Something very important is brewing just beneath the radar of most media attention-something which looks very much like the first stages of a progressive tax revolt. Moreover, it is about to converge with a broad range of developing strategies which suggest the possibility of something even more interesting: a progressive "ownership society." Taken together the two directions could offer new hope for progressive politics in general
Your quotations are necessary, for no redistributed provision of the progressive tax represents anything more than creative accounting, and certainly not ownership. Short-term effects of these redistributions can tickle the fancies of socialists, but one must realize that coerced investment is not a long-term solution. The point will be proven.
Furthermore, the manic optimism that would term a few desultory policies evidence of a "revolt" markedly ignores the reality that Mr. Bush was reelected with a greater margin than he was originally elected, after he imposed several wide-ranging tax cut policies.
Consider the following little noticed facts: Last November California voters approved tax increases for people making more than $1 million--and earmarked the proceeds for mental health programs.
I should expect these mental health programs, if they are successful, to permanently prevent California voters from approving any more progressive tax proposals.
New Jersey has enacted legislation taxing those making more than $500,000-and uses the money to offset regressive property taxes.
Well, the first rational question would be why the state of New Jersey needs to stifle growth with a progressive tax when they can simply cut the rates on the property tax to which they are supposedly opposed.
Interesting development 1: New Jersey solves the problem of an unfair tax on group x with another unfair tax on group y. One supposes the reasoning in Trenton was, Why reduce tax burdens on one group when you can hose every social stratum? Interesting development 2: This government response of equitable extortion is immediately hailed the paradigmatic example of the "progressive ownership society."
Easy and Obvious Prediction (EOP): Policies like New Jersey's will limit investment (with the progressive tax) and solidify poverty (with the property tax). Think stagflation, except with individual incomes.
In Connecticut-which is currently considering a new tax on incomes over a million-a recent poll found 77% of voters in favor of the tax (including 63% of Republican voters!)
Would you like to see the poll data confirming rampant homophobia in the form of nearly unified opposition to gay marriage and then continue your beatification of public opinion?
The conservative Virginia State Senate has also approved legislation to raise income taxes on those making more than $150,000. And in Indiana, Mitch Daniels, once President Bush's extremely conservative White House Budget director ("the blade") and now governor of the state, proposed a special tax increase on residents making more than $100,000 a year
Well, I suppose it might silence some people who have been saying that "conservative" politicians are tools of the rich, right?
Oh no seriously, it simply proves that politicians have little understanding of basic economics. You have yet to cite any reason that wealth eliminates any claim to equal tax representation, presumably content with the assumption that your progressive crusaders will automatically recognize the tautological need to implement restrictive taxes at arbitrary income points with six digits.
Tax increases, besides obviously reducing the amount of available capital for investment and consumption, also create deadweight losses in the economy. Estimates average that every dollar increase in income tax revenues creates a 25 cent deadweight loss in the economy at large. Specific to contemporary policy, Harvard professors Martin Feldstein and Daniel Feenberg estimate that the 2001 Bush tax cut reduced deadweight losses by 38 cents on the dollar.
Even as Washington has been cutting taxes for the rich, these initiatives aim to raise them at the state level. The progressive tax revolt is the logical result of three fundamental realities:
For what it's worth, the progressive tax isn't based on any fundamental realities, the least likelihood of which would economic realities.
The argument goes as follows:
We find, in American society, that we derive our greatness from the promotion of great achievement, and that individual accomplishments are both the goal of our communities and the cause for celebration among society at large.
Thus, we see two arguments against the progressive tax:
First is a moral argument, seeing no justification (beyond greed) to deny wealthy individuals to maintain control over their incomes even as we allow middle-class individuals to do so with theirs. Yes, they make more. However, a surplus of a desirable commodity (money, intelligence, beauty, friends) does not bestow the right of coercive transfer to those who lack them.
Second is an economic argument, seeing that there are more reasons to support an equitable (by equitable, I mean "having equity", not the progressive definition of "having various standards of fairness in accordance with an effort to institutionalize jealousy") tax code. The first of these reasons is that the net worth of the rich (often business owners) is the source of employment and investment funding for the rest of the economy, and thus must be uninhibited. The second of these is that the economic stratification that results will invariably erect barriers between these arbitrary wealth brackets. The third is that deadweight losses accrue to the harm of economic society with every income tax increase, especially when tax rates vary.
First, the draconian Bush tax cuts have led to equally draconian federal spending cuts.
1) What exactly is "draconian" about a tax cut? Draconian is defined as "exceedingly harsh," which doesn't really apply to the return of earned income to individuals, at least according to my third-grade level understanding of political morality.
