September 18, 2011

Citizen Cain's fallacious analogy of taxes and tithes, 9-9-9

By Lil Joe

CAIN: Let's cut to the chase, this is what business people do and politicians don't do. Here's how I would fix this economy, first, eliminate the current tax code. It is a drain on entrepreneurs, it is the biggest barrier that's holding this economy back, and what I would do is to propose a bold plan, which I have already released. I call it my 9-9-9 economic growth plan. Throw out the current tax code, a 9 percent tax on corporate income, our 9 percent tax on personal income and a 9 percent national sales tax. If 10 percent is good enough for God, 9 percent ought to be good enough for the federal government. This will replace all federal income taxes. It'll replace all federal income taxes. It will also replace the payroll tax, so everybody gets some skin in the game. And it replaces the capital gains tax.

First of all, the demagogue that he is, Herman Cain's premise is based upon nothing but demagogic rhetoric. He has neither presented any evidence for his bare assertion that taxes are what is 'holding this economy back'; nor has he defined 'economy'. But, his assertion that the 'tax code is a drain on entrepreneurs', indicates what he means by 'the economy': economic interests are identified as capitalist's interests, since capitalists own the national wealth, the means of production and distribution, the nation's productive forces are capitalist's private possession.

Second, Cain's assertion that existing capitalist taxes paid in the framework of the existing progressive tax code 'is the biggest barrier that's holding this economy back' is a lie. The real barrier to the self-expansion of capital is the inherent contradictions in capitalist commodity production by wage labor, the appropriation and exploitation of wage labor, valorisation in the labor process itself, require capitalists to sell those commodities in order to realize profits to reinvest. The current collapse in the markets, the bankruptcy of the capitalist mode of appropriation, by reaction bankrupts the capitalist industries, both industrial capitalist commodity production and agricultural produced commodity production, and that's what's 'holding this economy back'!

Further more, all the clap trap catering to capitalists, ostensibly enticing them to invest in production, by reducing the quantity of taxes they pay to their State, circumvents the class nature of the State by the straw manning rhetoric about 'the federal government'.

The State, its bureaucratic-military apparatus that represent the interests of capitalism and capitalists domestically and abroad is never addressed by the Republicans, nor for that matter by Democrats, when they speak of 'big government' v 'small government', nor do they speak of eliminating the military-industrial complex to 'cut government spending'. Indeed, neither can the political lackeys of these capitalist partisan parties advocate such, so-long as class property exists as the possession of the appropriating classes there will be the need for a State as an instrument of their class domination.

Moreover, capitalists need no enticement to hire and exploit workers. They don't invest because valorised products as commodities cannot be sold. Tax cuts, even if restricting revenues to whats needed by capitalist's bureaucratic-military apparatus, thus excluding all social spending, still wouldn't get the capitalists out of the economic ditch they find themselves in. Commodities produced for markets cannot be sold in volume sufficient to make profits to reinvest.

Workers don't need to entice capitalists by tax cuts and deregulation in order to increase their disposable income and profits. What is needed to get production and distribution functioning is not a flat tax, but for the working class to expropriate the productive forces and eliminate the capital character of both the productive forces and the labor force: end the system of buying and selling of commodities and of labor power.

On this basis will be the elimination of classes and the exploitation of class by class, because the productive forces will be Community property - the public property in possession of everyone, and therefore of no one in particular. Workers in the United States need this working class perspective to spread in opposition to the capitalists and their political lackeys and paid propaganda of ideological lickspittles.

It is in the interests of capitalists and wealthy to advocate the flat tax, which precisely is what Cain proposes by his demagogic rhetoric advocacy of '9%- 9%- 9% on the basis of ancient Hebrew religious tithes, about which more later.

In an article which appears in News and World Report, the class character of a flat tax was exposed:

Flat Tax Is Class Warfare
System’s simplicity hides the further shifting of the tax burden to the poor and middle class
By Holley Ulbrich

April 12, 2010
Holley Ulbrich is an economics professor emeritus and senior fellow at the Strom Thurmond Institute at Clemson University.

Albert Einstein said that "Everything should be made as simple as possible, but not one bit simpler." Good advice for people who want to redesign tax systems. It's true that there are now 24 countries with a flat tax, but none of them got there by scrapping an established progressive income tax system nearly 100 years old. Fifteen of these countries are formerly Communist countries of Eastern and Central Europe. The others are very small, ranging from Montenegro to Iceland. No major industrial nation has made that choice. There are good reasons for going slowly.

