November 15, 2004

REGRESSIVE IS THE NEW PROGRESSIVE:

Turning the Tax Tables to Help the Poor: The Democrats could enact some progressive policies by hijacking the Republicans' fervor for tax cuts, the
military and private property. (DALTON CONLEY, 11/15/04, NY Times)

The poor have been off the public agenda for the last two election cycles. This is in part because the left essentially ceded the debate on poverty in 1996, when welfare reform was enacted. Workfare presented Democrats with the chance to say that these "working families" deserved more. But aside from a call to raise the minimum wage, there has been little effort to renew the discussion about helping the bottom one-third of American households. [...]

Harold Wilensky, the political scientist, once lamented that the American left had not learned the lesson of Europe: allow taxation to be more regressive to collect enough money to finance the programs that liberals hold dear. European governments collect an enormous amount of revenue through the value-added tax (sales tax); their effective tax rates on lower-income workers are much higher than America's; and they do not rely very much on property taxes (which are the most progressive of all). In return for a more regressive tax structure, Europeans receive a litany of social services that are politically unthinkable in this country.

Another lesson, however, is that there is nothing particularly American about the paradox of progressive taxation - that folks resist progressive tax structures. The Republicans seem to have learned this. In fact, some pundits have even argued that the Republicans manage to stoke the populist anti-tax fire to reduce top marginal tax rates by raising them on lower income Americans. (Ronald Reagan's payroll tax increase provides the classic example.)

In facing this reality, Democrats can essentially choose from two responses. The first is the European option, for lack of a better name: agree to a flat tax in return for more spending on health care, child care and other services.

The other option would be to hijack the Republicans' fervor for tax cuts, the military and the ownership of private property. Let's start with tax cuts. From an accounting standpoint, there is no difference between a direct transfer to the poor and a refundable tax credit. In political terms, one is called welfare (a sure loser) and the other tax relief (an almost certain winner).


The reality is that the poor disappeared from the public agenda because of how well the bottom third of the American population lives. We were all concerned when they lived in actuial poverty, but--having intuitively grasped http://www.brothersjudd.com/index.cfm/fuseaction/reviews.detail/book_id/748>de Tocqueville's lesson on pauperism-- aren't willing to keep transferring money to them until they have as much as the working middle class.

Mr. Conley's message though is important for conservatives: you can make the tax code much more regressive so long as people are reasonably satisfied with government. Increasingly voucher-based and privatized services should boost that satisfaction.

Posted by Orrin Judd at November 15, 2004 9:03 AM
Comments

How about this: Only people who pay taxes can get anything cvalled a tax cut, tax rebate, tax credit, tax incentive, etc. And only people who pay taxes can vote.

Posted by: M. Murcek at November 15, 2004 10:36 AM

The "European scheme" is a HORRIBLE idea.

Regressive taxation coupled with generous gov't social programmes leave the bottom half reasonably well-off, but unable to advance.

In America, the poor are poorer, but most of them manage to become middle class, where they are better off than Europe's middle class is.

How about just providing free vocational training to all US citizens ?

Posted by: Michael Herdegen at November 15, 2004 12:14 PM

This discussion misses the real issue; how to get people prepared and motivated to work and succeed. Anything else is immoral and un-American.

Hoping to make a tax code more regressive so that the poor can be bought off, may be politically expedient, but it is a lousy thing to do to people and no different than liberalism.

Posted by: Perry at November 15, 2004 1:59 PM

Perry: Why isn't the sole legitimate purpose of the tax code to raise money to fund the government?

Posted by: David Cohen at November 15, 2004 2:49 PM

David:

A tax system that isn't generally supported by the public is counterproductive. And any way of getting the funding you can find will have other consequences. You could raise all the money by taxing food, but it would offend decency.

Posted by: oj at November 15, 2004 3:25 PM
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