Does capitalism require both low and high taxes?

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I know that taxes are a hot button issue right now but I feel too often that the sides get divided into the capitalist/libertarian/low tax crowd and the socialist/government programs/high tax crowd.

Rather than start a thread that will just dissolve into ideological bickering, I want to come at this problem from a different angle.

I often have conversations with my cousin who embraces the Ayn Rand/libertarian position, and I have to admit that I have sometimes been taken with aspects of the position, and I might have fallen just a little bit in love with Ayn Rand when I first read her (such utter disregard for Kant, man that chick has balls!).

Both my cousin and I are in our early thirties. We both attended public schools that were good enough to prepare us both to graduate from University of California schools with minimal student loan debt and to successfully procure stable employment.

Here's the thing: Both of us were born in the early eighties, so we were beneficiaries of the public education system that had been built by high taxes in the fifties, sixties, and seventies. As we all know, in the eighties taxes declined dramatically and government spending shifted away from education and towards defense. It is no secret now that our public education system is not what it used to be, and that to receive a higher education you need to incur crippling student loan debt. This is all due to decreased government spending on education.

Now I know a basic tenet of libertarianism is that government should stick to providing external defense, maintaining internal order, and keeping and honest currency. This keeps taxes low so that capitalism and innovation can procede uninhibited. However, I would argue that the government is also responsible for building infrastructure and providing education, since this is something no corporation will meaningfully engage in due to the fear that the education or infrastructure they provide would be exploited by a competing corporation. The chaotic state of the power grid in the United States is a prime example: A tree knocking over a power line in Ohio could black out several states, but the various private entities that provide power refuse to improve the infrastructure because the investment that any one of them would make would benefit their competitors. In this situation, and in other infrastructural and educational projects, I argue that we need the government.

We have had a long period of low taxes in the United States and coincidentally, we have an increasingly crippled infrastructure and we have corporations with a lot of money to hire people but we don't have people who are qualified to fill those positions.

I guess the gist of what I am asking is whether the bedrock that allows capitalism to succeed (infrastructure and skilled educated workers) is at odds with the tenets of capitalism itself? Maybe high or low taxes are not abhorrent or beneficial to capitalism respectively, but rather a cycle that needs to be maintained so capitalism can continue to succeed?

Does the fact that my cousin and I received a publicly subsidized education which was good enough to allow us to be able to debate libertarian ideology in the first place mean that we were produced by a society that libertarians would abhor?

(Sorry for the long post. It was shorter in my mind)

That is interesting.

I've often found this pdf clarifying, though I'm not sure I've read it fully accurately.

http://www2.ed.gov/about/overview/budge ... istory.pdf

It shows the department of education's budget from its inception in '79-80, to today. 14 billion around when Reagan took office, only about 2.5 billion of that being mandatory spending, the other 11.5 being discretionary spending. It has since averaged between 50 to 100 billion over the last decade, peaking 100 billion twice. So I don't quite know what governmental support that existed pre-Reagan, that you and many others cite, stopped through the 80's as a result of cold war spending, but if such a support structure existed, its phasing out was clearly replaced by the DOE coming in.

That said, public education is so expensive because every school wants to specialize in everything, and yet, none of them do anything particularly well unless it is a well funded state university with a beautiful endowment.

Unless you can say that Steve Jobs generation who got by on far far far far far less spending is somehow inferior because they didn't have access to new textbooks every year and technology, there is no excuse for the kind of public education spending we do, the audacity of the public university system to raise tuition as they do, and the results that we end up with. My thinking might be that the horror of the left is that public spending on education has decreased as a % of our economic spending, even as the economy has increased by as much as it has. Because then when they say that our spending on education has decreased, they mean relative to it as a % of the economy, and that is true.

The government is responsible for infrastructure spending, and the amount of spending infrastructure is receiving is pathetic. I am convinced that only 3% of the stimulus went to infrastructure so that people could continue to advance this horror of our crumbling infrastructure.

But I guess it also depends on what qualifies as "infrastructure" and is there a decent ROI.

I've heard one estimate suggest 121 billion to modernize the grid. That would be money well spent. Syphoning revenue from the highway trustfund to spend on public transit that is not self-sustaining is not. Taxes need to be raised to provide decent infrastructure necessary to keep us competitive, but often, ideology overtakes practicality, and you end up with pointless urban renewal projects, high speed rail and tram ways, and other eye candy for the visionaries/intellectuals of our society.

Capitalism needs moderate taxes. Low enough as to not smother the barrier of entry, yet high enough to fund things that allow us to live well and attract others.

Personally I do not see what gives a gov. the right to extort money from its citizens.

Extortion is the act of threatening and carrying out the threat if the victim does not pay up.

Which is exactly what most taxes are.

Property tax (and all like it) is a perfect example. I purchase a house/land. Once it is 'mine' I also owe 'protection' money to the gov. and if I do not pay it my property gets taken away and I will likely end up in legal troubles, even jail time. The money that is extorted from me is not used in any way or form by the gov. towards anything related to my property. It does not pay for maintenance of the grounds nor roads (there's a separate tax for that) nor services (there's also taxes for that).

I believe taxes should only be levied for services the citizen receives and on items the citizen consumes (sales tax). These taxes would be low or high depending on what the citizen uses/consumes. A filthy rich person would pay a much higher amount than the average joe.

Corporations should receive tax breaks only based on how many citizens they employ. Citizens = citizens and legal residents. Work visa holders are not part of the tax break; on the infrastructure they build and the community programs they fund.

MarketAndChurch: I do concede that we spend a lot on education, but increasingly in higher education the burden of cost is being shifted onto the student. Student loan debt has now outgrown credit card debt.

My wife taught high school for a few years, and she tells me that the public schools today are not like the ones we went to as kids. In particular she complained that the class sizes were too large to manage. If we are spending that much on education, then I guess we're doing a pretty bad job at using what we do spend.

Thousands of jobs in the STEM fields are going unfilled because our education system isn't producing qualified students. I guess I was trying to argue that it doesn't make sense to have low taxes on job creators when the jobs they create can't be filled because we have a poor education system due to those low taxes. But I concede that it might be a problem of how the taxes are spent rather than how much are levied.

I agree with you that ideology overtakes practicality. You gave some pretty practical replies. That's all I wanted from this post so I guess it's a success!

It is government that requires taxes to operate. Capitalism can exist in nations with minimum government or large extensive government. Capitalism is a system that provides goods and services. What it needs are raw materials, a sufficient labor force, markets and relatively few legal impediments to operate. One the legal things necessary are laws regarding contracts and breaches of contract.

ruveyn

capitalism will never invest in high speed trains

I bet that when we're all said and done as a world power, the historians will point to our sprawl as a reason why we didn't last.

Well, as pointed out earlier, education spending has tripled over the last few decades. The experiment of higher spending did not produce results though. Student test scores remained the same. Possibly some of the newer education ideas, charter schools, internet learning, etc. will have better success going forward.

As for taxes, and helping future American, I don't think it is so much libertarianism, even though there are elements to that, as much as it is the break down of the social blue model of government. What worked in the 20th century does not mean the same ideas will work in the future. For example, it used to be that we had large manufacturing production unionized jobs, Today, largely due to automation, those high paying jobs are going away. The Post Office is a good example of the internet largely replacing the need for an organization. Overall, basically there is now less to tax. Raising taxes isn't going to bring back the old ways of life.

Thought this a nice article about the break down of the social blue model of government and what it means.

"Feeding the Blue Beast"

http://blogs.the-american-interest.com/ ... lue-beast/

excerpt from the article: