Celebrate The Income Tax By Buying 2.41 Big Macs

Over the weekend, USA Today marked the anniversary of the income tax by publishing an article by Al Neuharth (“How income tax has changed in 100 years”), which was followed by a “Feedback” section. Since apparently no media organization can discuss taxes without interjecting the reactionary opinion of Grover Norquist, here is what the paper included with Neuharth’s story:

“All consumed income should be taxed once at one low, flat, internationally competitive rate. High marginal tax rates and redundant taxes on savings retard economic growth and make us poorer.”

— Grover Norquist, President Americans for Tax Reform

What Norquist means by “consumed income” is that part of one’s income that will be spent on goods and services and not saved. For many working class folks, this means almost all of their income, since these days they have to spend most or all of it just to get by.

Many conservatives believe that such a wealthy-friendly, “low, flat” tax rate as Norquist proposes would make us more “internationally competitive.” What does that mean?

Perhaps we can get a glimpse into what conservatives mean by saying that America needs to become more globally competitive by looking at what happened on Bill O’Reilly’s Reactionary Review on Friday night.

Laura Ingraham, subbing for O’Reilly, took a swipe at unions, when it was suggested by Demos think-tanker David Callahan that unions would help mitigate the enormous transfer of America’s wealth into the hands of the 1 percent:

INGRAHAM: Stronger labor unions? How do we compete with China, Vietnam, South Korea, India, when we are going to have stronger labor unions that insure that we have more work place regulations, more ways that business has to pay more money to make ends meet? The two things don’t add up.

Ahh. That’s what they mean by making us more internationally competitive: competing with low-wage economies like China, Vietnam, and India. I get it now. Even if it doesn’t add up for Ingraham, it’s starting to add up for me:

1. Conservatives believe that we need to keep taxes low on the wealthy in order to make us more internationally competitive.

2. And they believe we have to keep wages low for workers to make us, uh, more internationally competitive.

Now we can add it all up: The rich get richer and the poor get poorer, all in a race to the bottom for most Americans.

Speaking of competing with low-wage countries, Princeton professor of economics, Orley Ashenfelter, published a study last year famously using a “Big Mac Index,” which was an attempt to compare wages across the world by measuring “the number of minutes it takes for a McDonald’s worker to earn enough money to buy a Big Mac sandwich.”

Let’s look at what the professor found (red highlight mine):

Big mac index

Laura Ingraham asked, “How do we compete with China, Vietnam, South Korea, India“? How, indeed. In the U.S. the “McWage” is $7.33 an hour and will buy almost two and a half Big Macs. In China the McWage is 81 cents an hour and will barely buy half a sandwich. In India the McWage is even lower (45 cents) and will buy one-third of a Big Mac.

So, in order for us to “compete” with such countries we will definitely need to lose our affinity for Big Macs and then win the race to the bottom that people like Norquist and Ingraham and other conservatives would have us run.

Finally, I do want to include another quote from the Feedback section of that USA Today tax article, this one from someone who gets it:

“Our tax system’s evolution has produced a middle-class nation that takes care of our elderly, educates our children, protects our environment, etc., etc. These blessings are well worth the price.”

— Robert S. McIntyre, Director Citizens for Tax Justice

3 Comments

  1. Anonymous

     /  February 4, 2013

    Why do they never want to pay US managers the same as overseas managers?

    Like

  2. Excellent analysis, Duane, and the Big Mac Index is absolutely brilliant! Economics is tough material to understand but the BMI should be clear to almost anyone: an hour of flipping burgers in Peoria buys 5 times the number of Big Macs that it does in Beijing. QED!

    Like

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