Ezra Klein has an interesting discussion on this issue, the politics, policy, and ideological bent of the conversations.
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Tuesday, August 23, 2011
Ezra Klein's Wonkbook
Two months ago, Wonkbook was mostly a compendium of articles detailing the Democrats' interest in raising taxes and the Republicans' resistance to the same. In recent days, that's flipped: now each morning brings new articles about how Republicans -- yes, Republicans -- want to raise taxes, while Democrats want to keep them low. So what changed?
Who we're talking about, mostly. Two months ago, we were talking about raising taxes on the rich. Now we're talking about keeping them low on the poor. And the politics of that turn out to be totally different.
For one thing, you've got the payroll tax cut, which the administration favors, which is understood as a stimulative measure, and which offers almost no benefit to the wealthy. As Charles Babington reported for the Associated Press, "many of the same Republicans who fought hammer-and-tong to keep the George W. Bush-era income tax cuts from expiring on schedule are now saying a different 'temporary' tax cut" -- the payroll tax cut -- "should end as planned. By their own definition, that amounts to a tax increase."
Then there's the federal income tax. In recent years, Republicans have become increasingly agitated by the fact that as many as half of all Americans don't pay federal income taxes. In an article at Slate, Dave Weigel traces the mounting outrage. For now, this argument is more rhetorical than it is legislative. Unlike the payroll tax cut, which could expire at the end of this year, there's not been a serious proposal from a serious Republican politician to raise taxes on this group. And perhaps there can't be. These are pretty sympathetic groups, and pretty popular policies.
A plurality of the no-income tax club are the elderly. They don't pay taxes because they don't have jobs, they get a bigger standard deduction, and many Social Security benefits don't get taxed. Who is going to be the politician to stand up and propose raising taxes on low-income retirees?
Most of the rest of the folks who don't pay taxes are quite poor. Either the standard deduction wipes out their tax liability, or the standard deduction plus some of the income support we do through the tax code, like the Child Tax Credit and the Earned Income Tax Credit, wipes out their tax liability. What you'll notice about both those policies, of course, is that Republicans both passed and expanded them in recent years, and haven't shown any specific interest in undoing either. (For a full breakdown of why half of Americans don't pay income taxes, head here.)
But if that explains why so many Americans don't pay taxes, it doesn't explain why Republicans are suddenly upset about it. Weigel has one theory: "When the Tea Party started rallying in 2009, it wasn't protesting higher taxes, because federal income taxes were lower, with more loopholes. It was protesting the perception that productive Americans were shelling out for an ever-expanding class of moochers. And Republicans have taken the Tea Party's lead." Babington relays another, at least as relates to the temporary payroll tax cut: "Republicans say their stand is consistent with their goal of long-term tax policies that will spur employment and lend greater certainty to the economy."
My view is that this is a mixture of partisanship, politics and ideology. The partisanship part is Democrats want the payroll tax cut extended, so Republicans don't. The politics bit: Democrats are making Americans angry with poll-tested language arguing that the rich don't pay enough, so Republicans are responding with an argument that the poor are mooching off the middle class. Then there's the underlying ideological framework: Republicans believe, either implicitly or explicitly, that the economy is really driven by well-compensated, wildly productive geniuses at the top, and so the true aim of tax policy is keeping their tax burden low so they have sufficient encouragement to unleash their potential. Democrats believe those folks have so much money that they're no longer primarily driven by monetary concerns and that, either way, the key question for the economy is how to get more demand into it quickly, and for that, tax cuts to the poor are clearly superior, as the poor spend the money they get.
But whichever explanation you go with, the bottom line is the same: we're not really having a discussion about taxes, yea or nay, in this country. We're having a discussion about the distribution of the tax and deficit-reduction burden, and the two sides' opinions on that question are driving their take on taxes.
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