“PragerU” Creates Taxpayer Fantasyland

PragerU is seen here constructing an argument on their own terms, creating a “reality” that conveniently fits their narrative, rather than explaining how their narrative fits our reality.  Their argument is based on a hypothetical involving a trio of brothers named “Tom, Dick, and Harry” in effort to portray our progressive income tax system as being unfair.  But huge problems with logic are met early on in the presentation, most significantly with the representation of taxpayers as being generic beings who all earn the same hourly wage.

The one variable they do apply actually compounds the fundamental problem with their argument, using the amount of hours taxpayers “choose” to work as the only metric by which they differ.  Yet the consideration of varying wages, salaries not based on work ethic, the unique circumstances and opportunities of the individual, and one’s ability to pay are all absent from their argument.

In other words, all the specific attributes that actually make up the individual taxpayer are ignored in this examination of the issue, with the one exception being “hours worked.”

See the video here.  On to the details:

Narrator: “They were raised in the same home, with the same parents, had the same IQ, same skills and same opportunities. Each was married and had two children.”

But three brothers with the same characteristics is not an accurate portrayal of the tax-paying population.  Besides the glaring fact that we all have different IQ’s, skills, and talents, and family sizes, what conservative theology often fails to acknowledge are the different levels of opportunity in life.  In comparing both ends of the spectrum, an individual born in poverty, enduring the continuous anxiety of their crime-ridden neighborhood with poor schooling is not given the same chance for economic opportunity as a child who was born in the wealthy suburbs, inherited a fortune, and is living off the interest from dividends.

“They were all carpenters making $25 per hour.”

We all don’t earn the same wage.  PragerU paints the taxpayer with a broad brush in effort to make the figures they provide throughout the presentation easier for their audience to grasp by not using a variable wage.  But by not acknowledging these variables that pertain to what one earns and how they earn it, they create a fatal flaw that discredits everything.

“…they had different priorities. For example, Tom, chose to work 20 hours per week, while his brother, Dick worked 40 hours and Harry 60. “

There are two problems with this common conservative mantra that connects “priorities” with work-ethic.

First, the amount of hours you work doesn’t necessarily equate to wealth.  There are those who work little and make a ton of money, and those who put in long-hours only to bring home a small paycheck. A worker at an Amazon warehouse can work 60 hours a week, and receive compensation that is far less than a salesman who works only 40 hours, or a manager that works only 20.
But because PragerU ties them all together as each earning $25/hr, Harry is the wealthiest because he simply works more.

Second, many workers, especially in bad economies don’t “choose” to work only 20 hours.  Part-time work is often all the employer can offer them, with the employee very willing to work more hours if they become available.

“Tom and Dick spent all of their family income.  Since they paid into Social Security they figured, they didn’t need to save for retirement.  Harry and his wife, on the other hand, had, over many years, put away money each month and invested it in stocks and bonds.”

Another simple assertion is made here – that all taxpaying citizens have extra money to put into savings, or to invest in the stock market to plan for their retirement.  For PragerU’s implication is if you don’t have money saved up, you must have simply chosen not to do so.

This flawed argument has been made by many notable conservative figures in different forms, such as when Mitt Romney stated that kids should “borrow money from their parents” if they can’t afford college.  Or the promotion of the Bush-era “Health Savings Accounts” as a solution for the poor to save for medical expenses.

But a large number of Americans have no savings or retirement, not simply because they choose not to plan for the future.  Instead, they find themselves diving deeper and deeper into debt, maxing out credit cards, and needing every penny from their paycheck to live day-to-day as a result of Reagan-era policies that have never been re-adjusted.

“Here’s how it worked out: Tom made $25,000 a year, Dick and his wife made $75,000 and Harry and his wife, $150,000.  When a new housing development opened up in their community, the brothers decided to buy equally-priced homes on the same private street.”

Little is needed beyond basic common sense to realize that someone making $25K a year would not buy the an “equally priced home on the same private street” as someone who makes $125K a year.

“One day the brothers decided to pool their funds for the purpose of improving their street.  Concerned about crime and safety, and wanting a more attractive setting for their homes, the three families decided to install a security gate at the street’s entrance; repave the street’s surface; and enhance the lighting and landscaping.  The work was done for a total cost of $30,000.”

How this even slightly resembles realistic circumstances of two completely different kinds of taxpayers is beyond my realm of understanding.  First, he seems to be describing amenities that a private community may share, usually paid for by association fees, not public tax dollars. Someone paying $30,000 for upgrades in their own community does not at all represent how tax revenue is disbursed.

