Friday, December 28, 2012

Wrestling Snakes

So, Gerard Depardieu recently moved to Belgium to avoid paying taxes in France.  How much would he have to pay?  Well, according to him, he's already paid $190 million over his career, and new rates are about to go into effect raising the marginal rate to 85%.  What this means is that for every dollar he will earn over one million dollars, the government will take $.85.  To many, this is outrageously unfair, an outright theft.  Depardieu calls it insulting.
"I am leaving because you consider success, creativity and talent grounds for sanction."
These numbers do indeed sound big.  When we imagine ourselves being taxed at such rates, it seems entirely unfair.  And has he really paid $190 million already?  That might seem unfair.  But looking at the math, it seems less so.  According to the best source I could find, his current net worth is $200 million.  He's clearly made a lot of money.  In order to get to $200 million, he would have had to average $5 million a year over 40 years - and that's just in taxes paid.  I haven't been able to find any better details on his career earnings, but we can only assume that it was an enormous lot.  Remember that this is an increase in French taxes, and still merely a marginal rate of 85%, after an income of one million.  So his career average income would have to be closer to 10 million a year.

But let's assume for argument's sake, that his average after-tax income was an incredibly conservatively estimated to around 1 million a year.  That is an outrageous amount of money.  We're talking about $83k a month.  That's twice the average middle class pre-tax yearly salary.  Can you even imagine having that kind of money to spend?  This is the kind of income that makes luxury spending like this seem reasonable:
"The average jet setter spends nearly $30,000 per year on alcohol (wines & spirits.... hotels and resorts ($157,000 a year), or events at hotels and resorts ($224,000 a year). Spa treatments even fetch more jet-set dollars....$107,000 a year at spas around the world....$147,000 a year on watches....$117,000 on clothes....a whopping $248,000 a year on jewelry."
Are these people really victims?  Is this lifestyle being unfairly hindered?

There are a few things at work in debates over progressive taxation, falling into two main categories.  First, there is the utilitarian argument over what the actual effects are of progressive tax rates.  Do tax rates like those in France (and, it is worth remembering, those we paid her in the US a few decades ago), disincentivize the most productive investors, hinder overall growth, contributing to higher unemployment, higher prices, less innovation and lower standards of living overall?  Or do they actually boost productivity by decreasing income inequality, spreading wealth out into middle class communities and paying for common-good investments like infrastructure and social programs that boost public welfare overall?  The answer to this seems empirical.  Yet, as is often the case with issues that involve a moral component, as we'll get to next, the empiricism is easily lost in the moral intuition.

The second argument is of course one of morality and principle.  Are the rich really deserving of their large incomes, such that forcing them to pay far higher rates is indeed unfair and akin to a form of theft?  Are the middle class really deserving of their modest incomes, and thus deserving of their lower rates of access to things like quality communities, quality services and generally drastically lower standards of living?  The answer here is again empirical, to a degree.  For while there are plenty of cases of individuals obviously inheriting their wealth, and the ability to leverage and thereby access more of it, there are harder cases, those of seemingly genuine wealth creation through more intrinsic, self-generated means. 

However, it must be asked then where did this apparently highly valuable self-agency come from?  At this point many will begin hand-waving about simple free will and choice and self-determination.  More compelling to me, is the social research that gives lie to this concept, as well as the philosophical and neuro-scientific research that paints a much more deterministic picture of human agency.  When looking at any one successful individual, there always seems to be something in their life, come by some kind of environmental or biological fortune, that paved for them their street with gold.  As a larger social matter, the kinds of economic, political, social and cultural institutions in society are enormously determinative in their power.  Even if not entirely determinative, they are at least so much so as to more than justify the moral position that current levels of income inequality in our country are truly unfair, and allowing one to make at least $1 million dollars a year, or $83k a month is perfectly reasonable enough reward for whatever truly self-determinative, and thus morally "earned" productive activity they have engaged in.

At this point, however, those engaged in a moral argument for the rich deserving their riches tend to return to the first argument, that of utility.  And unfortunately, the empirical nature of that debate seems always to be biased by the moral subtext and intuitions regarding fairness and desert.  It seems an endless sort of loop, a tautological ouroborous in which one's righteous position is the only thing that matters.  I couldn't possibly argue that I myself am immune from what I can only assume are my own intuitive, Marxist biases. 

Yet, there is truth in the end.  We cannot all be right.  As concerned as I am with compassion and empathy - my thoughts tending toward humility and the imagination of the other - I place a good deal of faith in these attitudes as allowing me more room for rational objectivity than a posture of self-interest and self-projection onto others might.

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