12.11.07

Sanity On Taxes

Posted in Around The Nation, Around The State, Bad Government Republicans, Commentary, Taxes at 12:31 pm by wcnews

Via this post, Estate Taxes - Are We Homers or Not?, at The Monkey Cage, came across this NYT column by economist Robert H. Frank, Reshaping the Debate on Raising Taxes. The article basically rips the anti-tax, “it’s you money” argument for what it it - incoherent.

In short, realistic proposals for solving our budget problems must include higher revenue. But unless political leaders can develop strategies for dealing with the powerful anti-tax rhetoric that has sunk similar proposals in the past, the impasse will continue.

One strategy would be to inform voters that the “it’s your money” argument is incoherent. Taken to its logical conclusion, it implies that it is illegitimate for the government to collect taxes. But if that were true, there could be no government and no army, in which case, the United States would have long ago been conquered by another country. Then we’d be paying compulsory taxes to that country’s government.

In the real world, governments not only maintain armies, they also provide a variety of public goods and services that would be impractical for private citizens to provide for themselves. Every government, including our own, has always levied taxes of some sort to pay for these goods and services.

So it’s strongly in our interest to talk about what services the government should provide and how to raise the revenue to pay for them. Politicians need to explain this clearly to their constituents. The argument is simple and would fit easily into a 30-second campaign spot.

Anti-tax crusaders sometimes brand proposals to make the tax structure more progressive as class warfare based on envy. This tactic has also been rhetorically effective, but, like the “it’s your money” slogan, it stifles an important conversation to everyone’s detriment.

Progressive taxation is not about envy. Top earners have captured the big share of all income and wealth gains during the last three decades. They’re where the money is. If we’re to pay for public services they and others want, they must carry a disproportionate share of the tax burden.

Anti-tax crusaders often bristle at taxes whose aim is not just to raise revenue but also to alter behavior. They label such efforts “social engineering.” But as even Adam Smith recognized, behaviors that are attractive to individuals are often harmful to society as a whole.

And then he basically shows how to reframe the estate tax debate.

Nowhere have the carefully constructed slogans of anti-tax crusaders been more been powerful than in the case of the estate tax, which they like to call the “death tax.” Although voters in the bottom fifth of the income distribution are more likely to be struck by lightning than to leave an estate large enough to set off this tax, two-thirds of them support its repeal. This is bamboozlement of the highest order.

FORTUNATELY, there is clear evidence that reframing the discussion often has a big impact on the way voters think about tax policy. In the spring of 2005, for example, I asked the Survey Research Institute at Cornell University to conduct two telephone surveys to investigate public attitudes about the Bush administration’s proposal to eliminate the estate tax.

In the first survey, respondents were simply asked whether they favored the proposal. Almost 75 percent said they did. In the second, respondents were first told that lost revenue from eliminating the estate tax would necessitate some combination of raising other taxes, borrowing more money from abroad and further cutbacks in government services. This time, almost 80 percent of respondents favored keeping the estate tax.

Given the effectiveness of anti-tax rhetoric, presidential candidates are understandably reluctant to tell voters what must be done to put the fiscal house in order. But voters are smarter than many cynics think, and they may be especially receptive to fresh points of view at this stage in the political cycle. The anti-tax rhetoric of recent decades is at the root of many of our current problems. Candidates with the courage to confront it head on may not only contribute to our economic recovery, but may also win additional votes.

Taxes are a part of life. They can be, and have been used for many good things. It just depends on who has the keys to the government. Those who currently have the keys in Texas and had, until recently had a stranglehold on them at the national level, have done a considerable amount of damage to our government. Change is coming let’s just hope it will come in time.

It’s still a real long shot this will happen. It would take real leadership for a politician to stand up and say this kind of thin. Risking what the “Very Serious People” might call political suicide. In their minds the right thing to do would be more tax cuts for the wealthy, which are tax increases on the middle class.

Taking the time to explain this to the people is not the hard part. What would be hard would be getting a fair opportunity to explain this position in today’s political environment. An opportunity to lay this out to the people without the biased political media and pundits coming after the politician with “right wing” talking points.

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