Archive for July, 2008

Goal of Taxation

Sunday, July 20th, 2008

“Isn’t it lawful for me to do what I want to with what I own?” — Matt 20:1-16

A reliable distinction between Conservative and Liberals is the way they view the purposes of taxation. While it is clear that Liberals are more expansive in their view of the ways that taxes should be used for public welfare programs, Liberals also view taxes as a redistributionist tool even if its use for this purpose reduces the level of taxes available.

H. L. Menchan  once defined Puritanism as “The haunting fear that someone, somewhere, may be happy.” By analogy, please permit the observation that some Liberals scowl fretfully at the world with the apprehension that someone, somewhere, may have accumulated what Liberals judge a disproportionate amount of money.

With such an attitude, one purpose of taxation becomes punitive. It is just unfair that some people have very much more money than others. By definition, this money could not have been accumulated entirely fairly. Even people who make money in direct proportion to a conspicuous talent, like a professional athlete or an entertainer are viewed with suspicion. The fact that some of these people become extraordinarily wealthy is not evidence of extraordinary talent, but a  economic system that unfairly rewards such talent.

All would agree that taxes are needed and in general it is better demand more taxes from those with more resources. Bank robber Willie Sutton when asked why he robbed banks, is reputed to have replied “because that’s where the money is.” Similarly, government taxes the more affluent because that is where the money is. Less cynically, the affluent can be said to have benefited more from the social arrangements under which they have prospered. Hence, they have a greater obligation for its maintenance.

However, the perpetual desire to punish the affluent can sometimes create a system where ironically the affluent less pay a smaller fraction of federal taxes, despite more progressive rates. In a recent article, Stephen Moore of the Wall Street Journal cites a study by Columbia University economist Glenn Hubbard. In President Carter’s administration, the highest marginal tax rate was 70% (twice the current 35%). However, the top 1% paid only 16.7% of all federal income taxes. At the current 35% highest marginal rate, the top 1% actually pay more than twice the fraction of total federal income taxes (39%) than they did in the 1970’s. Hence, the federal income tax system became more progressive with lower marginal rates.

How can this be? The answer is simple. Capital and the wealthy who own capital have many options available to them. They can decide not to take the risks necessary to earn some additional income because the rewards are too small. They can shield themselves from taxes by finding tax loopholes, like the simple tax-free municipal bonds. They can move themselves and money overseas. Indeed, it is now far easier for capital to migrate to those regions of the world where wealth accumulation is treated more favorably than it was in the 197os.

Conservatives and Liberals rightly view taxation as a necessary expense for the functioning of government, though clearly Conservatives and Liberals differ on the proper role of government. However, it is simply wrong-headed and counterproductive for Liberals to seek to increase tax rates beyond the point where revenues go down and the federal tax system becomes less progressive to satisfy their congenital anger at the affluent.

Interpretation of the Second Amendment

Saturday, July 5th, 2008

“A well regulated Militia, being necessary to the security of a free State, the right of the people to keep and bear Arms, shall not be infringed. — Second Amendment to the United States Constitution.

There are some Second Amendment advocates who are conspicuously pleased with the Supreme Court’s decision in District of Columbia et al. v. Heller. In many ways, they should be. The majority opinion swept away the lingering doubt about about whether or not the right to “keep and bear” arms is an individual right, not contingent upon membership on a militia. The Court came down unequivocally on the side of the Second Amendment’s protection of an individual right.

However, the decision prevailed by the slimmest possible margin 5-4. A Court with a different composition, say one in which a potential President John Kerry had been able to choose different justices than John Roberts and Sam Alitio, or one in which a future President Barrack Obama would be able to replace one of the five in the majority, the decision would have been certainly different.

Nonetheless, the Heller case will serve as a  precedent and it will take some time for even a future, liberal and energetic Court to whittle away at this decision. One reason this precedent will be difficult to erode is the granite-hard reasoning and rigid clarity of Justice Antonin Scalia’s majority opinion.

The most frequent argument against an interpretation of an individual right to keep and bear arms is that the first or “prefatory” clauses implies that the second or “operative” clause is limited to the militia. Specifically, that the militia rather that than an individual has the right to “keep  and bear arms.”

Scalia points out that other documents written at the time for state constitutions had prefatory clauses indicating intent, but such clauses have never held to limit the rights of the operative clause. Scalia cites legal doctrine of the time to buttress this approach, “It is nothing unusual in acts . . . for the enacting part to go beyond the preamble; the remedy often extends beyond the particular act or mischief which first suggested the necessity of the law.” [1]

Very simply, the writers of the Second Amendment were concerned that the Federal Government might supersede and the eliminate state militia. By explicitly recognizing the “right of the people,” the Founder realized that it would be impossible for the Federal government to disarm the militia (“all males physically capable of acting in concert for the common defense”)

It is as important to note that the phrase the “right of the people” is used elsewhere in the Constitution. In each case, it refers to an individual right as in the:

  • “…right of the people to peaceably assemble…” (First Amendment) and
  • ” …right of the people to be secure in their persons, houses, papers, and effects, against unreasonable searches and seizures…” (Fourth Amendment)

There are some who have tried to interpret the “arms” that people have the right to keep and bear are the “arms” in common use at the time of ratification. Under such an interpretation, modern handguns are not arms that people have the right to. Of course, such an interpretation is easily dismissed. The Constitution is not limited by the technology of the time. For example, freedom of the press reasonably includes more modern forms of telecommunication.

According to this decision, the arms included under the Second Amendment protections are arms that people use for legal and legitimate purposes, such as hunting and self-defense. This leaves some broad discretion on the part of the state to limit the use of extreme or uncommon weapons. However, in this case, the Court ruled that handguns have an important self-defense use, the right to keep and bear these arms is protected.

The salient political observation with respect to this case is to recognize those who are pleased that individuals are little freer after this decision and those who are not.

[1] J. Bishop, Commentaries on Written Laws and Their Interpretation, Section 51, p. 49 (1882)