Doing the Math on Westover's Parables.

I can almost hear the clatter of hooves when Craig Westover lectures on economics.

No, not cloven hooves, silly! Just the sound of the carriage sweeping him away to his drawing room, where he can peruse his crumbling, leather-bound volumes of Bastiat, Hazlitt and von Mises, gathering strength before heaving out of his Chesterfield to compose a yet another grumpy missive to Dave Mindeman.

I do not disagree with some of Westover's argument. Such is the curse of a libertarian-leaning leftist who tries to keep an open mind. For example:

But beyond the essential obligations of government, as spelled out in its constitution, it is incumbent on government to prove the usefulness of the services it would propose to supply in exchange for taxpayer dollars. Apart from the intrinsic utility of government services, no valid argument can be made in favor of keeping a government employee on the payroll simply because such benevolence provides the employee a job.

Notice, if you follow the correspondents, Westover is refuting an argument Dave Mindeman does not actually make in his critique of the governor's approach to balancing the state budget. Mindeman, in my reading, does not say benevolence requires preserving government jobs. He simply observes that cutting services to avoid raising taxes on the wealthy produces more unemployment.

And, if I may add, it takes money out of circulation by people who must spend it so the investor class might place it productively with AIG, Bernie Madoff or collateralized debt obligations.

In response, Westover must haul out his Hazlitt again and run his finger over the well-rubbed lines:

Repetita docent: The benefits to government workers of collecting a salary is what is seen. The benefits to the economy that result from their spending is also what is seen. Mr. Mindeman cannot be accused of ignoring the obvious. But the great burden weighing on the taxpayer like a sodden cotton coat is what is not seen. The salary the government worker spends on himself is money the taxpayer does not have to spend on himself; the money the government worker spends in support of those who supply him is money not spent by the taxpayer with people who supply him.

To illustrate his point, he then lurches through an hilarious parable about a well-to-do family foregoing a $10,000 addition to their home because their taxes were about to spike by a similar amount.

Do the math. A family, let us postulate that they are well-to-do, is sitting at the kitchen table about to sign a contract with a home remodeler to build an addition on its home for $10,000. But just before they sign a newspaper article catches their eyes. It relates how the state of Minnesota will raise taxes in their bracket by $10,000 a year. This sobering news makes the prudent family reconsider, and it does not hire the remodeler to build the addition on its home.

Sobering news, indeed. But to swallow such a concoction, the family must read his newspaper columns to the exclusion of all else. Clearly, Westover must have learned the economics of the remodeling trade from his boss, who operates from a similarly theoretical grasp of taxes and small businesses.

Do the math, says Westover. Oh, I want to, but it is so hard with the tears running down my cheeks!

Nevertheless, here it is, based on the 2008 Minnesota tax tables.

The family in Mindeman's post with an adjusted taxable income of $200,000 might normally pay $14,145 in state income tax. To render a $10,000 increase for this family, Caesar would have to increase the rate for the current top marginal tax bracket from 7.85% to 32.88%!

This would never happen even if Margaret Anderson Kelliher and Larry Pogemiller handed out crack before every legislative session between now and the end of May.

Or let's say the family is making twice the threshold Mindeman mentions, and the evil state has added a new top bracket to steal their wealth, starting at income above $250,000. That would mean the new fourth tier would have to jump from 7.85% to 14.5% in order to raise an extra $10,000. (We won't even take into account that state taxes are deductible on federal income tax returns, so the effective cost to the high-income tax payer remains about 1/3rd less than $10,000.)

While it's not apparent, even in this economy, where to find a contractor who can do a home addition for $10,000, it's rather obvious who has not done the math.

There's yet more teeth gnashing in the post, but we've heard it before. The invitation to check his math, though, is new.

[By the way, a real bill that proposes to add a fourth tax bracket, just introduced by Sen. Ann Rest, would introduce an 8.5% top rate in 2010. For our family with the $400,000 income, that's a tax increase of about $1,000, unless they decide to move to South Dakota.]