As we glide into the new year and begin the slow march toward tax day in April, it's good to remember how lucky we are to be able to pay taxes. Sounds crazy, eh? Well, back in April of last year, the economist, Robert Frank, wrote and article in the NY Times that was in response to the so-called "Tea Party" movement, entitled, "Before Tea, Thank Your Lucky Stars," where he talks about this very issue:
The link between success and luck is stronger than many people think. Analysis of this connection provides a useful framework for weighing the issues raised around the country at recent "tea parties," where orators in high dudgeon bemoaned their "crippling" tax burdens. Responding to President Obama's plan to let the Bush tax cuts for top earners expire in 2010, one protester's placard read, "Spread your own damn wealth around!"Other protesters contended that the tax system already strains the vital connection between individual effort and reward and warned that further tax increases might destroy it.
But these accusations don't withstand scrutiny. The current system is much fairer than many people believe, and the president's proposal will make it both fairer and more efficient.
Contrary to what many parents tell their children, talent and hard work are neither necessary nor sufficient for economic success. It helps to be talented and hard-working, of course, yet some people enjoy spectacular success despite having neither attribute. (Lip-synching members of boy bands? Money managers who bet clients' retirement savings on subprime-mortgage-backed securities?)
This seems particularly accurate:
Although people are often quick to ascribe their own success to skill and hard work, even those qualities entail heavy elements of luck. Debate continues about the degree to which personal traits are attributable to environmental and genetic factors. But whatever the true weights of each, these factors in combination explain nearly everything. People born with good genes and raised in nurturing families can claim little moral credit for their talent and industriousness. They were just lucky. And they are vastly more likely to succeed than people born without talent and raised in unsupportive environments.
For instance, as Frank points out from Malcolm Gladwell's book, "Outliers":
A disproportionate number of pro hockey players owe their success to the accident of having been born in January, which made them the oldest, most experienced players in every youth league growing up. For that reason alone, they were more likely to make all-star teams, receive special coaching and eventually become professionals.
And there's this:
As a Peace Corps volunteer in Nepal long ago, I hired a cook who had no formal education but was spectacularly intelligent and resourceful. Beyond preparing excellent meals, he could butcher a goat, thatch a roof, plaster walls, resole shoes and fix broken alarm clocks. He was also an able tinsmith and a skilled carpenter. Yet his total lifetime earnings were less than even a very lazy, untalented American might earn in a single year. Well-paid Americans owe an enormous, if rarely acknowledged, debt to the social investments that supported their success.
Egg-zactly...
Which leads us to the phase-out this year of Bush's tax cuts for the wealthy, enacted 10 years ago:
The president's proposal is modest: raising the top marginal tax rate from 35 percent to 39.5 percent, its level when Bill Clinton left office and well below the corresponding level in most other industrial countries. There has never been a shortage of talented people willing to work hard for success -- even in countries with top rates much higher than 50 percent. And the president's proposal would not cause such a shortage in 2010.
Let's keep the following in mind the next time we see those Tea Baggers huffing and puffing:
Financially successful tax protesters seem blissfully unaware of how incredibly fortunate they are. To borrow from the late Ann Richards and her description of the first President Bush, they were born on third base and thought they'd hit a triple.
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Tags: marginal tax rate, Robert Frank, taxes, Tea Baggers
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