For some people, any taxes at all are unfair. The current Republican opposition to tax/revenue increases is a culmination of the determined effort spearheaded by Grover Norquist, a one-time aide to President Reagan, and his “Americans for Tax Reform” to persuade the Republicans to oppose taxes, not as a matter of sound economic policy but as a fundamental violation of our “liberty.” As Norquist himself puts it: “You are stealing money from some people and giving it to others.”
Norquist’s campaign has been hugely successful, and he has inspired the GOP to re-brand itself as the “no-tax party.” All but 6 of the 240 House Republicans and all but 7 of the GOP Senators have signed Norquist’s no-tax pledge. No wonder House Speaker Boehner is locked into an uncompromising stance, despite the extraordinary Democratic concession of offering a 3:1 ratio of spending cuts versus tax increases.
Underlying this anti-tax attitude are some truth-claims that need to be examined. One is that the wealthy pay a “disproportionate” share of our income taxes, currently at 38 percent of the total, twice their share 30 years ago, while the bottom half of income earners pay a very small portion of the taxes. Well, yes, but that is because the incomes at the top of the scale have more than doubled while the median income of the bottom half has significantly declined. (When inflation is factored in, “real incomes” among the middle class and blue-collar workers have declined even more.) Today, the top 1 percent of income earners receive 24 percent of the total and the top 10 percent take home almost half. If you use the “progressive” criterion of scaling taxes to the distribution of income, the wealthy should be paying even more than 38 percent.
But what about Norquist’s libertarian argument related to “freedom”? It is based on the claim that the income distribution in our free market capitalist is a result of “merit,” and that the rich deserve to keep the “fruits of their labor.” Of course, these “fruits” may or may not be the result of merit. Some wealth is inherited (think Paris Hilton), or maybe a matter of luck (like owning a piece of land on top of an underground pool of oil), or of shrewd gambles (like the 25 hedge fund managers who, in 2009, bet against the market and took home an average of $1 billion – yes billion – each). Or it might be the result of having a monopoly, or exploiting workers, or malfeasance, or politics. For instance, top CEO salaries today average some 320 times that of the average worker (more than $10 million apiece), versus about 20 times as much in 1950. Do they merit that much more compensation?
Then there is the “trickle down” (supply side) theory, going back to President Reagan’s time. The idea is that the wealthy are the real “job creators” in our society. So a tax reduction will stimulate more economic activity that will ultimately trickle down to the workers and will pay for itself with increased tax revenues. In other words, everyone will benefit.
This theory was actually tried out by President Reagan in the 1980s, and again by President George W. Bush in the 2000s. Both times, nothing happened except yawning budget deficits. Indeed, the theory has even been tested again (indirectly) in the current recession; corporate profits are at a record high (they increased by $528 billion last year) and average CEO compensation went up by 23 percent last year. Yet there hasn’t been any burst of job growth. Instead of a trickling down of income, we’ve seen a bubbling up.