Thursday, September 27, 2012

Mitt Romney's taxes and the common good

Joe Stiglitz in Mitt Romney's tax avoidance weakens bonds of American society Guardian 09/03/2012 looks at how tax avoidance by prominent wealthy people like Republican Presidential candidate Mitt Romney serves to undermine the basic social contract in the United States:

Conservative politicians in the US underestimate the importance of publicly provided education, technology, and infrastructure. Economies in which government provides these public goods perform far better than those in which it does not.

But public goods must be paid for, and it is imperative that everyone pays their fair share. While there may be disagreement about what that entails, those at the top of the income distribution who pay 15% of their reported income (money accruing in tax shelters in the Cayman Islands and other tax havens may not be reported to US authorities) clearly are not paying their fair share. ...

Democracies rely on a spirit of trust and co-operation in paying taxes. If every individual devoted as much energy and resources as the rich do to avoiding their fair share of taxes, the tax system either would collapse, or would have to be replaced by a far more intrusive and coercive scheme. Both alternatives are unacceptable.

More broadly, a market economy could not work if every contract had to be enforced through legal action. But trust and co-operation can survive only if there is a belief that the system is fair. Recent research has shown that a belief that the economic system is unfair undermines both co-operation and effort. Yet, increasingly, Americans are coming to believe that their economic system is unfair; and the tax system is emblematic of that sense of injustice. [my emphasis]
Democracy can't survive the extremes of wealth that our tax policies are creating. It isn't just about budgets or deficits, it's about the nature of our political system and political commonwealth.

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