Magazine article The American Prospect

The Next Tax Revolt: Progressives Need to Stop Worrying and Learn to Love Taxes

Magazine article The American Prospect

The Next Tax Revolt: Progressives Need to Stop Worrying and Learn to Love Taxes

Article excerpt

It's doubtful anyone has ever enjoyed paying taxes. In most developed democracies, taxation is a necessary evil that finances the services that make for a fair and dynamic society. Taxes let people take risks with their lives, guarantee a financially secure retirement, educate children, keep our roads drivable, pay police, and help ensure that the benefits of prosperity are broadly shared. But starting in the late 1970s, political entrepreneurs on the right helped launch a broad "tax revolt" that completely changed the public's view of taxation. Before, higher taxes were a price that one might or might not want to pay in order to finance an expenditure. After, taxes became an unmitigated evil, and "to do that, you'd have to raise taxes" became an unanswerable objection to any policy endeavor. Progressive governance efforts came to be centered on trying to find ways to disguise expenditures as "tax credits," with new spending financed by making cuts in other areas.

To some, Barack Obama's successful 2008 presidential campaign points the way out of the box. As Obama described his plan while debating Sen. John McCain, "If you make less than a quarter of a million dollars a year, your taxes will not go up; if you make less than $200,000 a year, your taxes will go down." In other words, there's no reason to fear tax hikes because you won't be paying them--someone else will.

Obama did not change the framework so much as find a way to survive within it. A platform of no tax increases for the bottom 95 percent can win elections, but it reinforces rather than debunks the right's fundamental view of the tax question--that public services aren't worth paying for--and merely suggests that the correct answer is to get someone else to pay for them. This is, to be sure, better than the alternative, which is to provide no public services at all. And amid a cataclysmic recession, there are sound macroeconomic reasons to eschew any kind of tax increase until recovery is underway. Still, it's hard to see how a long-term progressive agenda can be financed with the revenues raised through this method. A March report by the Congressional Budget Office showed that the administration's proposed budget would lead to unsustainably large deficits in which interest payments would steadily grow as a slice of the budget pie. This set off a brief political firestorm, but attention waned once it became clear that neither congressional Republicans nor Democratic deficit hawks had any serious alternative to offer.

For the moment, that's all for the best. The administration argued, correctly, that its proposed increases in spending are vital to transforming the country's health, energy, and education sectors. The mere fact that the 2010 budget document implies unduly large deficits in 2014 or 2017 is not a problem in 2009 when the bleak macroeconomic outlook calls for large short-term deficits. The moderates were not off base in their concerns about long-term deficits. But, having drawn attention to a real problem, they were unwilling to face the only realistic solution: higher taxes.

The flaw in the budget is that the taxes it proposes are too low. Obama would stabilize revenue at about 18.8 percent of gross domestic product, somewhat lower than it was in the final years of Bill Clinton's presidency. That was enough revenue to fund the programs that existed in 1999, but it's not enough to implement a transformative domestic agenda that goes beyond our ambitions of 10 years ago. There is also the question of our aging population. Growth in the over-65 age group is likely to increase the budgetary cost of Social Security by about 2 percent of GDP, and even without medical-cost inflation, demographics would increase Medicare and Medicaid expenses by an additional 2 percent of GDP over the next 30 years. Add the broadly shared progressive goal of creating a universal health-care system and a commitment to increased spending on schools, anti-poverty programs, infrastructure, early childhood education, and other social services, and it becomes clear that the necessary revenue cannot be found exclusively through efforts to soak the rich. …

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