Langone and the Old Days

http://www.futureofcapitalism.com/2010/10/langone-and-the-old-days

In a Wall Street Journal op-ed, Kenneth Langone recalls starting Home Depot in 1979:

If we tried to start Home Depot today, under the kind of onerous regulatory controls that you have advocated, it's a stone cold certainty that our business would never get off the ground, much less thrive. Rules against providing stock options would have prevented us from incentivizing worthy employees in the start-up phase—never mind the incredibly high cost of regulatory compliance overall and mandatory health insurance. Still worse are the ever-rapacious trial lawyers.

I'm as critical of President Obama as just about anyone, but the nostalgia for 1979, when the top marginal federal income tax rate was 70%, strikes me as maybe a little misplaced. There are plenty of ways in which technological advances have decreased the cost of starting a business today as opposed to in 1979, too.

Mr. Langone also joins the crowd clamoring for a means test for Social Security:

it makes little sense to send Treasury checks to high net-worth people in the form of Social Security. That includes you, me and scores of members of Congress. Why not cut through that red tape, Mr. President, and apply a basic means test to that program? Just make sure that money actually reduces federal spending and isn't simply shifted elsewhere. I guarantee you that many millionaires and billionaires will gladly forego it—as my wife and I already do when we forward those checks each month to charity.

I respect Mr. Langone, but his argument for means testing Social Security doesn't convince me. Those aren't "Treasury checks" — they are, at least theoretically, a return on money that Mr. Langone and other recipients paid in to the Social Security system to begin with in the form of payroll tax contributions.

"Just make sure that money actually reduces federal spending and isn't simply shifted elsewhere"? What are the chances of that? Low, in my estimate.

"Many millionaires and billionaires will gladly forego it"? What about the ones who won't? Don't they have any rights to the benefits they were promised when they paid their Social Security taxes?

"As my wife and I already do when we forward those checks each month to charity"? Those are voluntary contributions, while the surrender of benefits that had been promised by the government in exchange for payroll taxes paid in is an involuntary contribution, at least for those who are not in the "gladly forgo it" camp. There's a big difference. With a voluntary contribution, Mr. Langone can decide on a cause he thinks is worthwhile. With an involuntary contribution, the politicians and bureaucrats in Washington can spend the money on things such a bridges to nowhere, farm subsidies, or other projects that may please lobbyists or campaign contributors but that Mr. Langone may not find as worthwhile.

by Ira Stoll  |  Oct 15, 2010 at 11:37 am Related Topics:  Taxes receive the latest by email: subscribe to the free futureofcapitalism.com mailing list