For the eight years of the George W. Bush presidency, economic policy in the United States had as its lodestar the view that we needed to lower taxes. Liberals objected that Bush-era tax-policy proposals were regressive, tilting the majority of their benefits to high-income taxpayers who had the least need for additional funds. The retort at the time was that this was a misleading way to think about it: The lower taxes weren't simply designed to bolster individual incomes; they were supposed to bolster overall economic growth. Higher growth rates would result in higher incomes for people up and down the economic ladder. The results of this policy have been disappointing, to say the least. Even those who claim that the economic health of the middle class is being understated are producing charts that show ten years of flat incomes for the median American household.
In response, Republican presidential candidates are uniformly proposing new rounds of regressive tax cuts.
The right's overwhelming consensus on this point is partially obscured by the clown-show quality of the ongoing Republican primaries. But make no mistake—as different as Hermain Cain and Mitt Romney are in affect and background, their economic prescription is essentially identical.
Start with Cain, who's improbably risen in the polls based on his past success at managing a third-rate pizza chain and his impressively simplistic "9-9-9" tax plan. The 9-9-9 plan is, in essence, a flat 27 percent tax on wages. Since low and middle income people earn a much larger share of their income from wages than do wealthy people, the impact of this is terrifyingly regressive. Households with incomes of over $1 million would see their after-tax income skyrocket by over 20 percent. Households with incomes of less than $20,000 would see tax increases nearly as large. On average, households earning less than $200,000 a year would all see tax hikes, while those earning more would see their taxes cut.
It's an insane plan. But then again, Cain is the joke candidate, right? The one who we all understand won't possibly win a presidential nomination no matter how well he does in early polling. What about a much more serious candidate like Texas' incumbent governor Rick Perry?
Well his tax philosophy, outlined Tuesday in a Wall Street Journal op-ed, turns out to be exactly the same. What's needed are big tax cuts for rich people. Perry wants to give taxpayers the choice between paying their current tax rate or paying a 20 percent flat tax that also "preserves mortgage interest, charitable and state and local tax exemptions for families earning less than $500,000 annually."
Under the current system, in which the tax rate rises as one makes more money, a single person gets taxed at 20 percent when he or she has a post-deduction income of about $80,000. For a married couple filing jointly, it's about twice that. In a country where half of households are earning less than $50,000 a year, opting for the 20-percent flat rate is effectively a tax hike. But a single person with a taxable income of a $1 million could get an extra $100,000 from Perry's proposal. On top of this "rich get richer" income tax scheme, Perry brags that his plan "also abolishes the death tax once and for all, providing needed certainty to American family farms and small businesses."
Of course Perry, too, is a bit of a joke despite a resume much more impressive than Cain's. But what about Mitt Romney, the thinking man's Republican? Well, the tax section of his economic plan [PDF] calls for full extension of the Bush tax cuts, reduced taxes on investment income, and, again, full elimination of the estate tax.
This is less pernicious than the other two only in the sense that the scale of Romney's proposals is smaller. But in all three cases the premise is the same—that the problem with economic policy during the Bush years was over-taxation on investment income. Since investment income is overwhelmingly the province of the rich, cutting taxes on it will naturally have a regressive impact. In theory, that's supposed to help the average family by bolstering economic growth. But how? Or why? The overwhelming presumption ought to be that repeating Bush-era tax strategies will just produce more of the same results we've been living with for the past ten years.