Ari Fleischer makes an argument I never expected a Republican to make: The government should raise taxes on poor people during a recession. Yes, it's true. It includes some beautifully Orwellian imagery, including replacing the tax code with an "Economic Growth Code" and a sub-hed proclaiming that "it's bad for our democracy to exempt half the country" from taxes, even though the word democracy doesn't appear in the rest of the article. His case relies on presenting statistics that demonstrate the tax burden on the wealthy without recognizing the real effect of that burden. For instance, when you hear that the top 10 percent of the country -- those that make more than $92,000 a year-- pays about 70 percent of all income taxes collected, you might say, well, that's no good. The top one percent, who make more than $450,000 a year, pay 21 percent of all income taxes. But these numbers are disingenuous, because the relevant factor is the marginal tax rate. Right now, the top bracket's marginal rate is 35 percent, and the president would like to take it back up to 39.6 percent. That's not extortionate -- there was a time when the wealthy paid as high as 70 percent of their income, and the country didn't fall apart -- and no one is suggesting we return to that time. Look more closely at the breakdown: Fleischer's complaint is that relatively few very rich people pay a progressively higher rate of taxes (yet still remain wealthy, somehow) while a ton of people floating just above the poverty line get a small rebate check from the government. It's only when you look at that in the aggregate that it seems like some cosmic injustice, but these people pay such a big share because they are much wealthier than everyone else. As a related note, the average increase in income for the top one percent of earners in 2006 was $60,0000. For the bottom ninety percent, it was $430. That's an aggregate number that might worry you, too. Meanwhile, thanks to cuts in the capital gains tax, the 400 richest Americans pay 17.2 percent on their income. Is that an injustice? Of course, the easiest way to see through this hypocrisy is a little thought experiment: if this redistribution deal for the lower 40 percent of earners is so good for them and so unfair for the rich, why don't affluent people work less and try to cut their incomes so they can take advantage of this -- shouldn't there be a John Galt-style race to the bottom? On the other hand, maybe the wealthy ... like being wealthy. Fleischer does raise a few good points. Loopholes are a problem, and the tax code could certainly afford a good deal of simplification. Revenue is going to have to rise to deal with the deficit, and that could mean expanding the tax base or raising taxes on the middle class; it should certainly mean new tax brackets at the top of the pyramid, since someone who makes $1 million a year should be taxed different from someone who makes $20 million a year. But Fleischer is ultimately not that concerned with the deficits or with growth -- he never does explain how his tax plan would facilitate growth, he just assumes that it would, nor does the $1.7 trillion the Bush tax cuts added to the deficit warrant a mention. Instead, Fleischer tips his hand with the last line: "It's funny what happens when everyone pays the bills; Americans may want less spending so they can pay fewer bills." It's sort of a demand-side "starve the beast" strategy. Conservatives have already proven that you can't cut spending by cutting taxes, because people like the government. Now they'd like to cut spending by raising taxes, thinking if they can use the government to tax people on the poverty line, they'll presumably have a broader, more angry constituency for their tea parties. But of course that would require having GOP politicians campaign and vote for tax increases on working-class people, so good luck with that. -- Tim Fernholz P.S. I laughed out loud when I read this: "We need to return to an era of more conservative, fiscal discipline." That's a good one, Ari!