The attraction of simplicity hides a big change in the distribution of tax obligations among the poor, the middle class, and the rich. When think tanks like Cato and Heritage support changes that redistribute the tax burden in that way, they usually warn us of the evils of class warfare. But the proposed flat tax is, in fact, class warfare—yet another attempt to reduce the tax obligations of higher-income households in exchange for the unenforceable hope or promise that they might use the money to invest and create jobs, maybe even jobs in the United States.

Two considerations should give us pause before jumping on the flat-tax bandwagon. The first is the disruptive effect of eliminating deductions, credits and exclusions that benefit the middle class as well as the rich and that play important roles in our lives—pension contributions, employer-provided healthcare, and deductions for mortgage interest, property taxes, and charitable contributions that support everything from soup kitchens to education to the arts. Second is the role of our mildly progressive federal income tax in offsetting regressive taxes elsewhere in the system.

The first argument against the flat tax, one that resonates with homeowners, charitable organizations, and anyone with employer-provided health insurance or a pension plan, is the disruption that would come from trashing the current income tax system in favor of something untested and untried. We have all made decisions on the basis of the existing and long-standing tax rules. It's hard to get people to save for their retirement, but the tax treatment of employee pensions, IRAs, and 401(k)'s has played an important role. Would we have bought a house if we knew that we were going to lose our home-related deductions? Will charitable organizations that serve those who fall through the holes in the safety net and also enrich communities with education, religion, and culture lose financial support when charitable contributions are no longer deductible? And will we have to declare our employer-provided health insurance as taxable income?

Second, there's no concealing that the flat tax would radically redistribute the tax burden. Adam Smith, to whom economists always turn to for economic wisdom, observed, "It is not very unreasonable that the rich should contribute to the public expense, not only in proportion to their revenue, but something more than in that proportion." The current U.S. tax system consists mainly of taxes on income (personal and corporate), payroll (Social Security), sales, and property. In 2007, these taxes provided 92 percent of federal income and 51 percent of state and local government income. Sales taxes are regressive—they take a higher share of low incomes than higher incomes. State and local income taxes range from flat to mildly progressive. Payroll taxes are moderately regressive because they fall on only wages and salaries and only up to a maximum of $106,800 in earnings. The distribution of the property tax burden is not clear, but the family home is the primary financial asset for most middle-income households. Property taxes are levied on homes, but rarely on other kinds of financial assets. State and local governments also depend on fees and charges for services, which fall heavily on lower-income households, for 44 percent of their revenue. So a moderately progressive federal income tax, with rates ranging from 15 percent to 35 percent, helps to offset regressive taxes elsewhere.

The rhetoric about ending double taxation ignores the fact that under a flat tax, wages would still be taxed twice, but dividends only once. Wage earners pay both payroll and income taxes. They've paid double taxes since 1935. Why should income from owning financial assets be treated differently—especially since most of that income goes to upper-income households?

A flat tax would shift tax obligations from the rich to the poor, and especially the middle class, and eliminate desirable tax incentives for retirement savings, home ownership, and charitable contributions. Simple? Yes. Efficient and equitable? Not so much.

Cain's 'bold plan' to scrub the existing progressive income and capital taxes, to in fact displace it with a regressive flat tax of 9% '9-9-9' is not presented by him as an argument that is based on the evidence of contemporary economic data, but based on an analogy.

Bringing into this the Hebrew Scripture is Cain's attempt to manipulate those among American Christians who don't know the Scripture and the Constitution, nor the difference between Leviticus tithes and State's taxes.

The Levites were not a State. The States of Israel and Judea, the same as any other State in the region at the time, was economically based on peasants and slavery. The owning class were represented politically by monarchies, the State was essentially special bodies of armed men, with prisons, &c. at their disposal, which appropriated its revenue by forced taxation.

The labor power of the producing classes -in this instance chattel slaves- was directly appropriated by their owners. Slaves had no 'income'. They didn't sell their labor power. There was no income tax or payroll tax. Peasants and artisans were not wage workers, either, and they paid no income taxes.

