George W. Bush has made tax cuts the touchstone of his presidency, supporting new ones each year, with the economy in growth and in recession, with record budget surpluses and record deﬁcits, in peace and in war. Most of his fellow Republicans have sworn blood oaths never to raise taxes. They even managed to gain overwhelming popular support for repeal of the estate tax -- perhaps the nation's most progressive tax, affecting less than 2 percent of the wealthiest few -- by renaming it the “death tax” and peddling a big lie about protecting family farms and small businesses.
Most Democrats, meanwhile, are loath to talk about taxes. “Spend and tax” Democrats sensibly prefer to emphasize the beneﬁts of the spending, not how it is paid for. While President Clinton pushed through tax increases on the afﬂuent as part of his ﬁrst deﬁcit-cutting budget, he focused rhetorically on putting people ﬁrst and balancing the budget, not on progressive taxation as good policy for its own sake. Later, Clinton and then Al Gore championed smaller, targeted tax cuts as a way to counter the Republican call for across-the-board breaks. When Bush was elected, Democrats preemptively embraced a modestly more progressive tax-cut package with a cost only slightly smaller than the Bush plan.
In 2004, John Kerry campaigned on rolling back Bush's top-end tax cuts in order to lower the deﬁcit and pay for health-care and education investments. He wasn't hurt by this, but he wasn't helped much, either. His economic agenda was generally overshadowed by the debate on national security and social issues, and taxes ranked relatively low among voters' concerns.
Now, with large deﬁcits projected as far as the eye can see and a sluggish economy desperately in need of public investment, Democrats have to ﬁgure out what to say about revenue. We simply can't ﬁnance activist government without paying for it. Bush and the Republican Congress are pushing to make their tax cuts permanent, while adding billions more in new tax breaks for the wealthiest Americans. And Bush is planning to roll out “tax simpliﬁcation and reform” this fall, most likely code for a program aimed at further reducing taxes on wealth and corporations -- and increasing them on workers and consumers.
In this debate, progressives and the Democratic Party have largely been missing in action. At a time of Gilded Age inequality -- with CEO salaries ballooning and corporate America carrying ever less of the nation's tax burden, even as workers' wages stagnate -- only a few groups such as Responsible Wealth have issued a populist demand for fair taxes, or for taxing the rich.
But it is possible for progressives to make tax equity good politics. The following examination of the public's views about taxes, based on recent opinion polling, lays out the elements of a strategy.
Fair but too high. General attitudes on taxes are not as conservative as our political debate suggests. No one really likes to pay taxes, but in the wake of September 11 and two wars, a solid majority of Americans (61 percent to 34 percent) think that the taxes they pay are fair, according to a Gallup Poll conducted in April. Consistent with other times in our history, these numbers reﬂect the dramatic way that war and national-security concerns inﬂuence public opinion. In World War II, Gallup surveys showed that eight out of 10 Americans believed that their taxes were fair. In 1999, near the end of the stable and afﬂuent Clinton years, nearly half of the public (49 percent) thought that their taxes were unfair, while 45 percent called them fair. The polls shifted again dramatically after 9-11.
At the same time, somewhat incongruously, a bare majority of Americans (51 percent) say that they think their taxes are too high, as opposed to the 44 percent who think that their taxes are about right. Nearly 30 percent of those who think that their tax burden is fair also say that they pay too much in taxes. But attitudes here have also changed dramatically since 9-11. In 1999, more than two-thirds of Americans thought that their taxes were too high (Gallup, 2005).
Bush's tax giveaways have given Democrats of all stripes occasion to argue against tax cuts for the wealthiest Americans and tax loopholes for corporations. And polls suggest signiﬁcant public support for progressive taxes. An NBC News poll in April found that 55 percent of respondents preferred a system “like the one we have now, with higher rates for people with higher incomes,” while 39 percent favored “a ﬂat tax with the same rate for everyone and no deductions allowed.” Similarly, research for the Center for American Progress the same month found 64 percent supporting progressive taxes over 32 percent favoring “the same rate regardless of their income,” according to a poll by Penn, Schoen & Berland.
