The continuing national debate over taxation and federal budget policy in this country is good--as is the boldness with which both liberal and conservative elements are stating their positions.
My hope is that an honest consideration of these positions will help those of us who haven't spent the past few years buried in tax policy come to ethical and compassionate conclusions about what, exactly, we will prioritize--and how we'll pay for it.
For me, the big picture is simple: I think we've somehow made greed a virtue in this country in the past decades, and that attitude threatens empire and exceptionalism.
We've been on a 30-year experiment in supply-side economics, wherein we continue to lower the marginal tax rates on the people who enjoy the greatest amount of wealth, while cutting services--including infrastructure and education, not to mention wages--to those who have access to the least amount of wealth. The result is measurable, increasing and unassailable income disparity that is affecting the quality of life in this country for the majority of its citizens.
The president put it succinctly in his recent budget address: "Think about it. In the last decade, the average income of the bottom 90 percent of all working Americans actually declined. The top 1 percent saw their income rise by an average of more than a quarter of a million dollars each. And that's who needs to pay less taxes? They want to give people like me a $200,000 tax cut that's paid for by asking 33 seniors to each pay $6,000 more in health costs? That's not right, and it's not going to happen as long as I'm president."
Beyond the (literal) bankruptcy of the policy itself, however, is the "ethic" that undergirds that policy--it's a case of putting marginal tax rates ahead of people and making that something to applaud.
In February, I blogged a local tidbit on the JFP website--Northside Sun publisher Wyatt Emmerich had written a piece, "With Welfare it Makes Sense to Work Less", that included a chart purporting to show why "people don't want to work."
Emmerich wrote: "'How can this be?' you may ask. You have to work to eat. Well, that's really not true anymore. In fact, our welfare state rewards not working. You can do as well working one week a month at minimum wage as you can working a $60,000-a-year, full-time, high-stress job."
To blame, of course, is "welfare."
His chart burned up many of the right-leaning tubes on the Internets. It was talked about at Sean Hannity's blog, on the right-wing blog Zero Hedge and at "The Corner" on the National Review's website.
The problem is that Emmerich's numbers don't add up.
In February, The New Republic ran a story called "From Mississippi to 'The Corner': A Tale of Right-Wing Wrongness." Emmerich's mistakes are documented in that story, and I've done my own version of his chart--with some additions and explanations of my own methods and assumptions--in a new blog entry.
Emmerich made a critical mistake in his numbers, a critical mistake in his analysis and one rather intriguing decision. (And there's a bunch of small stuff, too.)
The intriguing decision was this: For the sake of comparison, he chose a family of three--one parent, two children. It so happens that particular little low-income family will most often qualify for top benefits in our current system of safety nets, resulting in, perhaps, the best per-capita assistance.
Why is that? Because our system happens to be designed--if imperfectly--to keep impoverished families with children from starving, dying in the elements or succumbing to preventable disease. Hence, his was a fortuitous choice when you're selecting a case study that maximizes safety-net benefits.
His mistake in numbers, however, was in not using that same family to properly calculate how well our system treats single parents with young children when they're making decent money--his $60,000 example. That same family happens to be tailor-made for exemptions on a W-4, resulting in extraordinarily low federal and payroll tax withholding (~12 percent). And that's before they contribute to their IRA or make health-care payments or take their mortgage interest deduction.
And, finally, the mistake in analysis: Emmerich conflates "economic benefit" (e.g. food stamps or CHIP coverage) with "disposable income," something he admitted to when questioned by The New Republic, but that still doesn't seem to have knocked him off his premise as he's argued the case on the JFP website. The truth is, just fixing his withholding error put well over $5,000 back into that $60,000 household's checkbook. That's income; whether it's disposable is a matter of judgement. (More on the numbers on the JFP website.)
Emmerich ends his column with this zinger: "I hope I have helped answer the question concerning why Mississippi doesn't get many new industries," he wrote. "The welfare system in communist China is far stingier. Those people have to work to eat."
Emmerich does nothing to support his thesis that it's the shiftless and lazy who are responsible for the lack of new industry in the state. Could our safety net use tweaks? Of course. In fact, the best argument Emmerich mustered on our site is a valid concern that elements of our safety net--Medicaid and food stamps are two clear-cut examples--are cut off arbitrarily when a wage-earner reaches a certain income level. We can fix that with better sliding scales (or even single-payer health care) if we decide to do so.
But in concluding his piece with what can only be described as a tacit endorsement of communist China's treatment of its workers over our own--how else can you read that?!--I'm reminded of the line in the movie "The American President": "How do you have patience for people who claim they love America, but clearly can't stand Americans?"
As we engage in this national debate, I encourage you to consider this: Our budget priorities and tax policies should be guided by the idea that it's a noble goal to increase life, liberty and a chance at happiness for the greatest number of Americans--not the fewest.
I've corrected two typos in this from the print edition; that's what I get for editing and cutting my own piece on deadline!
- Todd Stauffer
One thing I would love to see come out of the debate on revenues and expenditures in this country would be the *final death* of the supply sider's fantasy that cutting taxes increases revenues. From Salon:
In 2006, Time business columnist Justin Fox adjusted the raw federal tax income revenue totals for inflation, and discovered an interesting thing. Revenue fell in the first few years after both Reagan and Bush's tax cuts, before growth resumed. In 2008, Paul Krugman adjusted for both inflation and population growth, to try to figure out the per-capita tax revenue increase for each decade since Reagan, and found something even more enlightening. Real revenues per capita rose 19 percent from 1980-1988. From 1992-2000, real revenues per capita rose 41 percent -- after tax hikes by both George H. W. Bush and Bill Clinton! And the numbers for George W. Bush? Pure disaster.
Someone amusingly called it the GOP's 30-year "War on Arithmetic"... and it's gotta stop. We need to raise marginal rates in this country; the Bush years saw extraordinary contraction in earned income in this country -- if we'd stayed in roughly the same growth pattern there would have been no need for stimulus according to David Cay Johnston at Tax.com. Writing in Sept 2010, he said:
The tax cuts did not spur investment. Job growth in the George W. Bush years was one-seventh that of the Clinton years. Nixon and Ford did better than Bush on jobs. Wages fell during the last administration. Average incomes fell. The number of Americans in poverty, as officially measured, hit a 16-year high last year of 43.6 million, though a National Academy of Sciences study says that the real poverty figure is closer to 51 million. Food banks are swamped. Foreclosure signs are everywhere. Americans and their governments are drowning in debt. And at the nexus of tax and healthcare, Republican ideas perpetuate a cruel and immoral system that rations healthcare -- while consuming every sixth dollar in the economy and making businesses, especially small businesses, less efficient and less profitable.
The reason I didn't argue too vigorously against the "compromise" of 2010 -- which left the top rates where they are -- was that it seemed to make sense not to raise taxes while the beginnings of recovery were happening. But that has meant higher deficits. So if you're going to rail against deficits and for balanced budgets -- and not do it solely for political gain -- then the reasonable person needs to be in favor of increasing REVENUES as well. You do that, in part, by raising marginal rates on those who can most afford it.
- Todd Stauffer