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The Benign Neglect of Tax Policy 2

By Big Tent Democrat

Kevin Drum writes:

The prosperity of the middle class obviously depends on a growing economy. But just as obviously, it depends on more than that. For liberalism to mean anything at all, we need to support policies that are aimed both at overall economic growth and at ensuring that prosperity is widely shared. We haven't done a very good job of that over the past 30 years.

30 years ago, Ronald Reagan was enacting tax policy that lowered the tax burden for the rich well raising it for the less well off (cutting income taxes and raising the FICA tax.) In 1993, Bill Clinton reversed this trend, and income inequality was lessened. Bush 43 cut taxes, especially for the rich, further exacerbating income inequality. More . . .

Yesterday I wrote:

A government program is only as good as its funding. And in fact, determining whether a government program is good must take into account how it is funded. Currently, our tax structure is extremely anti-progressive.

The health bill rejected the House's funding mechanism that imposed higher taxes on the rich and instead adopted the Gruber taxing health plans funding. The justification offered for this by Beltway wonks was that this would help hold down health insurance costs as folks would look for cheaper alternatives. Even if this were true,it is still anti-progressive. This change in funding shifted the burden from the rich to the middle class.

When The Deal was struck, Kevin Drum wrote:

It's not a very efficient stimulus, and it sadly caves into the conservative snake oil that the sum total of fiscal policy is tax cuts, but them's the breaks. Anyone who doesn't like it needs to spend the next two years persuading the public not just to tell pollsters they don't like tax cuts for the rich, but to actually vote out of office anyone who supports tax cuts for the rich. That's the only way we'll win the replay of this battle in 2012. And now let's move on. With taxes out of the way, it's time to repeal DADT.

(Emphasis supplied.) I disagreed with that analysis then and I disagree with it now. But more to the point of this post, you can't lament income inequality in the United States and then shrug your shoulders about tax policy.

The cave in on taxes The Deal represents was pernicious and frankly, inexcusable. It is not reversible in the near term. The notion that it will be different in 2012 is absurd.

The Deal will lead to more income inequality. Yesterday, Matt Yglesias wrote:

Here’s a couple quotes from Yale historian Steve Pincus’ 1688: The First Modern Revolution that I like:

In the 1730s especially Opposition Whigs emphasized that the revolutionaries had adopted Lockean economic principles. They developed their economic policies on the assumption “that the lands of Great Britain are made valuable by the number of people employed in foreign and domestic trade, and in the woolen and other manufactures of this kingdom.” The implication, based on “the authority of Mr. Locke,” was a policy of progressive taxation.

How to pay for government is one of the central issues of politics. That is tax policy. Democrats and progressives abandoned the field during the "most progressive Presidency and Congress in a generation." That is inexcusable.

Speaking for me only

Full post as published by TalkLeft on January 25, 2011 (boomark / email).