Ask more of corporations and the rich. Strong majorities also believe that corporations and the rich aren't paying their fair share of taxes. Gallup's April survey shows that more than two-thirds of Americans agree that too little of our taxes are paid by corporations (69 percent say “too little”; 21 percent say “fair share”) and “upper income” earners (68 percent say “too little”; 22 percent say “fair share”), while a slight majority thinks that lower-income people pay too much. Somewhat astonishingly, even a majority of those who describe themselves as upper class or upper middle class (16 percent of the population) agree that upper-income earners pay too little in taxes.
The Center for American Progress poll shows that the public overwhelmingly (by a margin of 77 percent to 20 percent) supports a reform that would “increase the percentage of federal revenues paid by corporate America and close loopholes used by companies to avoid taxes.” The same poll also shows widespread support for a range of initiatives to make the tax code more progressive. By 69 percent to 28 percent, for example, respondents favor reform that would cut taxes for middle- and lower-income families while “raising taxes on those making more than $200,000 a year.” (Americans are generally wary about “tax the rich” rhetoric, because all Americans want to strike it rich. Using an annual income ﬁgure -- $200,000 or higher -- is more effective.)
Similarly, in the current Social Security debate, the most popular reform option by far is to lift the cap on Social Security payments and have everyone pay at the same rate on their income. A January poll by Lake, Snell, Perry, Mermin & Associates shows 75 percent of the public in favor of (and 19 percent opposed to) such a plan. Even two-thirds of voters with annual incomes greater than $100,000 say that they support that reform. A strong majority continues to staunchly support this reform, even after hearing the proposal characterized as a steep tax increase.
In any discussion of national priorities, concern about taxes currently falls below worries about the economy and jobs, health care, the Iraq War, terrorism, and education. So on any single tax proposal, opinion is often unformed and ﬁckle. For example, when it comes to income from investments or capital gains, 64 percent of respondents to the Center for American Progress poll thought that such income should be taxed at the same or greater rate than other income, while 28 percent thought that it should be taxed at a lower rate. But a proposal to lower taxes on capital gains and income from investments to encourage economic growth was supported by a hefty margin of 72 percent to 22 percent.
Investments trump tax cuts. Because most Americans think that the government wastes much of the money it is given, tax cuts always have some attraction. People believe that if waste were eliminated, they would not be forced to choose among the investments they want (in health care and education, for example), balanced budgets, and tax cuts. That said, in any discussion of priorities, a majority of Americans do not rate tax cuts ﬁrst. Clinton used “save Social Security ﬁrst” to trump Newt Gingrich's demand for a large tax cut. When Bush ﬁrst made his case for tax cuts at a time of record budget surpluses, much of the public was skeptical. Polls suggested that people preferred investments in education and health care, or reducing the deﬁcit to save Social Security, over tax cuts. Bush sold his tax cuts by promising that he could reduce the deﬁcit, save the Social Security surplus, make investments in education and health care, and then, “with the money left over,” still fund broad tax cuts. (The president has never allowed truth to interfere with his patter.)
Now -- with deﬁcits soaring, the president claiming that Social Security is in trouble, and new cuts coming in education and health care -- the public is even more wary of tax-cut promises. Asked how to reduce deﬁcits, voters solidly choose raising taxes on large corporations and the wealthy as the best approach. An April poll by Lake, Snell, Perry, Mermin & Associates shows that most voters say that the Bush tax cuts made no difference for their families, and almost half didn't know how much they received. Moreover, the stagnant economy raises people's doubts about tax cuts as a growth strategy. An April NBC News/Wall Street Journal poll, for example, found that 54 percent agree that the “tax cuts have not been worth it because they increased the deﬁcit and caused cuts in government programs,” while only 38 percent say that they were “worth it because they helped strengthen the economy.”
