A Lesson from the Other Side of the Rabbit Hole

I love connecting the storyline of two separate newspaper articles, which the editors see as disparate, but are actually interrelated.  On July 19, 2011, the Wall Street Journal published two articles: “Get ready for 70% marginal tax rate" by Michael J. Boskin and "Notable and Quotable" a quote of a Heather McDonald statement on the University of California's diversity obsession. When read as one, the two articles lay bare an assumption that is critical to the liberal progressive view of government:  government never has a spending problem – it is always a revenue problem.  Really?  Only if you are Alice in “Wanderland.”

When progressives look at government – as Alice might have – “through the looking glass,” they see a well-oiled, efficient, and effective machine, which can only be harmed if taxes are not raised.  When conservatives look at government through a microscope, they see an out-of-control bureaucracy whose tax-and-spend profligacy robs them of their individual rights to life, liberty, and the pursuit of happiness – the basis of which is economic freedom. 

In “Get ready for a 70% marginal tax rate," by Michael J. Boskin, the author addresses the perilous nature of our economic future under a tax-and-spend scenario.  Boskin states “the current top federal rate of 35% is scheduled to rise to 39.6% in 2013 (plus one-to-two points from the phase-out of itemized deductions for singles making above $200,000 and couples earning above $250,000). The payroll tax is 12.4% for Social Security (capped at $106,000), and 2.9% for Medicare (no income cap). While the payroll tax is theoretically split between employers and employees, the employers’ share is ultimately shifted to workers in the form of lower wages.” Using California as an example, state income tax is about 10.5%. Thus the marginal tax rate paid on wages is approximately 44.1%. As Boskin points out, this is a net figure because state income taxes are deducted from federal income. Under this scenario, for a California citizen, the expiration of the Bush tax cuts in 2013 will result in the addition of a 0.9% increase in payroll taxes to fund the Affordable Health Care Protection Act. Obama's proposal to eventually uncap Social Security taxes will lead to a combined marginal tax rate in California of 58.4%.

But things get worse. The non-partisan Congressional Budget Office projects that an additional $841 billion deficit in 2016. Assuming a goal of a balanced budget through tax increases, all income tax rates will have to be increased by 31.7%, raising the combined marginal tax rate for a California citizen to 68.8%. Mr. Boskin then uses this argument to make the point that a California teacher, earning $60,000 a year, would keep approximately 30% of her wages or about $18,000. He states, “At the margin, virtually everyone would be working primarily for the government, reduced to a minority partner in their own labor.”

In the second article, Heather McDonald paints a clear picture of California’s true situation as it stares at the brink of economic disaster.  She states that “California's budget crisis has reduced the University of California to near-penury, claim its spokesmen.” “Our campuses and UC Office of The President already have cut to the bone," the university system's vice president for budget and capital resources warned earlier this month. According to Ms. McDonald, they have not cut their staff to the bone. “The University of California at San Diego is creating a new, full-time Vice Chancellor for Equity, Diversity, and Inclusion." This position will augment UC San Diego's already massive diversity apparatus which includes the following:

·         The Chancellor's Diversity Office

·         An Associate Vice Chancellor For Faculty Equity

·         The Assistant Vice Chancellor For Diversity

·         Faculty Equity Advisors

·         Graduate Diversity Coordinators

 

·         Staff Diversity Liaison

·         Undergraduate Student Diversity Liaison

·         Graduate Student Diversity Liaison

·         A Chief Diversity Officer

·         The Director Of Development For Diversity Initiatives

·         The Office Of Academic Diversity And Equal Opportunity

 

·         The Committee On Gender Identity And Sexual Orientation Issues

·         The Committee On The Status Of Women

·         The Campus Council On Climate, Culture, and Inclusion

·         The Diversity Council

·         Directors of the Cross-Cultural Center

 

·         The Lesbian, Gay, Bisexual, Transgender Resource Center and

·         The Women’s Center.

I wonder if the California teacher – whose take home pay is about 30% of what she earns – believes that the University of California may have a little further to go before they “reach the bone.”   That is unless she works for UC, in which case, the progressives’ view of the Utopia has come almost full circle: the teacher will be working almost full time to pay the taxes that pay her own salary.  

Alice would be proud.