Even more asinine is the allocation of the same neighborhood amenities to both the lowest and the highest earning brothers. Someone who earns $125K/yr may indeed have security gates, pristine streets, and well manicured landscaping on their private property or neighborhood.  But this bears little resemblance to the typical residence of a $25K/yr earner.  Instead, someone making $25K is much more likely to be living in a crime-infested neighborhood with poor schools, pothole infested roads, and bleak landscaping.

“Harry: ‘..my family makes more money because my wife and I work long hours, and because we have saved some of the money we’ve earned to make additional money from investments.  Why should we be penalized for that?'”

Again, working long hours does not equate to making more money.

And you’re not penalized for making additional money through investments – as a married couple making $125K a year, you’re rewarded by paying a low 15% capital gains rate on those returns, as well as writing off any losses up to a few thousand dollars.

Also, being given no details about the annual earnings, we are left wondering what that $125K is comprised of.  Presumably, it incorrectly includes returns on their capital gains investments.  If PragerU wants to use the taxable income of $125K a year in their example, they need to deduct that portion of the income that was made by capital gains as that is taxed separately 15%.  Capital gains are not taxed a second time as income.

I hear many Conservatives continually talk about the injustice of our tax system, using that 39% tax rate on upper-income brackets as the poster-child for their grievance.  Yet they never mention that the rate applies to income only, and is a nominal rate (the rate before deductions and credits), with taxpayers almost always paying much less than that.

Another common and substantial omission in their rhetoric is the means in which many in the upper income bracket accumulate their wealth – through capital gains, not income from wages.  So an honest portrayal of this argument should have included the low 15% tax on Harry’s gains through investment.  For some perspective, that 15% rate Harry pays is the same as that of a laborer earning $9,525 a year in income (the low end of the 15% income tax bracket).

“‘I’ve got an idea,’ Dick said. ‘Our combined income is $250,000, and $30,000 is 12 percent of that amount. Why don’t we each pay that percentage of our income? Under that formula, Tom would pay $3,000, I would pay $9,000, and Harry would pay $18,000.'”

Here they’re speaking of the idea of a flat tax, which would be the perfect system if everyone made the same exact wage and our earnings were strictly a result of how many hours we chose to work.  But this is a far from accurate portrayal.

What progressive taxation does is account for ones ability to pay by acknowledging that a 12% tax rate for a millionaire is a far less financial sacrifice than a 12% rate implemented upon a $25K/yr income.  Low wage earners often need the aid of tax-relief just to provide the basic needs for themselves and their family.

“Harry, however, was stunned.  ‘You want me to pay almost 80% of the bill despite the fact that each of us is receiving the exact same benefits?  Where did you get such a crazy idea?'”

But taxpayers don’t all receive the same benefits. U.S. policy which includes taxation, has been shown to primarily benefit the top 90%.  Here is the study conducted by Northwestern and Princeton Universitiy:

http://www.businessinsider.com/major-study-finds-that-the-u….

Our tax code is both directly and indirectly written by wealthy interests, often allowing for a high-income earner to pay a very low effective rate, while also allowing a company reaping billions in profits to pay very little to nothing in taxes.  Amazon was recently reported to have paid zero in federal income taxes in 2017- a company that also gets taxpayer subsidies by state governments.

This is not unusual, as successful and massively profitable corporations are subsidized by taxpayer dollars in virtually every industry.  An indirect subsidy is often also provided in the form of food stamps to employees who are paid an unlivable wage by these employers with astronomical profit lines.

While this realization would seemingly call for a bold initiative to correct this course and make government work for all of its citizens, this perfidious form of socialism reserved only for the elite has been emboldened by five conservative Supreme Court justices in the 2010 “Citizen’s United v. FEC” decision, allowing unlimited amounts of money to be spent by the wealthiest of entities to buy our politicians.

Prager U’s level of irresponsibility throughout this presentation is exceptional – no exploration of any subject matter should be taught with such a disregard for accuracy.  Instead this is intended to only promote an agenda, using a hypothetical that represents a complete fantasy rather than resembling actual taxpayers.

The ultimate irony may lie in Prager University’s other videos, in which they have had more than several guest speakers belittle the standards of our university professors and their curriculum.  But as this video shows, it’s evident that they are in no position to be throwing stones.

Amongst many other argumentative flaws, the withholding of obvious and necessary variables present in taxpayer construct is inexcusable, and would not be deemed as an acceptable way to present an argument by any university. ■

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