Instead, the public tends to support a broad investment argument over a deﬁcit-reduction one. When it was posed as a choice about what is more effective in stimulating the nation's economy, a Los Angeles Times poll in January showed that a solid majority -- 60 percent -- favored a strategy focused on “spending for improvements in the country's infrastructure such as roads, bridges and schools” over tax cuts (34 percent). Respondents were split between a strategy focused on “returning money to taxpayers through tax cuts” (46 percent) and one focused on “reducing the federal deﬁcit and paying down the national debt” (45 percent).
Closing loopholes, collecting taxes. In the early years of the Gingrich Congress, Republicans launched an attack against the Internal Revenue Service, holding show hearings about Americans who had been mistreated by the agency. Kicking the IRS seemed like good politics, and Republicans proceeded to cut the agency's enforcement budget.
But with people feeling pressed by rising property and local taxes and worried about service cuts, anger is growing at the way corporations and the wealthiest Americans avoid paying taxes. An April poll by Lake, Snell, Perry, Mermin & Associates for the Institute for America's Future contrasted an argument for collecting taxes against the claim that this would constitute a tax increase that would hurt the economy. More than half (53 percent) of Americans favored shutting down offshore tax havens and closing tax loopholes, compared with 34 percent who considered this kind of tax enforcement to be a backdoor tax increase. Support for tougher enforcement was particularly strong with weakly partisan Democrats (66 percent) and independents (57 percent), and even attracted many Republicans (50 percent).
And when proposals to stiffen tax enforcement are framed as a way to fund investments in Social Security and Medicare or avert cuts in health care and education, 50 percent favored aggressive collection. This argument seemed less attractive to independents, but it earned strong support among Republicans, voters under age 30, those making the least money (less than $20,000 a year), and those making the most ($100,000 and up).
What's a game plan for progressives? Democrats would be well advised to tie Bush's top-end tax cuts to the failure of his economic agenda. We're four years into the supposed recovery and there is still a net loss of private-sector jobs. Wages aren't keeping up. Tax cuts for corporations and the wealthy weren't tied to investment here at home. Republican policies created more jobs in Shanghai than in Saginaw. Democrats should say it loudly: If we take some of that money and invest it at home in alternative energy, roads, and schools, we'll create more jobs and more growth and make our economy stronger.
At the same time, Democrats should champion the message that corporations must pay their fair share -- especially in a time of war. Close down loopholes, crack down on offshore tax shelters, and ensure that corporations pay the taxes they owe.
In the coming tax-reform debate, the Democrats' argument about fairness should be linked to an argument about economic growth. Simplify the tax code and make it more progressive. Tax income on wealth at the same rate as income on work. Give low-wage and middle-income earners a break while raising taxes on the wealthy and corporations. Invest in areas vital to our economy. That would help generate demand and produce jobs here at home rather than chasing them overseas.
While Democrats are championing reform and linking it to economic growth, progressives need to drive a far more populist argument. Why not raise taxes on the wealth of the super-wealthy to invest in a fair start for every child, including health care, nutrition, preschool, and the basics in education? We should push for special tax levies on those who make $500,000 or more to invest in basic education and health care. Already in states as different as New Jersey and Indiana, governors of both parties have backed targeted taxes on high-income earners -- in Indiana, the surtax kicks in at $100,000 annual household income; it's $500,000 in New Jersey -- to avoid deeper cuts in programs.
Republicans lead Democrats with the public as the party that will hold the line on taxes -- and they likely always will. But today's circumstances -- America at war with deﬁcits rising, Bush's failed economic strategy -- provide a strategic opening for those of us who value greater social and economic equity. It's time to make the argument for public investment in education and the economy, and to link it to a campaign against the loopholes and tax dodges that allow corporations and the well-heeled to avoid paying their fair share of taxes. This would set the stage for contrasting Bush's regressive tax-reform efforts with a bolder progressive tax-reform package, one that would support the investments that can get this economy going.
Robert L. Borosage is co-director of the Campaign for America's Future and co-editor of Taking Back America, and Taking Down the Radical Right. Celinda Lake is president of Lake, Snell, Perry, Mermin & Associates.