Monday, September 20, 2010

"Simply Stealing"? Simply Silly

The closer we get to an election, the more absurd the political dialogue becomes. Last Sunday, a Spartanburg Herald-Journal editorial denounced the president's proposal to extend the current tax rates only for those making under $250,000 a year as "Simply stealing." That's right. Raising taxes is theft.

As silly as that statement is, it is illustrative. This debate regarding the extension of the Bush tax cuts is exposing some basic fault lines in American politics, the same lines that have dominated since at least the tax revolt of the late 1970s that culminated in the Reagan tax cuts of the early 1980s.

The basic question is this: should the current rates, which are set to expire at the end of the year, be extended as they are for all income groups (the Republican position), or should they be extended only for couples making under $250,000 a year (the president's position).

Before engaging the merits of the two positions, a little history for context. The reason they are set to expire is that the Republican Congress that passed the current tax rates back in 2001 had to limit the time they would be in effect in order to keep down the long-term loss of revenue. In other words, if nothing were to be done by this Congress, and tax rates were to revert to the levels of the 1990s, it would be due to the way Republicans wrote the bill back in 2001. And they wrote it that way so that they could pass it using reconciliation (yes, the same technique used to amend the health care bill, which today's Republicans denounced as an anti-democratic abuse of power).

But no one seriously proposes doing that. Republicans propose, as they have ever since they passed the initial bill in 2001, that the current rates should be made "permanent." In the 2008 campaign John McCain took that position, while Barack Obama argued that they should be extended for those making under $250,000 and allowed to expire for those making more. One could argue that the election results should have settled that question, but Republicans have done little in the last 18 months to show that they respect the results of the last election.

The various arguments advanced by Republicans today reveal the inconsistency of that party's economic vision. In 2001, they argued that the tax cuts were necessary because the federal government was running a surplus. Today, they argue that the extension of the tax cuts is necessary, even for the very wealthiest Americans, despite the fact that the federal government is running a huge deficit. So it seems that regardless of economic circumstances, taxes should always be cut.

They denounced the president's stimulus bill in 2009 because it was based on Keynesian economics: the idea that in a slow economy, the federal government should cut taxes and increase spending to increase economic activity. Republicans rejected that theory, and claim it has failed. Now they say no one's taxes should go up during a recession--which is itself a Keynesian concept.

They say we need tax cuts now, because the stimulus failed, while neglecting that fully one-third of the stimulus bill was tax cuts (and which Republicans almost unanimously voted against).

They argue that the president's proposal would hurt small businesses and prevent them from creating jobs, while the New York Times reports that fewer than 3% of small businesses would be affected by it:

"Even among the 750,000 businesses that would be subjected to the higher rates in 2011, many are sole proprietors — a classification so amorphous it can include everyone from corporate executives who earn income on rental property to entertainers, hedge fund managers and investment bankers. Because 80 percent of America’s 32 million businesses are sole proprietorships, 90 percent of the tax cut would be derived from businesses without employees."

In other words, it would have virtually no negative impact on jobs, while adding $700 billion in revenue to federal coffers.

None of the arguments against the president's proposal put forward by conservatives hold water. So what is the real reason? Fortunately, some people have trouble hiding their true agenda. In a stunning display of political obtuseness, Senate Minority leader Mitch McConnell stated last week said that those who make over $250,000 a year are “the people who’ve been hit hardest by this recession.”

This will come as news to the millions and millions of unemployed and under-employed Americans struggling every day to make ends meet. What should not be news to anyone is the dogged determination of Republicans to resist tax increases for the wealthiest Americans, regardless of the consequences. The wealthy have suffered the most, they believe, and cannot be asked to sacrifice any more. That's the honest explanation, but don't expect to see it in this season's campaign ads.


  1. I know that I am only a B student when it comes to math, and that is only with a calculator on hand, but am I correct that in order to help out a budget in crises that two things need to be done? Cutting expenses AND raising revenue? So why isn't raising revenue being considered?

  2. There is a sound argument for not considering general tax increases NOW. The economy is still limping along, growing but just barely, and to increase taxes threatens to reduce demand and thus potentially push us back into negative growth. This argument is less compelling, however, for those who would be affected by the president's plan, because they are less likely to actually consume with that income, and are more likely to simply save it. The effect of saving is also to decrease demand. But anyone who is serious knows that in the long run, both spending and taxes have to be on the table.

  3. Good points, but let me suggest an important rhetorical distinction. There isn't an Obama plan with "a middle class tax cut" -- the Obama plan is for a tax cut for everyone on all income below 250K. That means everyone gets a tax cut, even the rich, but only on the portion of income below 250K. The difference with the GOP plan is thus more stark--the difference between his plan and their plan is that his tax cut goes to everyone, whereas they want to add a tax cut that goes exclusively to the rich.

  4. That detail is easy to overlook, but significant, and the president has started pointing it out. The complaint then is not that the top two percent don't have their tax cuts extended, but only that it doesn't apply to the income over $250,000.