What follows is a long response to Beldar regarding a debate we have had over the morality of SALT deductions. This was initially a comment, but for reasons explained at the end of the post, I have elevated it to a new post, with light edits for those unfamiliar with the previous discussion. (It will certainly help to read the previous post to which I added the comment, and the comments thereto, to fully understand the discussion.) Here is the comment:
I also don’t understand your distinction between the same dollars being taxed and the same dollars being “taken” by two sovereigns. The latter is grammatically impossible.
I believe what you are actually objecting to is having the federal definition of taxable income based on your pre-(state)-tax income rather than your post-(state) tax income. That’s the effect of the deduction.
Yes, of course the same dollar cannot literally be taken by two different sovereigns. But there is a conceptual way in which something like that is happening.
Return to my example of two extortionists on a highway. Imagine that instead of reaching into your pocket, the two extortionists have you line up stacks of dimes. You have one hundred Inflatable football helmet tunnel dimes, and extortionist A goes first. He tells you to set them up in stacks of 10. You do, and he takes one of the stacks.
Extortionist B tells you to line them up in stacks of 10 as well. “Rather than taking stacks, I like to take one dime from each stack of 10.” You line up your nine remaining stacks, and he takes one from each stack. Then he says: “Where is the last dime.” You say: “What do you mean? I have only nine stacks.” He says: “You started out with ten. I want a dime from the stack you started out with.”
You say someone else has it. So he takes another dime from one of your stacks of nine.
Yes: literally he did not take one of the dimes the first extortionist took. The actual dime he takes will be a different dime, possibly with a different date and mint mark, a different state of cleanliness, and a different amount of wear and dirt.
But in a conceptual sense, he took one of the same dimes you gave the first extortionist. And in this world, where money is most often measured by numerical symbols on a computer screen, and the reality behind those symbols is a binary code reducing to a universe of ones and zeros, the conceptual is supreme.
So yes, I believe there is a sense in which it is indeed the same money.
But if that explanation somehow seems like mental trickery, let’s put it a different way. There is a tax base (defined as the universe of income you receive that is subject to taxation) and then the taxes (defined as the money actually paid out of that tax base). And my issue is not that the same dollars serve as the tax base for two different sovereigns. My issue is that the sovereigns each include in their tax base, money that is already gone, as taxes pledged (whether it has already been paid, or will later be owed) to a different sovereign.
Now, granted: some commenters have (in their mind cleverly) tried to analogize this to money paid to private businesses. For example, commenter “furious” says above: “You can no more declare your earnings ‘pledged to another’ than you can deduct from the electric bill what you paid to the gas company, or from Union 76 what you spent at Ralph’s.”
To fully explain why I think this analogy doesn’t work would probably require an entirely separate comment or post for me to explain it correctly. The short answer is that government is not just another “business” and the things it does are not just another “suite of services” that are on offer, the way any business might offer you a suite of services. The key difference is this: you choose to give money to a private business like the supermarket. By contrast, the government indeed resembles a highway extortionist much more than it resembles a private business. There is nothing whatever that is voluntary about the payment of taxes. Ultimately, if you fail to pay them and get caught, men with guns will appear at your door to forcibly throw you into a cage. There is nothing voluntary about that.
I don’t much care if you agree with some or all of what government does. If you are taking Bus A downtown to switch to Bus B which will run you to the City Park, and some guy with a gun hijacks Bus A and demands to be driven to the City Park, you might like where you are going — but that doesn’t really make it “voluntary,” now does it?
And I thought that aphrael’s rather amazing insight was that disallowing SALT deductions really creates a rather unique situation: in which two different government sovereigns, each with the ability to initiate force against me, are each extorting payments from me that are based on a tax base of money that is, in part, only theoretical — not because I used part of it voluntarily to obtain services, but because part of the tax base has already been extorted from me in the form of taxes, or extortion, by the other entity.
And that strikes me as wrong.
Different taxing authorities each set their own definitions. That was what I meant by my comment about highwaymen not respecting each others’ criteria. You’ve instead twisted that into my defending highwaymen.
I promise you, most sincerely, that I never intended to twist your words. I took care to state that I thought I was being fair. I am disappointed that you think I wasn’t. So let me try to see where I misinterpreted you. You said:
Your successive highway robber analogy presumes that highwaymen are supposed to be bound by consistency to respect one another’s tolls. But since when have highwaymen or taxing authorities ever been honorable or consistent or respectful of anyone?
To me, that sounded like a defense — or at least a description of the taxing authority that acknowledges that it really doesn’t need to be honorable or consistent, that it never has been, and that I shouldn’t expect it to be. You seem to say you didn’t mean it as a defense, and I’ll accept that. I suppose, then, that you mean it instead as descriptive: this is how it is.
But I have been arguing about the way it should be. I was attempting to force everyone — at least anyone who defends the concept of taxing the same dollar that another sovereign also demands — to morally justify the state of affairs in which we find ourselves. And I haven’t seen that from you, Beldar. Instead, I find a description of the taxing authority as not caring about honor or consistency or respect.
If that is your only response to my request for a justification, then I really don’t think I was being unfair to say that, in essence, you are making a sort of “might makes right” argument.
I disagree that it’s only “moral” for the federal government to consider your post-(state) tax income whether that’s post-state income tax, post-state property tax, or post-state sales tax. I don’t think you have any right, moral or otherwise, to insist that only your post-state tax income be considered as part of your taxable income for federal income tax purposes.
That is, with all due respect, an assertion but not really an argument. You are simply couching the issue in rather traditional terms and declaring that you don’t think it’s immoral. But why? Why should a sovereign be able to pretend that you have a tax base of x from which to draw tax dollars, when in reality you have a tax base of x-y, where x is what you started out with, and y is what another sovereign extorted from you.
This is what I am looking for. And it’s why I spent a long time writing this comment.
And why, rather than leaving it as a comment, I am turning it into a new post — to make it more prominent, to open up discussion from more people, and to make sure Beldar does not miss it.
[UPDATE: edited to remove a misuse of the word “normative.”]