Reverting to the Mean

If you lived in America before 1913 and weren’t rich, you were paying a whole hell of a lot more in taxes, proportionally speaking, than the men and women who, for all intents and purposes, owned the country.  Through a system of excise taxes, tariffs and fees, the bulk of which fell disproportionally on the working, middle and agricultural classes, the government financed its rather limited aims.  Throughout most of the course of the century after 2013, American politics moved steadily towards a more progressive model of taxation.

It was nearly a century ago now, on February 3rd, 1913, that the Sixteenth Amendment was ratified and the federal government (and subsequently, the states) then had the power to directly tax income.  It was around this time that the country was beginning to want more government (a movement that, somewhat counterintuitively, was started by progressive Republican Teddy Roosevelt).  The federal government and most states, one by one, instituted an income tax.  This had the effect of both providing more money for governments to use as they saw fit (wars, healthcare, infrastructure, etc.) and also had the added bonus of taxes, for the first time in the US being apportioned according ability to pay.

And for years, that model worked.  The further up the income chain you go, understandably, the less popular it is.  Because the more money you earn, the more you pay in taxes.  And while nobody likes paying taxes, as Oliver Wendell Holmes acidly noted in an opinion from about a century ago, they’re the price we pay for living in a civilized society.  However, a trend is accelerating, one that began, I think in the 1980s.  Some states are looking to get rid of their income and corporate taxes entirely (or at least greatly reduce), and replace them with, you guessed it, sales taxes, user fees and a myriad of other charges that let the wealthy escape entirely undertaxed.

Their argument goes something like this: tax the job creators less, and we’ll have more jobs, more growth and more revenue, which means that we’ll have even more revenue, eventually.  The problem with this policy is that the country’s been trying it since it was first proposed by Ronald Reagan, and the revenue hasn’t materialized.  Statistically, mathematically, politically and economically, it just boils down to a massive tax break for those that need tax relief the least.  It’s the economic equivalent of hallucinations or paranoid delusion: magical thinking at its worst.

This is a mistake which comes at a particularly damaging time.  In the first place, the US is barreling towards a self-inflicted fiscal crisis, which, if ignored, will decimate our economy.  Republicans say we just have a spending problem, but as nobody seems to agree on what to do with those entitlement programs we ardently adore (Social Security, Medicare, Medicaid), and we’re not going to either get rid of those programs, or cut them to the point where they’re fiscally sustainable.  As a country, we’ve already decided that we’re going to keep the programs, which means as we’ve already decided what we want, means that we have a taxation problem.  And the second part of the problem is that if we revert to a program of taxation that falls disproportionally on the middle and lower classes, that’s just one more thing that they can look forward to, on top of spiraling grocery, healthcare, college and housing bills.  That’s bad politics, bad for the economy and it’s just wrong.

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2 Comments

  1. And the economy does better when the bulk of people are paying less in taxes, not the wealthy. Businesses aren’t going to hire someone just because they got a tax cut if adding the worker isn’t going to move more product. They’re just going to pocket the tax cut. I only know that because it has happened repeatedly in the last 30 years.

    Reply

    1. At this point, as far as I’m concerned, it’s not even a debate. It’s an empirically demonstrated reality that, time and again, has been borne out. Claiming that tax cuts for high earners, or, job creators, as the GOP likes to term them, deserve the same intellectual respect at saying that vaccines lead to autism or that the Holocaust never happened. It’s just delusional and stands contrary to all other available, verifiable evidence. This, however, seems to be no problem for many Republicans. Shocking, no? No, not really.

      Reply

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