Chattel slaves were provided means of subsistence rather than wages to purchase their own means of subsistence. Chattel Slaves, which are property, are not wage workers that sell their labor power for money income. Slaves didn't pay income taxes.

What it would have meant for the State to appropriate a 9% tax from chattel slave families, would have had to have been the armed forces of the State to rush the dwellings of these slaves and to expropriate 9% of their subsistence and possessions.

In ancient Israel and Judea the poor, peasants as well as slaves were exempt from tithes that went to Levites and taxes to the State. Historically speaking, Cain's 9-9-9 is unhistorical and in the contemporary world is absurd.

Cain masquerades as 'Christian Conservative', there upon in his rhetoric he pretends it is the Bible and the Constitution that motivate his advocacy. The Constitution speaks of separation of Church and State.

The following if from an American Christian scholar:

Federal Taxation in the United States: A Biblical and Constitutional Perspective by Gerald R. Thompson

The example of ancient Israel illustrates the application of the law of God to matters of taxation in a specific polity. However, the use of Israel as a model for modern taxation must be made with great caution, because the law of Israel only partially applies to all nations. That is, Israel's law was derived from two sources, the first of which was the law of nature, i.e., God's law for all nations. The second source was the covenantal law of the Mosaic code, expressed in the form of an agreement between God and the people of Israel.

To the extent Israel's covenant verbalizes the law of nature, of course, it applies to everyone - not because the covenant makes it applicable, but because it would be applicable even without the covenant. However, not all of Israel's covenant verbalizes the law of nature. Many of its provisions apply only to Israel.63 Just because a covenant is of divine origin does not mean that it applies to everyone, all the time, everywhere in the world. God is not constrained to relate to every nation the way He related to ancient Israel via a divine covenant.

Nonetheless, Israel's law does, in part, exemplify the biblical principles of taxation previously discussed. For example, Israel's law did not provide for any property taxation.64 The family government had primary jurisdiction over all property.65 Real property could not be permanently sold, thereby passing by descent to the permanent owner's heirs without possibility of reversion or escheat to civil government.66 In this way, Israel's law complied with the law of concurrent jurisdiction by acknowledging the rightful jurisdiction of the family institution as against the civil government.67

Commonly suggested models of taxation from the law of Israel are the head tax and the Levitical tithe.68 The key attribute of these models is a reasonably low flat amount or flat rate of taxation allowing for few deductions or exemptions.69 The claimed benefits of basing modern taxation on these models range from making the tax burden more equitably distributed to constraining the size of civil government by limiting its revenues.70 Yet, in spite of these desirable features, the application of these models in all of their particulars to nations today is not as appealing as it might first appear.

The Levitical tithe was not merely the payment of a tenth of one's income to God in accordance with the precepts of the law of nature. Rather, the Levitical tithe is a creature of the covenantal law of Israel which, although rooted in the law of nature, has certain attributes which are unique to that nation.71 After God delivered Israel from Egypt, he set apart the entire tribe of Levi for priestly service to the nation.72 When God apportioned the promised land among the Israelites, the tribe of Levi had no share of the land but received one-tenth of all the produce of the land from the other tribes instead.73 The Israelite law of the tithe applied exclusively to the Levites.74 The Levitical tithe was a binding obligation to set apart a tenth of one's total increase for the benefit of a civilly recognized priesthood, that is, a state established religion.

Still, the Levitical tithe did conform to some of the biblical principles of taxation. The collection of tithes was pursuant to a lawful delegation of authority in Israel.75 The flat rate of the levy conformed to the law of equality. Since the Levites were not required to contribute to their own support, the tithe also conformed to the law of exemption. The tithe compensated the Levites for rendering a unique service to the nation which the people could not render themselves, following the law of service debt to that extent. However, the service rendered served a religious purpose, not a civil purpose, and cannot be used as a model for modern taxation in that sense.

But, this is the limit of the tithe's conformity with the law of taxation applicable to all nations. For example, the Leviticus tithe did not conform to the law of exaction at all. No one in Israel was authorized to enforce the payment of tithes.76 The obligation to tithe was not any less mandatory because of its lack of human enforcement, but the obligation was moral, not civil. Thus, the tithe cannot properly be regarded as a tax, because all taxes require civil enforcement.

The problem with using the tithe as a model for modern taxation is that no nation is, or can be, theocratic in the same sense ancient Israel was. See:

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