Death and Taxes

According to Benjamin Franklin, nothing in this world is certain except death and taxes.  When he said that in the eighteenth century, these two things were doubtless thought to be independent of each other, except to the extent that the former puts an end to the latter.  This is as it should be, for one of the consolations of life is the finality of death, which finally puts an end to our torments.  And of the torments that plague Republicans, paying taxes is the worst. (When paying taxes is no longer a Republican’s worst torment, he becomes a Democrat.)

There was a time when chief among life’s consolations was the hope of an afterlife, a Heaven devoid of all sin and suffering. But soon that was spoiled when some meanie came up with the idea of Hell, full of torment everlasting, the fate awaiting the vast majority of mankind.  This led to the paradox that many true believers ended up fearing death more than the atheists, for whom death meant nothing more than oblivion.

Much in the way that the idea of Hell spoiled the consolation of Heaven, so too did it occur to Republicans that the idea of having to pay taxes after one has died would offend our sense of the rightness of things, for such would extend our torments beyond the grave.  Thus it was that they came to refer to the estate tax as the death tax, hoping to persuade people to let the rich pass on their wealth in its entirety.

Robert Novak once said, “God put the Republican Party on Earth to cut taxes,” from which it follows, I suppose, that Satan put Democrats on Earth to raise them again. Psychologically speaking, there may be something to that, for whereas Republicans always cut taxes with a sense of righteousness, Democrats experience feelings of guilt just thinking about raising taxes when they are in power, and so much so, that often as not they fail to raise taxes at all.

This asymmetry can be seen in the surveys that ask people, “Do you believe that something needs to be done about the entitlements?”  I am not so concerned with how many people answer that question one way or the other as I am with the implicit bias in the question, for the “something” that “needs to be done” in such questions is always understood as cutting the entitlements, never raising taxes to support them.

I have been opposed to every tax cut since 1980, which is when I first started paying attention to politics.  For that matter, I have been continually in favor of raising taxes ever since, and not just on the rich.  When the Greenspan Commission recommended raising the retirement age for Social Security as well as increasing the payroll tax, I thought to myself, “I wish they would leave the retirement age alone and simply raise the payroll tax even more.”  And this was at a time when I knew I would be paying that tax for years to come.

Another asymmetry concerns the deficit.  To express concern about the deficit is usually understood to mean that one wants to cut spending, seldom that one wants to raise taxes, as is the case for me.  The way I see it, we should first figure out what we are going to spend our money on.  Then we compare that with the revenue the government expects to receive through taxes.  If there is a shortfall, we raise taxes until the budget is balanced.  Actually, I would raise taxes just a little more, create a surplus, pay off the national debt, accumulate a savings, and lend it out to foreign nations at interest.  Essentially, this is what I did with my life—avoiding debt, saving money, lending at interest—and things worked out well for me.

But ever since I took that course in economics in college, I have been told that what is good for the individual is not necessarily good for society as a whole.  I naturally thought that since an individual would be better off if he saved his money, then society would be better off if everyone saved his money.  But I was informed that I was guilty of the fallacy of composition, the inference from what is true of the parts to what is true of the whole.  On the contrary, it turned out that there was this thing called the paradox of thrift, which has it that if everyone saves his money, this leads to a fall in aggregate demand, leading to less growth, perhaps even to a recession and higher rates of unemployment.

That made me feel bad.  You might think that I could just go on saving my money, knowing that society is full of spendthrifts who will not save, so I need not fear that what I am doing will harm the economy.  But as luck would have it, I had read Immanuel Kant, and I was familiar with his categorical imperative, which states, “Act as if the maxim of your action were to become through your will a universal law of nature.”  In other words, according to Kant, it would be wrong for me to save money. Fortunately for me, I am not that good.  So I saved my money anyway.

Or consider the recent tax cut.  The Republicans I play bridge with were allowing that this cut in taxes should stimulate the economy.  I said I wouldn’t be at all surprised, much in the way that a man who lives on borrowed money can enjoy a higher standard of living than if he lived within his means.  They were undeterred by my sarcasm, for they had also taken that course in economics, and they reminded me of the fallacy of composition, pointing out that what would be profligate spending for a household, leading to misery and ruin, can be regarded as sound finance when applied to the federal government, leading to prosperity.

According to Steven Mnuchin, this tax cut will not only pay for itself, but it will help pay down the debt as well.  Ivanka Trump went further, saying that it would completely pay off the national debt.  Well, it looks as though nothing needs to be done about the entitlements after all, right?  Wrong!  With the flip of a Necker cube, Republicans will now become serious about all this deficit spending, saying that we must cut the entitlements.  Of course, since President Trump has assured us that the average household will see a four thousand dollar increase in income, on which the payroll tax will have to be paid, one would think that this additional revenue would put Social Security and Medicare pretty good shape.  But there I go again with the fallacy of composition, thinking that what will be good for each household will in turn be good for society as a whole.

And so it is that the entitlements will have to be cut.  This will have a twofold effect. First, by cutting the entitlements, this will reduce the deficit, just in case the tax cut does not pay for itself.  Second, by cutting the entitlements, there will be more death. And death is cheaper than life.  That is, by cutting Social Security, there will be more poverty for the elderly, leading to a lower life expectancy, which in turn will reduce the amount of money that has to be paid out to recipients.  And by cutting Medicare and Medicaid, people will not be able to afford good health care, which in turn will lead to an earlier death, further reducing government expenditures.  And so it is that cutting taxes will lead to more death, and more death will lead to greater tax cuts in the future.

Now, you may be thinking that since death is bad for the individual, then all this death will be bad for society as a whole. But that just means you still don’t understand the fallacy of composition.

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