[Editor's note: I had a much better, much wittier version of this post yesterday. I was just about to publish it when I re-read it and realized I had made a grave error in calculation, and displaying my ignorance to the world was not something I was willing to do. Again. So I deleted it. Ten minutes later I was brushing my teeth and realized I was right in the first place. Alas, my past was deleted and cast into the cyberheavens. However, I'm now too lazy to actually re-write what I had before. so here is a lame short summary of yesterday's genius.]
There's been a lot of talk lately about the expiration of the Bush-era tax cuts that are set to end at the end of this year. Congressional Democrats want them to expire, since this will help plug the gap between lagging tax revenues and their massive spending; Republicans treat tax cuts like Christmas Candy and want to make all of them permanent; and President Obama wants to keep most of them except for the taxes on the very rich. (Oddly, no one has proposed, you know, restraining spending as a solution, but you'll have that.)
There are several factors involved here; it's a fairly established economic theory that raising taxes in the middle of a deep recession is a bad, bad idea. Of course, so is running a massive deficit, so the (legitimate) argument is which one is worse. For a Lafferite like myself, of course, the answer is easy, but it's at the very least debatable.*
I'm a good libertarian, in the sense that taxes are one of the few areas I'm willing to go Full Metal Unabomber on--if it were up to me, our current expenditures would be on roads, cops, and bombs, and nothing else, what with us having a Constitution and everything. However, I'm aware enough that in today's political culture, cutting the gummit to the raw bone and letting everything from Medicare to FDA Space Monkey Experiments wither on the vine is not only a bad idea but politically impossible, so I respect the fact that politicians have to pick their battles.
Anyway, it's easy to complain about taxes, and the Bush Tax Cuts have been reduced to Dick Cheney handing out large sacks of cash with a big dollar sign painted on the side directly to pharmaceutical executives and oil barons. People hate this; while the gut reaction is to view tax cuts like this as giveaways to the rich, it's nearly never the case. For those who don't know, when a corporation gets taxed, they more or less pass that cost on to the consumer, so you end up paying the taxes anyway. And it's the rich that are employing people and giving us mortgages and breeding innovation so that they can make more money. And for some reason when we give tax incentives to businesses it's Corporate Welfare (boo!) but when we do the same thing to your mortgage payment it's Reinvesting In America (yay!).
So imagine my surprise when I hear this report on NPR yesterday:
Consider this: If everyone's tax cuts expire on schedule this year, the government stands to collect an extra $238 billion next year. Only about 15 percent of that would come from the very wealthy, those making more than $250,000. The rest — $202 billion — would come from everyone else. By letting everyone else off the hook for higher taxes, the president would add $202 billion to next year's federal deficit. And he can't blame that red ink on his predecessor, George Bush. (Scott Horsley)
Here it is: those evil Bush Tax Cuts that were nothing more than a filthy gift to his rich friends suddenly becomes only 15% of the total. The bulk of the tax cuts--85%--went to individuals under the threshold. (Yes, 250 large is still pretty rich, but it's not as rich as you think.**) So under the Bush administration, this was a disaster for income equality, but now that they are set to expire they need to be preserved for the benefit of the middle class.
The Pledge: I hate being an apologist for the wealthy, since there are so many that are undeserving of defense. But it doesn't take much to look in your community and know that there's one kind of person creating new jobs, and it's not the broke hobo in the gutter. I'm also of the view that the government is going to spend the money regardless of when and how they collect it, so might as well give me my moneys now.
*The Laffer Curve, for those who do not know, is a theory that reducing tax rates actually increases tax revenues--since getting money into the hands of businessmen and innovators will allow them to create new jobs and new products, thereby increasing the tax base--it assumes (quite correctly, in my opinion) that people in the free market can do a better job of getting that money to its most productive use than the government is. While the Laffer Curve doesn't work in all situations, it works well enough that it has to be considered.
**The $250,000 is for joint filers. It wouldn't take much for two middle-aged schoolteachers in New England to exceed this, and I would hardly consider them rich. Also, I'm fully aware that that 15% is represented by only a small percentage--say, 4% or so. I don't think it invalidates the point, but it's another case of the people getting taxed the most are the ones that also get the same proportion of relief, and there isn't anything really wrong with that.