The only good tax cut is an across the board cut

By Rick Esenberg
web posted October 2, 2000

First, a confession. I am what Al Gore and the Democrats call "rich." If you knew me, you wouldn't think so. I don't have a million dollars - not even close. My house is not as nice as the one Al lives in, although it is much better than the ones he rents to tenants. I have a mortgage. I have car payments. While I am able to save for my retirement, I can expect to work, not golf, well into my sixties. I'm not complaining. I think I'm fortunate. But Al Gore and the Democrats say that I am rich and that it is only right that I pay a marginal tax rate of almost 50 per cent. They say it is only right that my wife - a registered nurse - pay taxes of almost 60 per cent on her modest earnings. I seem to be spending much of my time at work, but mine is not one of the "working families" that the Vice President has promised to fight for.

George W. BushSecond, a surprise. I do not want relief from the tax code's marriage penalty, although my wife and I are among its poster children. Although I believe that the federal tax burden, including that imposed on middle class taxpayers, is unconscionably high, I oppose targeted tax cuts of any kind. I oppose George Bush's plan to completely remove additional familles from the tax rolls. The only good tax cut is one that everyone can enjoy - the larger, the better. Here is why.

In recent years, as the Wall Street Journal's Amity Shlaes and others have explained, the proliferation of tax credits have steadily removed lower income families from the tax rolls. Combined with the phasing out of many deductions and exemptions at higher (but hardly plutocratic) levels of income, there has not only been a dramatic shift of the tax burden to wealthier, but not rich, households, but the removal of a number of poor and lower middle class households from the obligation to pay any income tax. Estimates vary, but it now appears that between 30 and 35 percent of the public pay no income tax. The top five percent of taxpayers (a distinction that begins at the comfortable, but hardly stratospheric, annual income of $108,000) pay roughly fifty percent of all income tax, while earning only twenty percent of the national income.

What's wrong with that? Plenty. A country in which large numbers of people vote on the tax burden to be imposed upon others without consequence to themselves hardly fits the Athenian ideal. Imagine a frat party where all of the collective hangover was reserved to the dorky guy who paid for the beer with his father's credit card. What disciplines irresponsibility when the consequences are reserved to a minority?

We can see the results. The federal government is currently running a surplus, i.e., it is ripping us off. While excess revenue is apparently cause to crucify people who run HMOs and drug companies, we are supposed to celebrate the fact that our federal government now takes, by threat of force, more than it needs. Placing himself squarely within the confines of this received wisdom, George Bush proposes a mild tax cut plan (only ten percent) that is moderately biased in favor of lower income tax payers. Don't shake your head, the last part is true. Although Dubyah seems completely unable to sell the point, under his plan, the less you earn, the greater the percentage by which your taxes are reduced. Mathematics being a stubborn thing, however, there are few ways to design an across the board tax cut without giving something back to those who are paying the taxes, i.e., those filthy rich. (Remember me?)

Al GoreFor this, Al Gore has acted as if Bush was proposing a return to indentured servitude. Bush, says Al, is proposing to waylay Robin Hood ( the benevolent federal government) and give back his loot to the oppressive overlords. (Me again.) If you doubt this, ask a Democratic friend to repeat the phrase "George Bush's tax cuts." Ten bucks says that he cannot help but add, without pausing for a breath, "fortherich." Make sure you give him a cracker.

"Orwellian" is an adjective so overworked that it can barely keep its eyes open, but how else do you describe returning an overcharge (a/k/a "the surplus") as a "give away." Yet, this is working. While part of the blame undoubtedly belongs to the timidity of the Bush campaign, I can't help but think that part of it is the caste system that is slowly being built into our tax code. Many voters must wonder why they should support a reduction in the burden that others are bearing, particularly when the money could be spent on a good cause, i.e., programs for them. Promising 51 per cent of the public that you give them money taken from the other 49 per cent may be demagoguery, but it can be great politics. Remember FDR?

So what to do? As difficult as it may be to accept, those who favor a tax system that rewards initiative must abandon the notion that any tax cut is a good one. Tax relief must be across the board, addressing the high marginal rates that are paid by even the modestly successful. The idea that we can lower some rates now and seek additional reductions, or even expect rate stability, is naive. In 1986, the Reagan administration agreed to an elimination of most reductions in return for reduced marginal rates. With deductions out of the way, rates have been slowly increased. When it comes to taxes, trusting politicians to discipline themselves is like offering Roseanne Barr just one bite of your cheeseburger. Never let them have what you don't want them to keep.

Rick Esenberg is an attorney and adjunct professor of Political Science at the University of Wisconsin-Milwaukee.

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