Tax Creep

U S CAPITOLI have seen it at least twice in recent days, a twist on the tax creep argument opposing tax increases.  It is a subtle twist, but important.  I’ll explain.

The argument begins simple enough, even seems to be logical.  If we clamp down on the top 1%, say, voters in the next 5% will fear they’re next.  Then voters in the next 5% might fear they are next all the way down to the poor slobs who are already paying more than their fair share at the bottom.  Often summed up as “What will they do when we run out of rich people?”

The problem with this argument is where we are starting with it.  First, it presumes a baseline of fairness — or worse a form of ambivalence about fairness — in our tax code.  In reality even this argument is moot.  We could achieve a level of fairness in taxes without a rate increase.  An increase in tax revenues could be gained by removing the loopholes, deductions, and subsidies that allow top earners to reduce their effective tax rate.  Second, this argument implies that we should or should want to protect the current unbalanced tax policy.  So any increase in taxes — or closing those loopholes — would mean that in order to maintain the status quo of “fairness” we would naturally need to raise rates on lower income earners as well.  There is nothing that says you cannot raise taxes for some and not all.  We do it all the time, right or wrong.

Whatever the case, without these presumptions, it is hard to see this tax creep argument as anything but one that defends a regressive tax policy that gives most breaks to top earners.

The most recent example of this sort of “tax creep” argument I noticed appeared in an article about Tom Perkins, a man who very well might have a strange sense of humor although he seems to speak without irony.  He gets away with mainstreaming some outrageous ideas and comments.

tax-rates-oecdThe people Perkins defends are earners where every 1% change in effective tax rates can mean serious money — literally millions of dollars in any given tax year in some cases — while lower income (e.g., middle class) earners paying a higher effective rate, one where 1% might not mean millions of dollars in a tax year, but can have real bearing on a family’s overall long-term economic opportunity, has much more immediate consequences for themselves and our economy.

This is entirely missed by people who accept the tax creep argument Perkins promotes, but it is also at the heart of our failed supply-side economic strategy that set up this unbalance in the first place.  What Perkins suggests is a trickle down of fear — fear of government, fear of taxes — that has trickled down, not economic activity.

Maintaining the supply side myth requires constant attention anyway and so this subtle change in the tax creep trope could be a new talking point.  “Hey there, freedom-loving Americans, don’t let Big Government tax the rich, because you’ll be next.”  Unsaid here is the implied acceptance that it is unfair to the rich to expect them to give up their tax advantage without the rest taking on more of the same.  How else can you explain it?

Forms of this argument have prevailed in politics since we first imposed income tax levies, but they were positioned differently.  Conservatives like to think they are either rich (or the incubating nouveau riche), for example, but they also like to pretend to be modest and self-deprecating about their delusions.  In a world where everyone is “rich”, these schemes to make billionaires pay their fair share are really schemes to tax us all.  So when people talk about making taxes fair, conservatives cry about a war on the rich they turn it into a war on Joe the Plumber. 

And of course there is the idea that if you raise a little today, you’ll ask for more tomorrow.  I get it.  However, to make these arguments to protect a regressive tax code, is sleazy.

Peasants for PlutocracySpecifically defending the top income tier merely on the premise that a tax there will mean a tax everywhere turns a blind eye on the imbalance in the first place.  It maintains a focus on anti-tax for the sake of anti-tax without looking at who pays what, what it pays for, and who benefits.  Give conservatives credit, however; they are indeed adept at controlling the narrative.  As long as that narrative says government is bad — no matter its role or benefit — the debate remains superficial.

There once was a more common and more honest way to take issue with tax creep or more specifically “bracket creep”.  The argument points out that as an individual’s income rises he is eventually pushed into a higher tax bracket.  This is an issue with all sorts of implications and scenarios, but it is one that primarily affects people climbing in the middle class, which is probably why we are not hearing much about it anymore.

An oldie and a goodie.  It sums ups the lie best.

An oldie and a goodie. It sums ups the lie best.

The middle class is made up of people who should be especially offended by a trickle-down tax creep argument that protects unbalanced tax policies which coddle those already well ahead.  Taxes today are lower than they have been in generations, especially for the wealthiest, and it has allowed the creation and hoarding of great wealth.  In effect it puts a ceiling on upward opportunity for middle class climbers.

Times have changed, but too many middle class voters behave as if they haven’t.

I will insist that it isn’t a problem of higher taxes creeping downward and burying the middle class and the poor, but the problem of higher taxes on the middle class and poor not creeping upward.  In other words the problem  starts with a lack of tax parity and fairness, but the real issue is defending it.  In a regressive tax system, those benefiting should be the last to complain about change.  Of course we should not be surprised — who wouldn’t want to preserve his or her advantage? — but why should those people not benefiting join in the fight against change?

That’s the beauty of the Reagan Revolution.  However, if thirty-plus years of Reaganomics has taught us anything, it has taught us that the economic fortunes of the upper crust — the so-called job creators — do not trickle down to the masses anyway.  Republicans some how believe that what happens to the most fortunate will happen to the rest.  In truth, that argument is about all they’ve got in their rhetorical war chest and it’s like fighting a modern war with cannon balls.  But even cannon balls can defeat an enemy not willing to fight.

The time to tell these knuckle heads to shut the hell up and argue their positions from facts is long, long overdue.  Until people hear, listen, and think I’m afraid those arguments from fact and fairness will not come.  Instead we’ll be governed by well-financed sound bites and fantasies of wealth and opportunity.  And that, indeed, is creepy.

 

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