2) If there is one thing George W. Bush is not, it is thrifty. If you are concerned about him spending insufficient amounts of money, you should quickly alleviate your stomach ulcers by observing the number of digits (twelve) in the federal deficit. If you are concerned about the reduction of funds for specific programs, you should say so. Accuracy is generally smiled upon in debate.
3) By the actual definitions (your clumsy nomenclature notwithstanding), if anything would be draconian, it would be the reckless tax increases you propose. The difference, of course, is that you refuse to recognize the right of the wealthy to have recourse when their incomes are axed arbitrarily by greedy progressives. Interestingly, you find the natural stratification of economic society disturbing while you find the artificial redistribution of funds through arbitrary definitions ideal.
4) An accurate observation would hold that draconian federal deficits (harsh obligations saddling future generations) led to the draconian tax increases (the harsh fiscal moiety you leave the wealthy in terms of disposable income).
5) Furthermore, if the concern is about spending cuts, why would tax increases do anything except reduce the deficit (which, again, you didn't mention), as no surplus of funds would fund programs that the federal budget does not fund. Tax revenues are not intelligent life forms that find their way into the pockets of your pet indigents; they have to be apportioned in Congress. Did you miss civics class in high school?
Also, the data indicate that progressive tax laws end up stratifying economic society more than they augment it's wealth. Why is this? Break points in tax brackets force incomes away from the bracket limits, consolidating incomes into communities.
Simple Elucidating Example (SEE): A society institutes its first progressive tax, at $50,000. Above $50,000, one gets taxed twice as much as those who make less than $50,000. As a result, those people making $49,000 are happy to stay right where they are, and they certainly don't want a raise to $50,000. They'd take a raise to $55,000 (or any other number to meaningfully offset the tax increase), but as we know, $6,000 raises are much more difficult to come by than $1,000 raises.
At the same time, those people making $51,000 would like to see their incomes jump a bit, since their real incomes were reduced with a doubling of their tax obligations. They will, unlike their below-$50k brethren, will take any increase in income. As a result, they receive the $1,000-5,000 raises that would have been given to the first group.
What happens then? Incomes continue to evolve so that certain segments stagnate (below $50K) while others increase to a point (above $50K), and soon society sees millions of people who were making $46,000-49,000 per year staying where they are. At the same time, people making $51,000 and more are moving up with the free market ease (and the capital that would have been used to assist the first group) that existed before the tax was implemented.
Also, deadweight losses generally increase by the square of the tax wedge between pretax and posttax income levels (e.g. a doubling of the wedge quadruples deadweight losses).
Multiply this scenario a few dozen times for America's tax brackets until it smacks you in the face why our society is divided along these economic lines and what we should do about it.
Second, the pain these are causing is being felt at the state and local level as mounting educational, Medicaid, transportation, environmental and other problems.
Tax cuts are not known to cause any quantifiable form of pain, but deadweight losses certainly are, and every augmentation of progressive tax rates (as shown) eliminates valuable capital from both the pockets of individuals and the bulging coffers of federal revenue.
If your desire is to allow funding to proliferate, you should quickly observe that tax revenues currently comprise 17-20% (depending on the eventual permanence of current tax cuts) of GDP. Any increase in the tax rate increases this percentage, reducing free capital for individual consumption and investment, along with increasing deadweight loss, slowing economic growth. However, tax simplification reduces deadweight loss, restoring capital to the economy, along with reducing the aggregate percentage of taxation vis-à-vis GDP, leaving more capital for individual use.
Third, at the state level there is politically often simply no other place to turn for revenues but to those at the top.
If we are to make the (blind) assumption that all federal spending cuts must be ameliorated with spending increases at the state level, the following options should be exhausted before one "politically often" goes to "those at the top."
1) Tax reductions increase economic efficiency, so state level tax cuts should also be imposed.
2) Vertical quests for funding solutions are not desirable, from the standpoints of both efficiency and responsibility.
Unlike attempts to tax the suburbs, moreover, targeting the very top elite groups can put 95-98% of the electorate on one side of the line of political demarcation-and only a tiny 2-5% on the other side.
Nice reasoning. Observe the problems:
1) Solipsism is not a desirable voting pattern. Political considerations ideally should be beyond what x individual receives from a policy.
2) You should be informed of the following. The reason your socialist tax utopia hasn't been proposed in Congress is because most Americans, believe it or not, consider themselves potentially wealthy and thus see little allure in punishing other people for the money they hope to make in a few years. Populism has its limits, even in a naturally greedy society that you hope to exploit.
3) Ochlocracy is not a bedrock principle of liberal democracy, unless you would be interested in explaining how putting 87-88% of the electorate on one side (white) of the line of political demarcation and only a tiny 12-13% on the other side (black) would be desirable during the debate over the Civil Rights Act of 1964.
