Four years ago, the modern Tea Party seemed to emerge from nowhere, leaving journalists bewildered and the public with few reference points to understand seemingly spontaneous rallies by middle-class people seeking lower tax rates. A search for the phrase “tea party” in connection with “politics” in major newspapers yielded fewer than 100 mentions in 2008—and when the words did appear linked together, they suggested studied formality and decorum. The next year, they appeared more than 1,500 times, often connected to “protest demonstration.”
With Edward Snowdon on his whirlwind tour of countries unfriendly to the United States and the Supreme Court handing down a bunch of important decisions, this is a good week for stories to get lost in the back pages. So you may not have noticed that late yesterday, the IRS scandal, supposedly Worse Than Watergate™, came to a sputtering halt with the release of new documents in the investigation. The whole scandal, you'll recall, is about how conservative groups applying for 501(c)(4) status were given extra scrutiny, while other kinds of groups just slid right through. Well, it turns out, not so much:
A familiar tale: In a small country on the Mediterranean rim, the government chooses to solve an economic crisis by enacting an austerity budget. Regressive taxes will rise. Aid to families will be cut. Less will be left of the welfare state built decades ago. The novice finance minister promises this will heal the economy.
As the people of that unhappy land say: Happy are those who believe.
Today is tax day, the yearly opportunity for millions of Americans to shake their fists at the government and declare their contempt for the ideas of mutual concern and collective responsibility. So on this most practical of days, it's good to remind ourselves of some realities. First, the taxes we pay are, by international standards, fairly modest. Second, despite what some would have you believe, the wealthy are not crushed by the burden of taxation. And third, though nobody particularly enjoys giving part of their income to the government, taxes are the price we pay for having an advanced, democratic society.
With the sequester now beginning, I find myself thinking about Robert F. Kennedy—and 46 years ago when I was an intern in his Senate office.
1967 was a difficult time for the nation. America was deeply split over civil rights and the Vietnam War. Many of our cities were burning. The war was escalating.
But RFK was upbeat. He was also busy and intense—drafting legislation, lining up votes, speaking to the poor, inspiring the young. I was awed by his energy and optimism, and his overriding passion for social justice and the public good. (Within a few months he’d declare his intention to run for president. Within a year he’d be dead.)
In February 1913, exactly a century ago, the Sixteenth Amendment gave Congress a constitutional green light to levy a federal tax on income. Later that same year, lawmakers made good on that opportunity. An income tax has been part of the federal tax code ever since.
No idea is more central to conservative economic thinking than the belief that cutting taxes leads to higher economic growth. One can certainly understand the appeal of this belief: Itwouldbe great if government could collect the same amount of revenue, but with much lower tax rates, because those rates fostered strong growth.
If Mitt Romney began this week with a misstep over foreign policy—accusing President Barack Obama of “sympathizing” with the people who attacked the American embassy in Cairo—then he has ended it with a misstep over class. In an interview with Good Morning America’s George Stephanopoulos, he said that “middle income is $200,000 to $250,000 and less.” Here’s the full context:
This afternoon, during an event with the press, Romney answered questions about his taxes with a declaration that he has never paid less than 13 percent:
He says that, for the most recent year, he paid 13.6 percent in taxes. There’s an obvious problem here: Unless Romney answers calls for more tax returns—which have come from Democrats as well as top supporters—it’s impossible to prove that he’s paid that tax rate.
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.
When conservatives rail against redistribution, it’s important to understand what they mean by the term. It’s not that they are opposed to removing resources from one sector of the economy and moving them to another, but that they’re opposed to taxing funds from rich people, and directing them toward the poor. If you go from the other direction, taxing money from ordinary Americans and giving it to the rich, then there isn’t a problem.
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:
Mitt Romney's old ski lodge, aglow with the warm light of taxpayer subsidy.
Like a good liberal, I feel a tiny pang of guilt when I do my taxes every year and see how much the government is subsidizing my choice to buy a home. Not that I'm going to turn it down as long as it's in place, but the mortgage interest deduction is not easy to justify. Even if there are reasons to believe that homeownership is a good thing, that doesn't necessarily mean that the government should pay you thousands of dollars to do it, particularly when you were probably going to do it anyway.