Political gold, fiscal bankruptcy

Throughout the debt crisis debate, President Obama has clung to a tried-and-true political slogan of the left: The rich can do more. He has insisted on what he calls a “balanced approach,” which in fact is a proposal to raise taxes only on the rich while leaving the rest of the population’s tax rates untouched.

A substantial number of House Republicans have proven that they have the political will to oppose such a tax increase. What they have not proven, though, is their ability to articulate to the American people why raising taxes on the rich is such a bad idea.

To many Americans, the notion that we can help pay down our debt by asking the rich to pay more does not sound all that unreasonable — after all, the rich can afford to do so. The tax-the-rich solution sounds even more plausible given most Americans’ unfamiliarity with the tax code. President Obama and his Democrat colleagues have shown no hesitation in capitalizing on this unfamiliarity, suggesting that the rich do not pay their fair share when in fact they already give up a higher percentage of their incomes than the rest of the population.

The Republican counterargument thus far has been that raising taxes on the rich will hinder economic growth by taking more money away from those who are in the best position to create jobs. This is likely true. Yet there is a more fundamental argument to be made for why raising taxes on the rich is a cause of — not a solution to — America’s debt problems.

A system that allows politicians to target one small portion of the population for tax hikes is an inherently dangerous one. In addition to fostering class conflict, the ability to raise taxes only on the rich when the government has trouble paying its bills strips the system of the discipline necessary to achieve a balanced budget. For those politicians who are willing to use it, “the rich can do more” mantra is political gold. It allows them to garner favor from a majority of the electorate by promising ever-increasing government benefits while assuring people that the excess costs will be covered only by the small minority of “those who can pay more.” At the same time, such policy is a prescription for spiraling government debt, for the average American has less reason to oppose wasteful spending when someone else is asked to bear the extra burden.

Taxpayers’ unwillingness to lose more of their money is the ultimate check on excessive government spending. The electorate will oppose further government spending when the hit to their pocketbooks, in the form of tax hikes, exceeds the benefit they will receive from such spending. However, when revenues can be raised by targeting a small minority of the voting population, leaving the majority untouched, the systematic check on spending is avoided. It is essentially all gain, no pain for the majority. This is not to suggest that raising everyone’s taxes is the solution to the debt problem. Rather, it is an argument for recognizing the crucial role aversion to higher taxes must play in curbing spending and managing the federal budget.

In the interest of reinstituting fiscal discipline, Republicans must continue to oppose the funding of wasteful government spending through tax increases that target only a small portion of the population. But more importantly, they must articulate to the American people why targeting the rich is such a dangerous practice. As President Obama continues to appeal to the majority’s immediate personal interests, Republicans must appeal to reason and the long-term common good.

  • mark_robbins

    Target tax?  This is all crazy.  Wage slave: W-2.  Independent contractor/investor: 1099-MISC.  FORMER worker getting unemployment: 1099-G.  Welfare recipient/section 8 housing voucher/ SNAP/ Pell grant: ???.  1099-GOV 1099-GOV 1099-GOV.  If you cannot decide to track it you might as well keep arguing with the wind.  All those government checks have names on them, just like payroll checks, but they don’t have any reporting and your vote doesn’t insure your job so what do you expect!  Obama has been destroying the economy and building his voting base.  He’s a shoo-in for 2012.

  • mark_robbins

    1099-GOV 1099-GOV 1099-GOV!  Isn’t it time that people that get checks from government, the ‘income,redistributed’, receive the same kind of reporting that we get from actually earning it before it’s taken.  Wage slave: W-2.  Investor/Independent contractor: 1099-MISC.  Welfare recipient/section 8 housing voucher/ SNAP/Pell: 1099-GOV.  The end result should be that if govenrment believes a breathing entitly “deserves” than all breathing entities deserve the same.  1099-GOV averages will equal tax exemptions on the other side.

  • Gridmark

    ****Republicans must frame the debate by asking voters whether programs such as TARP, the stimulus and Obamacare are really worth the money we have spent on them.****

    Was the Bush tax cuts worth the money we have spent on them? Or even Iraq? And neglecting the infrastructure in which we have not spent money on. And ignoring globalization and 2 billion cheap laborers which is taking away jobs. There are other issues that politicians need to own up to. Not hearing it yet. What policies do we need to get a return on money and the creation of jobs? Middle class jobs. If the Bush tax cuts work, then why the recession? Why the loss of jobs? And if the Bush tax  cuts did not work, then what will be the policies to deal with today’s problems? More of the same, seems to be not working. Maybe two parties are stuck in their paradigms. 

    There is a point of equilibrium. I believe that the tax rates should be reset to the Clinton Era so that you can get revenue, and that will deal with most of the deficit. This has to be gradual as the economy is fragile. And in an equal amount of time, reduce the corporate tax rate. (A lot of companies write off anyway) And then figure out what we can do to create jobs with a private/public partnership. Invest in your country, in your people, and in the future and get a return on your money. 

