter/statements/2011/jul/08/john-cornyn/john-cornyn-says-51-percent-american-households-pa/
There are few problems with this piece, many of them related to logic. For instance:
-why begin with “no one can, or should, argue capitalism is a perfect system”, when Stephen Kimber was not arguing that capitalism is imperfect. Does Mr. Risley think that those protesting income distribution patterns are protesting against capitalism? When Warren Buffet offers an opinion that he is not paying enough tax, does Mr. Risley believe he is actually saying he doesn’t believe in capitalism? When Richard Branson suggests that capitalism needs to be renovated, does Mr. Risley believe he is actually saying he’d prefer communism?
-Mr. Risley later illogically invokes capitalism again (“many are quite happy to work a conventional eight-hour day and enjoy maximum leisure and family time”), as though CEOs earning 129 times the rate of their workers could possibly be working 129 times as much or enjoying 129 times less leisure.
Some of the other problems are related to context and the presentation of incomplete information. “In the United States, 51 per cent of the population pays no income tax.” Here is the rest of the context on that one, which Mr. Risley may not have been aware of and should feel better knowing. Some points from the Center on Budget and Policy Priorities, one of many organizations which has debunked this well-used and misleading partisan talking point: 1. The figure “is an anomaly that reflects the unique circumstances of 2009, when the recession greatly swelled the number of Americans with low incomes and when temporary tax cuts created by the 2009 Recovery Act…were in effect.” 2. The figure “covers only the federal income tax and ignores the substantial amounts of other federal taxes…only about 14 percent of households paid neither federal income tax nor payroll tax in 2009 despite the high unemployment and temporary tax cuts that marked that year. This number would be even lower if federal excise taxes…were taken into account.” 3. “Most of the people who pay neither federal income tax nor payroll taxes are low-income people who are elderly, unable to work due to a serious disability, or students.” 4. “The federal tax system is progressive overall, but state and local tax systems are regressive.” http://www.cbpp.org/cms/?fa=view&id=3505
Mr. Risley goes on to worry about driving entrepreneurs away with an uncompetitive tax burden. So many questions. Wouldn’t entrepreneurs be more likely to be driven away by the bad (and worsening) odds of being able to crack into the 1%? Or, a different question: how many of these entrepreneurs are actually paying out their full tax rate? Don’t the numbers usually look more like 27 million earnings less 4 million in actual, paid tax? That is about 15%. Or, a different question again: doesn’t this idea suggest that entrepreneurs have no values other than monetary gain? So, for instance, a nation which is dangerous, environmentally unhealthy, and culturally impoverished but taxes entrepreneurs minimally would be a preferable homebase to a nation that is stable, safe, environmentally healthy and culturally vibrant but taxes entrepreneurs more.
This is a similar thought to the one I had reading Mr. Risley’s thoughts on unemployment (“if you choose to pursue an education in a field for which there is little market opportunity you frankly have little right to complain…the market is filled with rewarding career opportunities…from pipe fitters to plumbers to software writers to engineers.”) According to the Wall Street Journal (and common knowledge), studies in fine arts and architecture have among the worst job prospects. Students continue to study these disciplines, however, in many cases in answer to a combination of natural talent and enthusiasm which create a sense of a “calling” or vocation. The product of these legions of underemployed and low paid artists and architects have been considered an important part of our quality of life for a very long time. But if we measure everything by monetary yardstick alone, this aspect of living will disappear. Is this really what we want?
There are also some points that are confusing. For instance: “Steve Jobs and many others like them came from the ranks of the 99 per cent and in so doing grew the size of the pie for everyone”. Steve Jobs created economic activity, to be sure, but within the system which currently sees US executive compensation at 129 times that of the average worker (it was 35 times as much when Jobs was getting his start at Atari in the 70s, and today in Germany it is only 20 times as much). So in terms of pies and their size, it does appear that in Canada and the US at least, a bigger pie overall does not yet translate into a bigger slice for the 99 per cent.
Thank you for the opportunity to comment.
“Government is better able to provide such services because the economy, as it grows, can afford it.”
So, if anyone took a look at who was protesting – it wasn’t just unemployed undergraduates “too lazy” to work for anything harder. The people on Grand Parade put in many many hours of what basically amounts to social work helping street youth, homeless and those suffering from mental illness to drop bad habits and get more involved. To characterize them as whiny dropouts is ignorant.
But so too is to characterize the business leaders and lobbyists, etc. in the same way. They DO provide jobs and DO provide tax revenue for the government to fund these opportunity-leveling services (health/education). But, the statement that it is their money and they can do whatever they want with it spits in the face of ANY tax system. I’m pretty sure that’s how the economic zones in China work (the only place capitalism in any real form exists over there).
And could you please explain to me how someone suffering from PTSD, dementia or who had meth-head parents will ever get the gumption to start their own business? Better yet, explain to me who will take care of the growing numbers of these people. How much money will the caregivers be given? How much money will the bureaucrats make to dole out the money?
Turning a blind eye to these social issues only makes them worse – and that’s what Stephen’s point was.
John Ralston Saul proposes a solution to a lot of our social woes: responsible individualism. To me, this means the individual balances their decisions with the impact they have on the world. Putting money into a broken system only exacerbates the problems. If you are comfortable with the idea that there will always be poverty and homelessness and problems that are “just too hard to solve” then you’re less of an entrepreneur than the street kids doing meth.
I’m sorry if this comes across as harsh but I get pretty fired up about this stuff – it’s a serious issue.