Why liberals like taxing the wealthy
I have long been puzzled by the enthusiasm with which many young liberal bloggers cheer on proposals to raise tax rates on high earners. I can understand why they might favor them, but not why they seem to invest so much psychic energy in the issue.
Some of this may just be team ball: You cheer when your side puts up numbers on the scoreboard. So Democratic cheerleaders are rah-rahing what they insist on calling repeal of the Bush tax cuts (which have been in effect now longer than the Clinton tax increases they rolled back).
But the liberal bloggers cannot be entirely ignorant of the knowledge that we have a pretty progressive income tax already. In 2009, the top 1 percent of earners reported 17 percent of adjusted gross income and paid 37 percent of total income tax revenues.
By some measures, the American tax system, including the payroll tax and state and local taxes, is more progressive — in the sense of extracting disproportionate shares of revenue from high earners — than most European tax regimes, which rely heaving on value-added taxes.
Plus, as liberal economist Lane Kenworthy points out, you don’t get much income redistribution from higher tax rates.
You get more from transfer payments. But, as House Budget Committee Chairman Paul Ryan has documented, federal transfers are getting less progressive. Social Security and Medicare increasingly transfer money from young low earners to old people with relatively high incomes and considerable accumulated wealth.
One argument for higher rates is that increased revenues will reduce the federal budget deficit. But do liberal bloggers really care all that much about budget deficits? These same people often rue the fact that the Obama Democrats didn’t plow an additional $1 trillion into their stimulus package.
I think the answer to the puzzle can be found in a remark Barack Obama made during the 2008 fall campaign — a remark that seemed to go mostly unnoticed.
ABC’s Charlie Gibson asked candidate Obama if he would raise capital gains taxes even if, as in the past, that brought in less revenue to the federal government.
Yes, said Obama. “I would look at raising the capital gains tax for purposes of fairness.”
Ponder that answer for a moment. A candidate for president — president now — said he wants to take more money from people who earned it even though doing so would produce less money for the government.
The philosophy that has to be behind that answer is also behind the Obama administration budgets that have proposed capping the charitable deduction for high earners. The clearly intended result would be a massive transfer of money from the voluntary sector of society into government.
Alexis de Tocqueville in the 1830s identified the voluntary sector as a unique feature of American democracy, one that gave it strength and character. He compared it positively with his own France, where centralized government stifled initiative and innovation.
The cap on charitable deductions has gone nowhere in Congress, where many Democratic members undoubtedly heard protests from their friends and supporters in the voluntary sector. We can see where that proposal leads from the Obama mandate that voluntary-sector organizations must buy health insurance that finances procedures their leaders consider deeply immoral. Centralized government will decide what’s moral, and you’ll be forced to pay for it.
Higher tax rates on high earners, even if they produce less revenue, are an attempt to centralize power in government and to limit the autonomy and countervailing power of individuals in the voluntary sector.
Which is why the liberal bloggers cheer them on. And why they eagerly join the Obama White House in demonizing the Koch brothers, who donate large sums to conservative causes. (Disclosure: I have spoken at two Koch conferences and was reimbursed for travel expenses.)
The Obama Democrats don’t want their funders like George Soros getting competition from the likes of Charles and David Koch.
Similarly, the prospect of Republicans spending as much money as Democrats (unlike 2004 and 2008, when Democrats spent more) led Obama to declare inoperative his denunciations of super PACs and to create his own, with Cabinet members authorized to raise money for it.
This election is a contest between a Democrat who wants to make this country more like Tocqueville’s France and Republicans who want to keep it more like Tocqueville’s America. The liberal bloggers are rooting for France.