A few Republicans out there, struggling to put the IRS scandalette in a larger context, are now saying it shows we need tax reform. It doesn't really, unless their argument is that we've been letting shamelessly political 501(c)(4) organizations get away with a scam and we ought to clarify the law on what such organizations can do. But that's not what they're saying. What they're saying is that the IRS matter shows we need to change the tax code to reflect the same policies they've advocated forever.
It wasn't as though this particular scandal arose because filing your personal income taxes is too complicated or because the corporate tax system is riddled with loopholes. It was something very specific, the law regarding how certain kinds of nonprofit organizations are allowed to operate. Frankly, there's no part of the tax code conservatives care less about. What they're interested in is changing personal and corporate taxes.
America’s most futuristic governor seems borne back ceaselessly into the past these days. As he shows me around his office on a crisp winter morning, California Governor Jerry Brown points out not just the desk that his father, Edmund “Pat” Brown, used during his own term as governor from 1959 to 1967 but also photos of his grandparents and his great-grandfather, who came to California in the gold rush years. “He knew John Sutter,” Brown says. The only two governors in the past half-century who were native Californians, he points out, were he and his father.
The top marginal income tax rate, a testament to our oppression. (Flickr)
When the Tea Party movement started in 2009, some of its adherents made signs that read, "Taxed Enough Already!", since the movement defined itself in large part as a reaction against the oppressive tax policies of the federal government, sucking ordinary people dry in its endless search for cash to fund its freedom-destroying schemes. This was always an insane inversion of actual reality—the truth is that as part of the stimulus bill, President Obama actually cut taxes for almost everyone, and the only tax increase he imposed in his first term was a hike in cigarette taxes. It's true that the Affordable Care Act contains a number of different tax increases (on things like "Cadillac" health plans), but those have not taken effect yet. But to many conservatives, it just feels like they're paying more taxes, because...well, because there's a Democrat in the White House.
Today, the Congressional Budget Office released a report on the taxes we have actually been paying, and guess what: the average federal taxes paid by Americans are at their lowest point in the last 30 years:
A well-known job creator. (Flickr/Vaguely Artistic)
Some time within the last few years, conservatives decided that people who have lots of money shouldn't be called "the rich" or "the wealthy," but "job creators." Give them credit—they know how to use language to turn a problem into an opportunity. After all, defending low tax rates for the rich is hard, but defending low tax rates for job creators is easy. Every now and then you might get an apostate like this venture capitalist coming out and saying that the real job creators are middle class people who buy things and not rich people, but on the whole the "job creator" framing allows conservatives to make their tax arguments without any discomfort.
That gentleman's argument is completely valid: if you have enough middle class people buying Acme Widgets to require 100 people working in the widget factory to meet the demand, it doesn't really matter whether C. Montgomery Acme gets his income taxed at 35 percent (the current, Bush-established, free enterprise-supporting level) or 39.6 percent (the Obama-supported, freedom-crushing, socialist level).
But what about when Mr. Acme takes some of his money and invests in the stock market?
By way of this chart, Citizens for Tax Justice makes an important point about President Obama’s plan for extending the middle-income Bush tax cuts:
We talk about the Bush tax cuts as if there is one set that applies to people with income under $250,000 and another set that applies to people with income over $250,000. But that’s not quite the case. The “middle-class” Bush tax cuts apply to all taxable income under $250,000; if your taxable income is $1 million, then you’ll receive a tax cut on the first $250,000. Under the Obama plan, everyone receives a tax cut.
Barack Obama did a bunch of big things in his first term—passed health care reform and ended the war in Iraq, most notably. If he wants to do something big domestically in his second term (especially since he seems to have lost any inclination to do anything about climate change), one natural area to try would be tax reform. It might actually be possible to arrive at something both Democrats and Republicans could live with, if we put aside Republicans' desire to make sure he never accomplishes anything, ever (which will continue into his second term). Republicans already have their own tax plan, which lays out some goodies they'll give people (especially wealthy people, you'll be shocked to learn) while conveniently avoiding any specificity on how the goodies will be paid for.
Over at the Center on Budget and Policy Priorities, Chye-Ching Huang has written a massive review of the evidence and literature on the relationship between taxes on high-income earners and their effects on economic growth. Her key findings are surprisingly straightforward, and important for how we approach current debates over tax reform and economic policy:
This piece is the fourth in a six-part series on taxation, and a joint project by The American Prospect and its publishing partner, Demos.
The “Buffett Rule” proposed by President Obama and now being considered by the Senate would be an important symbolic step toward a fairer tax system. By instituting a minimum tax on very high earners, it would advance the principle of progressive taxation and reform the tax code in an overdue way.
Now that America's burning hunger for Mitt Romney has overflowed, and he really is the Republican nominee-to-be, the Obama campaign must settle on its anti-Romney strategy. Or more properly, they will reveal to us the anti-Romney strategy they settled on many months ago. One central component will be an argument about taxes, contrasting Obama's approach with the Republican one, and the cornerstone of that argument looks to be the "Buffett Rule." Which is kind of unfortunate. The Buffett Rule is, I'm quite sure, good politics. Believe you me, the Obama campaign wouldn't be going whole-hog on it if they hadn't already polled and focus-grouped it within an inch of its life. What it isn't is particularly good policy.
Democrats are doing everything they can to make the Buffett Rule as the predominant issue of the week before it is subjected to a Senate vote on Tax Day. The rule—named after Warren Buffett's frequent refrain that his secretary pays a higher effective tax rate than the multi-billionaire investor—would force multimillionaires to give up some of their tax breaks until they pay at least a minimum rate of 30 percent. Obama is headed to Florida tomorrow to promote the bill, while his campaign is highlighting the rule as a campaign issue in contrast to Mitt Romney's tax disclosures he released earlier this year, which revealed that the probable Republican candidate paid taxes of just 13.9 percent on his $21.7 million in income in 2010.
You don’t have to be a genius to know the basics of running for office: Look sharp, love America, take in big money, and—most important—promise you won’t raise taxes. Thanks to Grover Norquist and his band of anti-tax crusaders, raising taxes has come to seem akin to murdering puppies and loving terrorists. Even during the worst fiscal crisis in 80 years, if you’re a state lawmaker, you must cut core government programs without ever mentioning the “T” word. And if, God forbid, you decide to raise taxes anyhow, do everything you can to distract people from the effort. Openly calling for citizens to pay more to their government is nothing short of political suicide.
The other day, on a Manhattan sidewalk, I ran into a former colleague and asked her what she was doing these days. She shrugged: “I’m in limbo.”
When I looked her up later to connect online, her LinkedIn profile listed her as CEO of her own consulting firm. That didn’t sound like limbo to me, until I saw the fine print: “self-employed, myself only.” Scrolling through the rest of my contacts, I noticed that quite a few people in my professional orbit had titles like “president” or “founder” or “principal.” Some of these people, I know, are doing quite well; others are barely making it.