Thursday, May 15, 2008
How did a callous and inaccurate argument for taxing the poor become part of the conservative agenda and the White House playbook?
Dec 21, 2002 | On Nov. 20, the editorial page of the Wall Street Journal began worrying that most Americans don't pay enough in taxes. That was a shock -- since the editorial page, a leading forum for conservative thought in America, has always led the charge to cut taxes. But in an editorial titled "The Non-Taxpaying Class," editors agonized over the fact that the federal government gets most of its money from wealthy people. The top 5 percent of Americans -- people who earn about $120,000 or more a year -- "coughed up more than half" of tax revenue, the paper said, while poor people pay almost nothing. A worker who commands the kingly salary of $12,000 a year pays just 4 percent of his income in taxes. That tax burden, the editors conceded, "ain't peanuts" -- but it's too small for that worker to feel any "rage" toward his wasteful government.
"Who are these lucky duckies?" the editors asked.
The editorial was widely ridiculed as an example of ideological stubbornness gone disastrously, hilariously overboard. "One of the things that has fascinated me about The Wall Street Journal editorial page is its occasional capacity to rise above the routine moral callousness of hack conservative punditry and attain a level of exquisite depravity normally reserved for villains in James Bond movies," wrote Jonathan Chait in The New Republic.
Chait and countless others pointed out that the Journal's argument was both factually wrong -- it considered only the federal income tax, not all the taxes that poor and middle-class people pay, in particular hefty payroll taxes like Social Security -- and culturally out of touch. Had the editors ever met a person of little means? Did they realize that being poor, while perhaps an attractive tax shelter, tended to come with such hard-to-bear downsides as not knowing where your next meal will come from?
You might think the chilly reception to the Journal's tax-the-poor idea would have pushed conservatives away from the idea. But you'd be wrong. Last Monday, the Washington Post reported that the Treasury Department and the White House Council of Economic Advisers are looking for ways to show that the rich are overtaxed and the poor are undertaxed. Some liberal economists see these developments as the opening shots in a long-term effort by conservatives to get closer to what has long been a dream of theirs -- the elimination of the current, slightly progressive federal tax system, and the institution of a flat tax.
A flat tax is one whose rate is the same across all income levels -- people making $20,000 a year will pay the same percentage of their salaries or purchases (10 or 20 or 30 percent, say) as those making $200,000 or $2 million. It was a hot idea in the mid- to late 1990s, but none of the flat-tax proposals amounted to anything -- they cost too much, or seemed too unfair, or both. But Republicans are trying once again to flatten taxes -- only this time, they're doing it a bit more quietly and much more slowly, laying a political and cultural groundwork instead of simply calling for the immediate scrapping of the tax code, as many did in the 1990s.
According to Grover Norquist, an influential conservative lobbyist and the president of Americans for Tax Reform, Republicans will soon attempt to pass some of the tax initiatives that his group considers key to the eventual establishment of a flat tax. The administration is likely to ask the new Congress for lower taxes on corporate dividends and business expenses, both of which, Norquist said, would have "pro-growth" effects.
Like many of the tax measures conservatives embrace, however, these new cuts will favor the wealthiest Americans. Indeed, that's the political rub of flattening taxes: If you want to replace a progressive tax system -- one in which wealthier people pay higher tax rates -- with a flat tax and still maintain comparable government revenue, you can't avoid cutting taxes for the rich and raising taxes on the middle class and the poor. Tax-policy conservatives say this is only fair: "No American worker should be punished by being taxed at a higher rate because they work hard, take a second job or work overtime or on Saturdays," ATR says in a recent newsletter. "All income should be treated equally." But is the majority of the public willing to give a tax break to the rich -- with an increase, or no break, for themselves -- just to be fair?
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