4) To this, of course, your natural response would be that the civil rights debate contained issues of fairness and morality which transcended public opinion (which, coincidentally, was opposed to desegregation). I would naturally agree, and observe that similar principles dictate that individuals do not rescind their right to equal protection and economic success once they begin making $100,000/year...even if they are a minority group.
As the Republican poll data in Connecticut suggest, the extremely unequal economic gains of the last decades have made targeting the highly favored few politically and ethically compelling. The top 1% of income recipients currently garner for themselves more money each year than the bottom 100 million Americans taken together.
Neither greed nor envy is an ethically compelling emotion. Ergo the observation that the rich make more than the poor is no reason to implement progressive taxation any more than the observation that some people are better looking than others is reason to ban Victoria's Secret catalogues, or (for a more leftist reference) more than the observation that some people are smarter than others is a reason to ban the attainment of Ph.Ds.
However, any deprivation of the wealthy's spending power will invariably cause reductions in economic health for the nation. When you observe that 1% of America makes more than the bottom 100 million Americans, imagine the effect you are going to have on spending.
It's rather simple, and ironically an extension of the supporting claim. Consider that a tax of any percentage on the top 1% of Americans (your favorite minority to exploit) is the economic equivalent (in aggregate value) of a tax on 100,000,000 Americans.
Economics is blind to demagogy. You tax a certain 1%, and it means exactly the same in real economic damage as if you were to tax a different 34%.
There is even more, sir. As the wealthy spend their money on investments and incomes (as business owners), rather than the personal consumption that comprises the vast majority of lower and middle-class spending, the damage to the economy is even greater.
Taxation of top groups is important on its own terms.
Funny how you didn't mention any of them...
However, such taxes also suggest even more intriguing possibilities. Bill Gates, Sr. and Chuck Collins have proposed a way to connect new tax ideas to a variety of other progressive policies. Their proposal, if broadened and linked to the tax revolt, might well open the way to a new and powerful double-barreled progressive strategy: Gates and Collins suggest that revenues from a modified form of federal estate tax might flow into a Public Trust which then could allocate funds to various wealth building investments. Their revised estate tax proposal would impact only the top 1.5% but it would produce flows of roughly $1 trillion over two decades.
1) See above for the destruction of your "only x%" argument.
2) The $1 trillion is an evaporative benefit, meaning it leaves no permanent mechanism of receiving it again through gainful employment. However, a free-market system of deregulation and widespread tax reductions would have allowed the $1 trillion to have taken the form, naturally, of investments and emoluments to the permanent benefit of the recipients.
Variations on this theme might use other taxes aimed at those at the top to fund both state and federal trusts-and then invest in a wide range of increasingly popular and increasingly sophisticated community benefiting strategies.
I long nostalgically for the day where meaningful employment and ascendancy on the economic ladder was an increasingly popular community benefiting strategy.
I suppose it's not as sexily sophisticated as class warfare and illusory free lunches, though.
America's top 1% of wealth owners currently have title to just under 50% of all stocks, bonds and business assets. Government statistics show that an even tinier group-a mere 2/10th of 1%-made more money from the sale of stocks and bonds than all other taxpayers taken together in the most recent year for which data is available (1999). This is the reality behind the rhetoric of the Bush "ownership society." A very different and far more equitable "ownership society" is represented by the community benefiting efforts.
Complete economic equitability is not achievable in any society. The wealthy will make more than the poor. You can impoverish the wealthy with redistribution (if it is pursued completely), but you can never permanently remove the poor from poverty when their economic success is contingent upon redistribution.
It is the same economic principle that renders price controls inefficient: economic pluralism creates diversity in purchasing power.
Equitability may contain provisions for amnesty, but it will never engender distinctions negative in character, in William F. Buckley's felicitous phrase.
Progressives clearly need new strategies if they are to counter the dominant Bush era policies.
That a new line of more equitable taxation might now be feasible-and that it might be linked to very widespread and popular community building ownership strategies-suggest an important point of departure for what just possibly could become the basis of the next big progressive push.
As far as I know, the last big progressive economic push began in the 1930s and ended a decade later when individuals began to realize that widespread nationalization and 90% tax brackets were not the path to economic solvency.
If only the anti-war protestors spent their hours in the streets militating against class warfare instead of defensive warfare, we might just transcend the need for California's mental health programs and New Jersey's spending solutions.
Prices are the only known economic method by which consumption is effectively decreased. From the demand side, high prices reduce demand and lower consumption rates. It is most often applied as the realization that only high gas prices, and not state legislation, will get consumers to drive less.
In this case, the high price of income (through a progressive income tax) and the higher marginal price of income ascendancy renders the progressive tax an economic policy of attrition. Even if these principles were theoretical, deadweight losses will still completely eliminate the capital from a fourth of marginal tax increases.
In the end, it's not that there is a tax revolt from progressives; it's that the progressives are revolting. Take that as you will.