    • DeeMac

      Tax rates reset to the Clinton Era (love that term) – would the “rich” threshold be raised from $250K to today’s terms – that is, about $350K?

      • Gridmark

        I don’t know if 250 or 350 would be that significant. Just an overall tax rate in which we had under the Clinton era instead of using tax cuts as an ideology like Bush did. I am not in that much on specifics on numbers, just the direction of getting more revenue instead of running up deficits, cutting spending where needed, and having policies in creating jobs. Our major problem is globalization and yet they still don’t get it in Washington. 

  • Tim

    The rich have had 8 years to enjoy their tax cut.

    Where are the jobs? It’s pretty clear, by now, that lowering taxes on the top does not create jobs.

    We only have a spending problem because we don’t have enough revenue.

    • Guest

      When the tax cuts occurred in 2003, there was a lot of job growth, and unemployment dropped below 5%.  Additionally, as recently as 2007, our deficit was only 1.2% of GDP.  Since then, we’ve had the housing bubble burst/stock market crash, Obamacare, ever increasing regulation, higher energy taxes, the second highest corporate tax rate, etc…  The Democrats had the Presidency, and both houses of Congress for 2yrs, with dismal results.  Even if the Bush tax cuts expired, they would only raise ~$70 Billion in revenue, which doesn’t even scratch the surface of our economic troubles.  What we need to do now, is reduce regulation, corporate(and personal tax rates), capital gains taxes, so that businesses can flourish, and grow the economy.  That’s the surest way of increasing revenues.

      • Gridmark

        First, those tax cuts was on borrowed money. Essentially it was a fake economy. Secondly, just having tax cuts and ignoring the other problems is not an answer. Bush came to my state in 2004 and said “free trade is good” and we saw the factories close up. In fact, some 57,000 factories closed up or some 6 million jobs lost over a decade, and that is 1/3 of our manufacturing. All I saw under Bush was our jobs going overseas, our money going to Iraq, deficits and debt, and the neglect of our infrastructure. 

        As we look at the Bush tax cuts, they were for the “here and now” was borrowed money, is spent money, and it is less effective for today as Bush used it as an ideology and we lost our jobs anyway. What Bush did was a “guns and butter” economics, or another description was trickle down voodoo economics. 

        Basically, Bush had his roaring 20’s and today, with our jobs gone and all the stimulus gone, we face a double dip recession or near depression. Now we know what Roosevelt was up against. If you don’t have a private economy, then how do you create growth? 

        Obama is a mediocre president and has not shown much leadership. And at the moment, I don’t see anyone who sees our problems, except Donald Trump. 

        As far as making business flourish, I can’t figure out who will fill in all those empty factories as widgets can be made anywhere. And, as Foxconn realizes that Chinese workers are getting paid too much, they will replace those workers with 1 million robots. Reducing regulation and various taxes, and capital gains taxes make good sound bites, but it will fall far short in what we have to do. 

    • DeeMac

      Tim, you are the first person I’ve heard to indicate we don’t have a spending problem. Dems and Repubs, far left and far right, admit there is a spending problem. I could have replied to your ascertation and presented facts of how increased taxes hurt the economy, but without your realization of the spending problem, it would be of no use. So I will close with this thought: Think how bad the economy would be without the tax cuts.

  • http://thejoesteelblog.blogspot.com/ Joe_Steel

    Tax the rich because:

    The upper 1 percent of Americans are now taking in nearly a quarter of the nation’s income every year. In terms of wealth rather than income, the top 1 percent control 40 percent.

    -Of the 1%, by the 1%, for the 1% by  Joseph E. Stiglitz

    • Guest

      The nation’s income?  The money the rich have isn’t taken from anyone, and the top 1% pay 40% of all Federal revenue.  The top 5% pay 2/3 of all Federal revenue.

      • http://thejoesteelblog.blogspot.com/ Joe_Steel

        The distribution of income and wealth has been distorted in favor of the rich by their manipulation of public policy.  Had they not taken so much power for themselves, the rest of America would have retained their traditional share of income and wealth.  It’s our money and we want it now.

        • Anonymous

          Actually, technological change and globalization are responsible for rising income inequality, not public policy. That’s why income inequality has risen over the past few decades in almost every industrialized country. http://www.oecd.org/dataoecd/32/20/47723414.pdf

          • http://thejoesteelblog.blogspot.com/ Joe_Steel

            Globalization and technology do play a part but not nearly enough to explain the gutting of the American middle class.

  • Don Craft

    This article fails to mention that Obama’s proposed “tax increase” on the wealthy is simply rejecting the Bush tax cut for the wealthy, which targeted a specific portion of the tax-paying population, the very concept it rejects.

    • Peter

      Um, Bush cut taxes for all taxpayers. Bush treated all taxpayers equally, whereas Democrats are singling out high-income earners. 

      • DeeMac

        @Peter – I concur. The tax cuts were for all taxpayers. If “rich” is over $250K and taxes increase, what’s to stop the “new rich” from becoming $100K? For every dollar taken away from the private sector to fund the public sector is that much less in purchasing power, i.e., JOBS.