Articles: No New Tax Cuts

No New Tax Cuts
By Michael Barry

On O'Reilly on July 8, 2011, Alan Colmes said -- in defense of Obama's fiscal policy -- that 40 percent of the 2009 stimulus was tax cuts. If you look beyond this rhetorical flourish, you find that, yeah, there was 40 percent in things that the media called "tax cuts." They mailed out $116 billion in $800 checks to individuals making under $75,000. Fourteen billion in credits for green energy. A college tuition tax credit for individuals making under $80,000. An $8,000 check in the mail for first time homebuyers making under $75,000. An increase in the earned income tax credit. With "tax cuts" like these, who needs spending?

Throughout the 2008 campaign, Obama bragged that he was for tax cuts -- specifically, mailing checks to his friends and constituents. Obama is actually for keeping the Bush tax cuts, except for the "rich" (which I think this time is measured as singles making over around $170,000). The cost of keeping the Bush tax cuts for the rich was widely reported as around $700 billion (over 10 years). The cost of keeping the Bush tax cuts for everyone else? $2.7 trillion. Words fail.

The Bush tax cuts included a radical increase in the progressivity of the Tax Code. "[T]he share of overall tax liabilities of the top 1% increased from 22.9% to 25.3%, as the result of a tax system which became more progressive since 2000." Bush "cut the lowest income tax bracket by one-third and doubled the refundable child tax credit -- taking 10 million low-income families off the income tax rolls. In fact, the poorest 40 percent of households now pay zero income taxes, and many actually receive checks from Washington on April 15."

And now Senator Coburn (what happened to this guy?) is proposing changes to Medicare -- which includes its own self-contained tax-harvesting system -- that make benefits more progressive. Turning it into a welfare system financed by "rich" people.

And, oh yeah: The Democrats want to keep not collecting Social Security taxes (to "put money in the pockets of consumers"), even though they admit that that system is in fiscal trouble. Taxes under Social Security are "regressive" (that is, they are flat), but benefits are progressive, and the net is a marginally progressive system. Not collecting Social Security taxes, financing benefits out of general revenues, and radically increasing the progressivity of benefits -- all of these things, again, turn this into another system of transfer payments from the "rich" to the "middle class."

All of this heightened progressivity leads in only one direction. If you study the history of the development of democracy, there was only one major concern that thinkers not attached to some special interest were concerned with. That, as Franklin put it, "[w]hen the people find they can vote themselves money, that will herald the end of the republic." When half the voters pay no taxes, the only battle is over how much to tax the "rich," and every attempt to stop government growth is characterized as special pleading for the rich.

This has to stop. The Tax Code has become a whore. It can be anything to any person in a position to impose their will on the American people. Like financial regulation and the nascent federal health care system, it is an (intentionally) overly complex system for looting those out of favor and providing bread and circuses and payoffs and money-laundering to those in favor. G.B. Shaw famously said that all professions are conspiracies against the laity. Here we have a system that objectifies that principle in lurid detail. With the right lobbyist (professional) and the right spin, you can get a tax deduction. If you just stay home and do your job, you will be punished.

This system must be made radically simpler and the burdens it imposes and the benefits it bestows must be made radically more transparent and explicit. In a democracy, the people must have a way to understand and make intelligent decisions about tax policy. They can't now. And the system must burden all citizens.

America is going through a Magna Carta moment. Government is taxation. Democracy grew out of a resistance to monarchical demands for wealth to support luxurious courts and self-aggrandizing wars. The people -- historically, we are talking about people who, in today's dollars, did make over $250,000 -- said: "You can't tax us without our consent." Our country was founded on a tax revolt.

Before any new specious cuts which are simply newspeak for income redistribution, give us a Tax Code we can understand, and tax all voters. And then we can talk about rates.