On the margins

Thanks to Lizzie for her very good comments and questions. Some bits worth stressing. Lizzie wrote:

So everyone's taxed at X rate for the first M thousand dollars, and everyone's taxed at Y rate for the next N thousand dollars, you're saying? (And if you only have M thousand dollars, don't worry, you won't be asked to pay additional taxes on money you don't actually have?)

Exactly. If the new rate applied to every dollar, then it would make perfect sense to say that you were being punished for making more. But it doesn't work that way, as a cursory look at the tax tables makes clear.

I have a feeling that there's an awful lot of confusion about this. I have a feeling that it's one of the reasons why McCain has gotten whatever mileage he's gotten out of Joe the Plumber. It's why people sometimes worry that they'll be worse off by making more money and moving into a higher tax bracket. They think that all their earnings will be taxed at the new rate. But that's just plain wrong.

Lizzie also wrote:

Btw, I think it's good to note here that Obama is apparently only planning to return tax rates to what they were during the Clinton years.

Yup. The economy did well under Clinton, but marginal tax rates were higher than they have been under Bush. No one thinks that marginal rates don't matter. But the idea that we'd kill the entrepreneurial spirit by bumping the top rate up a bit from where it is now doesn't square well with history.

Finally, Lizzie wrote this:

Finally... well, I hesitate to say this, b/c I know it doesn't sound good, but... There's one sense in which all money that you make you wouldn't have made w/o the gov't, and so you're hardly being punished when the gov't says they're going to keep some portion of it... You didn't pay for the roads your trucks take to deliver your product, and you didn't pay for the development of internet technology you use in sales and advertising, and you didn't pay for the creation of utilities systems that allowed your office buildings to have lights and running water, and you didn't pay for your employees to learn to read, etc. The government, in contrast, had a had in all of that. And all those things the gov't did helped YOU, financially, a lot more than they helped someone who doesn't own trucks or office buildings or hire other people's labor.

Don't apologize! This is absolutely right and the only reason it doesn't sound good is that even though it's true, it's abstract enough that people find it hard to hang onto. The orderly possession and exchange of property, wages, labor and so on doesn't exist in a vacuum. Modern capitalism simply couldn't exist outside the modern state, and as you point out, big-time capitalists are big-time beneficiaries of government. Nothing wrong with that; society also benefits from big-time capitalism (at least when it doesn't run amok.) When things are working well, there's a symbiotic relationship among government, capitalism and society. The intellectual disease of folks on the hard left is to forget that capitalism really does bring benefits. Without capitalism, we couldn't even be having this conversation in this medium. But the more common mistake these days is on the right -- forgetting that government and taxes have a genuine, positive contribution to make to the whole enterprise.