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Incomes Taxes, Millionaires and Billionaires Ammo for the Battle of Ideas

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Off-the-books America

by Christopher Chantrill
December 25, 2010 at 10:47 am

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LAST WEEK Victor Davis Hanson wrote about the hollowed-out society in the Central Valley around his native Fresno, California. He wrote:

I wanted to witness, even if superficially, what is happening to a state that has the highest sales and income taxes, the most lavish entitlements, the near-worst public schools (based on federal test scores), and the largest number of illegal aliens in the nation, along with an overregulated private sector, a stagnant and shrinking manufacturing base, and an elite environmental ethos that restricts commerce and productivity without curbing consumption.

The elementary school that he attended as a child is now 94 percent Hispanic and well below standards in English and math. The rural roads are “fast turning into rubble.” The irrigation cutoffs have idled tens of thousands of acres, and unemployment is 15 to 20 percent.

There are many rural “trailer-house compounds” filled with junked cars, lean-tos, and trash, but for some reason the regulatory state does not reach out and regulate them.

It is almost as if the more California regulates, the more it does not regulate. Its public employees prefer to go after misdemeanors in the upscale areas to justify our expensive oversight industry, while ignoring the felonies in the downtrodden areas, which are becoming feral and beyond the ability of any inspector to do anything but feel irrelevant.

And, of course, nobody is doing anything about “the epidemic dumping of trash, furniture, and often toxic substances throughout California’s rural hinterland.”

For us middle-class drones, all this seems rather weird. How could the government be allowing all this illegal activity? How can our liberal ruling class, that lives to regulate everything that moves, allow this to happen?

But really, it all makes sense. An off-the-books economy is a direct result of the centralized regulatory state. And since the people that live and work in the off-the-books economy are often the poor and minorities, liberals just look the other way, and read a page or two from Barbara Ehrenreich’s Nickeled and Dimed to get themselves all riled up about Wal-Mart.

Suppose you are about to start on the bottom rung of the construction business, as a one-man residential fencing contractor. If you hire American laborers they might want to work as formal employees. Let’s just figure out what that would cost in Washington State, at the minimum wage of, say, $7.00 per hour. There’s the FICA tax of 7.65%. There’s the unemployment tax that, for a construction firm, is probably at the limit of 6 percent. Then there is workers compensation. That’s presently at $1.30 per hour for Landscape Construction and Renovation, or 18.6 percent of the hourly wage! All told, we are paying the government 32.2% in payroll taxes! You think that a seat-of-the-pants startup contractor is going to pay all that (let alone plow through the bureaucratic forms)? No, he’s going to hire illegal Mexican workers, because they want to get paid in cash. Bank account? Forget it: he’ll cash checks at The Money Tree.

Let’s look beyond the case of the gyppo contractor and the illegal alien workers. What about the marginal unskilled kid from the inner city or the white working class? Is he better off with his employer paying FICA, unemployment, and workers compensation? Of course not. He’d be much better off if he got the money in cash rather than the promises of Social Security in 40 years, unemployment benefits, and workers comp., all adding up to 32 percent of his wages that he never sees.

When ObamaCare gets going, of course, this situation will only get worse.

Every time the government enacts a new benefit, or tax or economic regulation, it increases the cost of doing business for ordinary, law-abiding businesses. Every marginal business affected by the new tax or regulation has to make a decision: does it try to obey the law, or does it go “off the books?” Of course, our liberal rulers understand the problem. That is why they often exempt small businesses from the latest regulation. But what they are admitting, every time they do it, is that their high-tax social-benefit state is profoundly unjust.

One of these days some right-wing demagogue is going to turn the general disgust with liberal injustice into a national political movement of bitter clingers.

But don’t expect the ruling class to notice until it is too late. As Deirdre McCloskey writes: a typical oligarchy rises, closes to new entrants, and then goes to sleep.

Meanwhile, the regulatory state starts to break apart from its internal contradictions, and more and more of the rest of us decide to work off the books. But there comes a time when it is not just economically necessary to avoid unjust laws and taxes. It becomes a moral imperative.

Christopher Chantrill blogs at www.roadtothemiddleclass.com.

Buy his Road to the Middle Class.

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Chappies

“But I saw a man yesterday who knows a fellow who had it from a chappie that said that Urquhart had been dipping himself a bit recklessly off the deep end.”  —Freddy Arbuthnot
Dorothy L. Sayers, Strong Poison


Civil Society

“Civil Society”—a complex welter of intermediate institutions, including businesses, voluntary associations, educational institutions, clubs, unions, media, charities, and churches—builds, in turn, on the family, the primary instrument by which people are socialized into their culture and given the skills that allow them to live in broader society and through which the values and knowledge of that society are transmitted across the generations.
Francis Fukuyama, Trust


Hugo on Genius

“Tear down theory, poetic systems... No more rules, no more models... Genius conjures up rather than learns... ” —Victor Hugo
César Graña, Bohemian versus Bourgeois


Education

“We have met with families in which for weeks together, not an article of sustenance but potatoes had been used; yet for every child the hard-earned sum was provided to send them to school.”
E. G. West, Education and the State


Faith & Purpose

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Finke, Stark, The Churching of America, 1776-1990


Conversion

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James M. Ault, Jr., Spirit and Flesh


Postmodernism

A writer who says that there are no truths, or that all truth is ’merely relative’, is asking you not to believe him. So don’t.
Roger Scruton, Modern Philosophy


Faith and Politics

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Pope Benedict XVI, Speech to European Peoples Party, 2006


China and Christianity

At first, we thought [the power of the West] was because you had more powerful guns than we had. Then we thought it was because you had the best political system. Next we focused on your economic system. But in the past twenty years, we have realized that the heart of your culture is your religion: Christianity.
David Aikman, Jesus in Beijing


Religion, Property, and Family

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F.A. Hayek, The Fatal Conceit


Conservatism

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Danny Kruger, On Fraternity


US Life in 1842

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Michael Novak, The Spirit of Democratic Capitalism


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