Your Taxes: Capitalist or Socialist?

I sound like a broken record lately, but it is clear that we need a basic understanding of certain definitions.

Socialism is an economic system the means of production, distribution, and exchange of goods are collectively or cooperatively owned by the government or community as a whole.

Capitalism is an economic system where the means of production are privately-owned and operated for profit, often in competitive markets. The distribution and exchange of good are controlled by private owners for profit.

A mixed economy is an economic system in which both the state and private sector direct the economy, reflecting both market economies and planned economies.Most mixed economies can be described as market economies with strong regulatory oversight, in addition to having a variety of government-sponsored elements.

When you look at the elements of a mixed economy, it becomes clear that almost all developed and strong economies, fall into this category. Any other economic system is more of an academic theory, or a useful guide, then an actual economic practice. One site claims that “economies from the United States to Cuba would be examples” of a mixed economy. I would dispute Cuba, with their 85% tax rate and state-run markets — but I am also not an economist.

The argument from conservatives is that the government regulatory power and tax rates are so stifling of the economy, that it does not allow an otherwise healthy economy to prosper. Republicans are not able to communicate this that clearly or positively, but that is in essence their position.

This is a beautiful image from Visualizing Economics, and they have dozens of great graphs. I will be using many of them from their site in the coming weeks to not only show why conservatives are wrong, but also the one or two times where they accidentally have taken a correct stance on policy issues.

Looking at the data, you can clearly see that the TOP TAX RATES on income, capital gains, and corporations are lower than they have been since…well, the beginning of the Great Depression.

We have also fought two of the longest wars in our history, at the lowest tax rates during wartime, and we wonder why the middle class are suffering.
We know that the poverty rate is increasing.
We know that the Top 10% are making more money.
We know that the Top 1% are drastically making more money.

The burden has to fall somewhere. So it falls on the poor and the middle class who have more debt just to provide their families with basic needs than every before.

If you were to believe the GOP, our taxes are ridiculously high. Not only is this not true, historically for the U.S., but it is not even close when compared to the rest of the world. The United States ranks #186 in tax revenue as a percentage of GDP, 14.7%; while countries like Cuba, Norway, Sweden, and Finland — the countries that free market proponents point to as examples of socialist economies — rank #1, #13, #15, #16, respectively. There is no way to define our tax rates as “socialist”, even by their own definition. (In the coming weeks, I will comparing the economies of specific countries, touching on all these issues)

The only other argument that conservatives lean on for their definition of “socialism” is the apparent ‘income redistribution’ of the different tax rates.

Wealth redistribution is a characteristic of a mixed economy, not a socialist economy.
Furthermore, when you compare the tax burden with the income burden, every tax bracket is well within mere percentage points of one another, not really how would define “wealth redistribution”.

When we discuss a tax increase on those making $1 million, we are talking about less than one-quarter million taxpayers, less than 2/10 of 1% of all tax filers.
It should also be pointed out that while those earning over $1 million will pay almost 30% in federal taxes, the Top 400 tax filers in America pay about the same rate (18%) as the definition of middle class, $50K-$75K (15%). This is patently unfair, and a reason why our economy is so clearly out of whack (It should also be noted that over 1,500 filers in the Top 1% do not pay taxes at all).

So, this discussion of “redistribution” is based entirely on the Top 1%.  You could successfully argue that the tax structure in the United States during the 1940s – 1960s were based on a socialist model. However, since our economy grew tenfold during these decades, I cannot believe in research while buying the argument that taxes quell economic growth. I’m trying really to hard that reliable source, I’m almost at a point where I really want to find it. It’s kind of like the Lochness Monster. There are those who swear that it exists, there are pictures that suggest that it exists, but when we try to actually find it, the whole thing escapes us.

So, is our tax structure capitalist or socialist? Well, it is neither. Our economy is based on a capitalist model with a regulatory government. We have a progressive tax structure, but to equate progressive with socialist is academically and intellectually dishonest.

About Creed

I often ramble. What some people can eloquently say in 10 words, when most people would take 25, I will intentionally take 100. It's always been this way. This blog is mainly to spare my friends, family, and co-workers from my epic long rants.
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